Posted:
Interesting case arrived today in the CAI Law Reporter - Hope they don't mind me copying it, but it touches on your issue:
Association May Give Owners Exclusive Rights to Common Areas
Harvey v. The Landing Homeowners Association, 162 Ca. App. 4th 809, 76 Cal. Rptr. 3d 41 (2008)
Powers of the Association: An association is permitted to grant exclusive rights to common areas to individual owners if the condominium declaration grants the authority and discretion to do so.
The Landing is a four-story, 92-unit condominium complex in Coronado, Calif. On the fourth floor of The Landing, each of the 23 units has attic space on top of the units, which is designated as common area. The attic space can only be accessed by the fourth floor units. For many years, several fourth floor unit owners used the vacant attic space, but after a complaint by another unit owner, the board of The Landing Homeowners Association ("association") conducted an inspection of all the attic spaces.
Of the 23 fourth floor units, 18 owners were using the attic space, ranging from 50-288 square feet of the common area. Ten owners were using more than 120 square feet of the space, and one unit owner had converted a portion of the common space into habitable living space. After the inspections were done, the architectural review committee's memorandum to the board concluded that the use of the attic space was "nominal" and suggested signing licensing agreements with fourth floor unit owners to secure insurance and liability for the use of the area.
However, the association's lawyers told the association that it may not have the authority to grant the encroaching owners the right to continue using the attic common areas. Based upon this advice, the association issued violation notices to the encroaching homeowners. Due to the complaints of a disgruntled homeowner, the City of Coronado became involved, and its inspectors advised the association that the attic space could only be used for storage and could not be used for living space. Several of the homeowners retained legal counsel and claimed that they had an irrevocable right to use the attic space that could not be disturbed by the association.
In 2003, the association settled the dispute during a board meeting by signing an agreement with fourth floor unit owners to limit the use of the attic space to 120 square feet, the amount theoretically allocated to each unit owner. The association also took steps to ensure that the association's insurance coverage was not affected. The city conducted periodic inspection and found that, outside of a few minor violations, the fourth floor owners complied with the agreement.
Three years later, the association passed a resolution that transferred to the fourth floor owners the exclusive right to use the common area attic space above their units. Shortly afterward, Miles Harvey, a board member and former president of the association, sued the association for trespass, breach of fiduciary duty and injunctive relief. The trial court ruled in favor of the association, determining that The Landing's declaration gave the board the authority and the discretion to allow an owner exclusive control over common area. The court concluded that the association made the decision after a reasonable investigation and acted in good faith and in the best interest of the community association. Generally courts defer to the board of a community association for expertise on use of common areas. Harvey appealed.
The appeals court affirmed the trial court's decision, finding that the declaration expressly granted the association authority and discretion to grant an owner exclusive use of a common area that is nominal in area and adjacent to the owner's unit. There was no dispute that the attic space was available only to fourth floor units and that its use by fourth floor owners was not an unreasonable interference with the other owners' enjoyment of the community.
Harvey contended that the declaration banned the use of common area for private storage. However, the declaration did not have a blanket prohibition. The declaration gave the association discretionary power to allow owners the exclusive use of the common areas and allowed the board to modify the use of common areas, including designating them as storage areas. The appeals court cited the rule of judicial deference in deferring to the association's authority and expertise regarding its sole rights to maintain, control and manage the common areas.
The court also found no grounds for the breach of fiduciary duty and conflict of interest claims. It is true that in order to pass the resolutions permitting the exclusive control of the attic to the fourth floor owners, the association required the votes of fourth floor unit owners. Citing the Corporations Code of California ("Act"), the court found that in situations where board approval was based on a vote by an interested director, the burden is upon the person challenging the transaction to produce evidence that the interested director has material financial interest.
In this case, Harvey did not produce any evidence that the fourth floor owners approving the resolution had obtained a material financial interest when they voted to allow storage in the attic. It was undisputed that the resolutions were adopted with unanimous or near unanimous majorities. According to the Act, where there is a disinterested majority and full disclosure of the proceedings the contract or transaction is considered valid.
Without any evidence to show that the fourth floor unit owners were voting for their own pecuniary gain, the court ruled in favor of the association in affirming the decision.
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You might look to an "exclusive right to use" agreement, in return for the maintenance, rather than a deed which may take forever to sort out and a lot more in legal costs for both you and the association. Look to your documents to see if there is a blanket prohibition about this. Also your position as president might cause some problems, but as the case shows, may be dealt with. In any event your going to have recuse yourself from any board action dealing with this. And you're going to have to deal with the question as to whether you will benefit financially from this. Even though there have been no problems up to now doesn't mean that some can't arise that could screw up the sale or cause problems for the purchasers, whcih could come back to you. Get it done right - get the lawyers involved and cross the t's and dot the i's.
Joe