Florida appeals court adopts the Lamden test in holding that courts must give deference to a condo association's decisions if that decision is within the scope of the association's authority and is reasonable.
The Association appealed the trial court's entry of partial final judgment denying its request for an injunction. This appeal arises out of a complaint filed by the Association requesting, among other things, a permanent injunction requiring Unit Owner, Sharon Hampton, to allow the Association to access her unit to perform repair work on her balcony. The unit owner denied the balcony needed to be repaired based upon her engineering consultant's option. The 4th DCA reversed the judgment and remanded the matter back to the trial court for further proceedings. The crux of the dispute in the appeal is over the standard by which the trial court should review the decision of the Association's Board of Directors. The Association contends that under the business judgment rule, a trial court is required to defer to the Association unless there is proof of fraud, self-dealing, dishonesty or incompetency in arriving at the decision. The unit owner argues that the business judgment rule applies only in suits against directors for personal liability and that the trial court was required to determine whether the repair work on the interior of her unit was necessary. The 4th District Court of Appeals opined that courts outside of Florida have adopted a two-prong test to review condominium board decisions, which closely resembles the test that has been applied, but not articulated, by courts in this state. See Kaung v. Bd. of Managers of Biltmore Towers Condo. Ass'n, 70 A.D. 3d 1004, 895 N.Y.S. 2d 505, 507 (N.Y. App. Div. 2010)(stating the judicial review of a condominium board's decision is limited to whether the Action was authorized and whether it was taken in good faith and in furtherance of the condominium's legitimate interest). The California Supreme Court has articulated the test in the following way: "Where a duly constituted community association board, upon reasonable investigation, in good faith and with regard for the best interests of the community association and its members, exercises discretion within the scope of its authority under relevant statutes, covenants and restrictions to select among means for discharging an obligation to maintain and repair a development's common areas, courts should defer to the board's authority and presumed expertise." Lamden v. La Jolla Shores Clubdominium Homeowners Ass'n, 980 P.2d 940, 942 (Cal. 1999). The Court adopted the test set forth in Lamden and held that courts must give deference to a condo association's decision if that decision is within the scope of the association's authority and is reasonable - that is, not arbitrary, capricious, or in bad faith. Applying this rationale, the court concluded that since there was no dispute that the Association had the authority to repair the concrete on Hampton's balcony, which is a common element under the Condo's Declaration, the Association may repair and maintain common elements as long as its decision to do so is reasonable. Thus, the trial court's focus was misplaced when it denied the injunction because there was a question as to whether the excavation and rebar work was necessary. Therefore, the trial court, on remand, must perform the Lamden test and determine whether the Association had the authority to access Hampton's unit to repair her balcony and, if so, whether it acted reasonably - not arbitrarily, capriciously, or in bad faith - in choosing to perform the work inside Hampton's unit.
Case Law Alert - 1st Qtr 2011