At one time or another, most associations are faced with the necessity of taking an owner to court to enforce restrictive covenants. The law in Colorado is that restrictive covenants must be enforced by the courts as written and the usual method of judicial enforcement is to request that the court issue an injunction. An injunction is an order from the court requiring compliance by the owner. Violation of the injunction can result in penalties ranging from a fine to time in jail. Despite this, we frequently hear from board members and association managers that they are frustrated because the courts fail to enforce restrictive covenants. While the general rule is that the covenants must be enforced, there are common defenses that an owner can successfully raise to sometimes thwart the enforcement effort of the association. The good news for associations is that these defenses are most often based upon the conduct of the association. Therefore, with the careful implementation of a thoughtful plan for enforcement, they can be avoided.
The defenses frequently raised with success by owners are estoppel, laches, waiver, abandonment, and selective enforcement. Owners asserting these defenses seek to use some act or failure to act by the association to convince the court that enforcement of the covenant would be unfair. Although closely related, each of these defenses has distinct elements that the owner must prove in order to prohibit enforcement.
To establish the defense of estoppel, an owner must prove that the association, or one of its officers, directors or agents, has done or said something on which the defendant relied to his detriment. Commonly, this defense arises in the context of architectural control committee (ACC) approval. Often a member of the board or committee tells a homeowner something to the effect of “I’m sure your plan will be approved as submitted, don’t worry about it.” After hearing that, but before any official ACC action, the homeowner then proceeds to landscape or complete construction according to the submitted plan, spending thousands of dollars. In the event that the plan is subsequently not approved, the homeowner is able to show that:
- The association, though its agent, made a statement;
- The homeowner relied on it; and
- The homeowner spent money as a result.
Most often, the association will be held to the statement of the committee member and the restriction requiring approval is unenforceable. These situations can be avoided by carefully instructing all board members, architectural control committee members and managers not to make any statements with respect to any covenant enforcement matter outside of official committee meetings, board meetings, or written decisions.
Laches is a defense closely related to estoppel. An owner can establish laches if there is a failure by the association to enforce a restriction for an unreasonable period of time, and as a result of the delay, the owner has suffered some disadvantage. There is no specific length of time that the homeowner must show to establish a defense of laches, but rather that the passage of time was unreasonable or unexplained and that there was some action by the owner based upon the inaction of the association. This is a defense that can be easily avoided by vigilant covenant enforcement. The association must act quickly upon receiving notice of a violation, and should have a specific enforcement policy. Warning letters should have a specific date for required compliance, and there needs to be diligent follow up by the association. The owner should never be given the impression that the association has no intention of enforcing the restrictions. Waiver is somewhat different from estoppel and laches in that the owner does not have to show reliance to his detriment on some act of the association. Waiver is generally defined as an intentional relinquishment of a known right. To establish a valid waiver, the owner must show that the association both knew that it had the right to enforce a provision, and intentionally failed to enforce it. Many declarations explicitly provide that if the association waives the right to enforce a covenant once, that waiver cannot then be held to apply to all situations. A variance is a good example of a waiver. Although the association has the right to enforce a provision, it intentionally grants a variance, or exception to the provision, to an individual homeowner under the specific circumstances of that situation. Many homeowners will try to “bootstrap” themselves into the defense of waiver based upon a variance granted to another homeowner by the association. It is essential that the association be very precise with respect to the granting of a variance, limiting it to the specific homeowner, and quoting any applicable sections within the declaration, so that other homeowners may not claim that variance constitutes a waiver of the provision as to other owners.
The fourth defense commonly raised by owners in covenant enforcement cases is that of abandonment. In order to show abandonment, the owner must prove that a reasonable person observing the neighborhood, with knowledge of the existing covenants, would conclude, due to the substantial and widespread violations within the neighborhood, that the association has abandoned the enforcement of the particular covenant at issue. The usual situation where this arises is where a homeowner would claim that there are numerous violations of that particular covenant throughout the subdivision, and based upon those violations, he or she reasonably believed that the covenant was no longer being enforced, and had been abandoned. There is no explicit numerical test or formula which can be relied on with respect to abandonment. It is a very subjective test which rests in the discretion of the Court. The association can take many steps to prevent the appearance that enforcement has been abandoned. Distribution of Rules and Regulations, accompanied by an explanatory letter, in a “Welcome Packet” to each new homeowner is an effective way of giving notice to new owners that the restrictive covenants are being enforced and help to rebut the abandonment defense. Signs at the entrance of a community indicating that the community is covenant protected and that the restrictive covenants are enforced can also help to convince a court that a reasonable owner would not think that covenant enforcement had been abandoned. The best insurance against a defense of abandonment is regular monitoring, and enforcement of covenants throughout the neighborhood coupled with effective communication to the owners of the intent of the association to pursue enforcement.
The fifth defense commonly raised by owners is selective enforcement. It is closely related to abandonment as it is the situation where some homeowners are allowed to do something that another homeowner is not. In order to show selective enforcement, the owner must prove that the Board allowed one homeowner to do something and then disallowed another homeowner to do the same thing in the same set of circumstances. One such situation might be where a Declarant has allowed a homeowner to install a shed and once the association has transitioned to homeowner control the Board refuses to allow homeowners to install sheds. In this type of circumstance it is necessary for an Association to show that the Declaration granted a variance and that the Association has acted consistently in its refusals and that no similarly situated homeowners were treated differently. The Court will look at the consistency in the application of the rules by the Association and the documentation by the Association for any variances granted.
The defenses of estoppel, laches, waiver, abandonment, and selective enforcement can be avoided by the adoption of written policies and procedures (and accompanying forms) that address the application and approval process, as well as the enforcement process. The association should be vigilant and prompt in enforcement and keep detailed records pertaining to the association’s enforcement actions. And the enforcement of the rules needs to be consistent and fair. These simple precautions can help the association avoid a losing day in court.