Association’s Protected by the “Business Judgment Rule”

This case involved a dispute between a homeowner member of a property owners association (“Owner”) and the association (“Association”) over a decision by Association’s directors not to take legal action against another homeowner. The dispute was over alleged improvements that were constructed on the homeowner’s property without the required approval by Association’s Architectural Review Board.

Factually, the owner that constructed the improvements on his property had originally obtained approval from Association’s Architectural Review Board, but during the months after obtaining the approval, the owner changed and revised the approved plans and continued with the construction of improvements that had not been approved. Over a year after the revised improvements were completed, Association learned of the changes that deviated from the approved plans and notified the owner of the alleged violations. The owner responded to Association by providing information from an engineering and construction firm, and from a local county building official that purportedly confirmed that the improvements were not in violation of Association’s architectural restrictions. After reviewing the information that had been submitted, Association’s board of directors approved the improvements that had been constructed.

Owner then filed suit against Association seeking injunctive relief to compel Association to take action to enforce its architectural restrictions against the offending owner. In the lawsuit, Owner alleged: