Court Says Association’s CC&Rs Violated FHA Protections for Substance-Addicted Individuals

This case involved a dispute between a homeowners association (“Association”) and the owners (“Owners”) of a property within the community that was being used by Owners’ tenant as a rehab facility to treat up to eight individuals who were recovering from drug and alcohol addiction. Association contended that Owners’ tenant was violating Association’s CC&Rs and rules that prohibited use of the property for a “commercial enterprise” and which limited leasing of the property to a “single family unit.” In response, Owners contended the property was not being used for a commercial enterprise and additionally, that federal and state housing discrimination laws allowed for the use and superseded Association’s governing documents that prohibited such use.

After Owners refused to cease its tenant’s use of the property as a rehab facility, Association filed an action for declaratory relief in which it sought a declaration from the court that Association’s CC&Rs prohibited the operation of a business such as Owners’. Owners filed a counterclaim against Association in which they claimed that Association’s CC&Rs violated the federal Fair Housing Act (“FHA”) protections for substance-addicted individuals. Procedurally, Association’s claim for declaratory relief was to be decided by the Judge, and Owners’ counterclaim was to be decided by a jury.

Following trial, the Judge ruled that Owners’ lease breached Association’s CC&Rs because: (i) the property was being used by Owners’ tenant for a commercial enterprise; and (ii):