The country and her citizens continue to seek ways – both large and small – to lessen our dependence on foreign oil, and help stem the tide of global climate change. In turn, common interest community association members, and management professionals, will continue to seek modifications to homes and changes to owner conduct that may implicate or violate covenants and/or rules. In considering these modification requests and owner conduct, common interest community association boards and management must balance many competing interests, all the while remaining mindful of each others’ fiduciary duty.

 

In any common interest community association or cooperative there are two classes of restrictions: (1) restrictive covenants that are set forth in the initial governing documents created at inception, which are fixed forever absent an amendment typically authorized by the members or shareholders; and (2) rules and regulations that are adopted by the board, which are subject to change with ease, upon majority vote of that same board. When interpreting, enforcing and/or waiving either of the covenants or rules, boards must act only as authorized by their governing documents, or not act when action is not required by those governing documents. Boards must also act, or not act (as the case may be) in good faith and with reasonableness. This is often referred to as the "business judgment" rule.

 

When faced with the "green revolution", boards have great flexibility when it comes to adopting and then enforcing "rules", as their existence and the substance are not contained in the original governing documents but reflections of the norms, standards and opinions of the common interest community’s leadership at that time. For instance, with respect to an HOA, the declaration may very well provide that no exterior modifications to the common elements may be made by owners without the prior consent of the board. In this context, modifications are not prohibited per se. They are in fact specifically allowed so long as approved by the board. So, the board can be flexible in relation to what it will approve, and what it will not. A board’s fiduciary duty requires it only to abide by the governing documents, and act in good faith and be reasonable. A board is not required to deny all requests so as to protect against claims of discrimination (i.e., a board can approve an owner’s request that he be allowed to install landscaping in a front flower bed that is less dependent on water, while still denying that same owner’s request that he be allowed to maintain a birdbath in that very same flowerbed). A board is not required to approve all requests so as to be able to approve some, or be labeled discriminatory. A board can use discretion when enforcing, waiving, creating and/or adopting rules, especially in relation to owners’ eco-friendly modifications and/or actions.

 

When faced with the "green revolution", boards have less flexibility when it comes to enforcing, applying or interpreting "restrictive covenants" that are contained in the original, recorded, master deed, declaration and/or bylaws. Absent formal owner-approved amendment, boards may very well be obligated to deny what may be an eco-friendly modification or action. While not ignoring existing restrictive covenants, a board may have the ability to interpret a provision in a variety of ways, based on the then prevailing societal norms. For instance, many master deeds, declarations and/or bylaws prohibit owners from using their units and/or homes for commercial practices and/or for business. However, such provisions have been interpreted by courts and attorneys, over the past several years, as only prohibiting commercial practices that have an impact on the common interest community (i.e., traffic, noise). Such an "interpretation" was necessitated by the growth of the amount of people working from home. It would simply be contrary to the public policy of our communities to contend that an owner cannot transact business from home when that business has no impact on the community’s members, and when, in all likelihood, the member would not even know that business is being transacted.

 

When it comes to the "green revolution", public policy considerations may more often influence the interpretation and/or the enforceability of our restrictive covenants. There is no greater example of this than the famous United States Supreme Court case Shelley v. Kraemer, decided in 1948. In 1911, owners within a neighborhood inserted a restrictive covenant into all of their deeds that prohibited each from allowing any home to be occupied by "people of the Negro or Mongolian Race". In 1948, when asked to enforce this restrictive covenant, the Supreme Court refused, instead ruling that the courts were precluded from enforcing such a restrictive covenant as it was repugnant and against public policy. The needs, interests and norms of society had simply changed around a restrictive covenant created in a different time.

 

In the end, boards should be creative, thoughtful and flexible in relation to eco-friendly technologies, ideas, actions and/or modifications on the one hand, and mindful of their fiduciary duties on the other. That duty does not compel any particular action or inaction. It compels on respect for the governing documents, good faith and reasonableness.