Covenant Enforcement - The Golden Rule
A question we are frequently asked by associations is how strictly they should enforce their covenants. This was exactly the dilemma faced by a small patio home community located in North West Denver. Apparently a homeowner had painted her house golden yellow. The color was not unattractive – it actually looked quite nice – but it was clearly not one of the earth tone colors approved by the association. After some investigation by the Association’s Board of Directors, it became apparent that this was an honest mistake by the homeowner. She was new to the community and was unaware that she was restricted in her color choices. Although she was also willing to work with the Association to correct things, money was an issue. She had recently experienced some serious personal problems and could not afford to repaint her house. This is when I received a call from the Board’s president asking “What should we do?”
Unfortunately there is no easy answer to this question. In this case it appeared that the Association had 4 options, each with positive and negative aspects. First, the Board could grant a variance and allow the home to stay golden yellow. The home looked nice after all, and the homeowner clearly could not afford to have it repainted. However, the Board was concerned that this would open the door to requests for variances from other homeowners, which would ultimately destroy the character of the community.
As an extreme alternative, the Board could obviously stick to its guns and strictly enforce the covenants, leaving it up to the homeowner to figure out how to pay for the new paint job. It the homeowner fails to comply, the fine machine could start up. While this position clearly shows other homeowners that the Board means business, it also risks a future newspaper headline that reads “Association forecloses on home because it is yellow!” This is not the type of publicity anybody wants.
As a third alternative, the Board could offer to repaint the house for the homeowner, and collect the costs at a later date. This would ensure that the character of the community would not be altered. However, the Board was not sure that it wanted to get into the business of handing out loans.
Finally, as a fourth alternative, the Board could still require the homeowner to repaint her house. However, it could grant her an extension (maybe 12 months) on the time she has to comply with the requirement. In this scenario, the house would eventually be repainted without destroying the homeowner’s finances. While this seemed like a perfect alternative, the Board was still concerned that it would send a message to other owners that the covenants were not being enforced (the house would remain yellow for some time). They were also concerned that the homeowner would not adhere to the extension, and they would be back at square one next year.
It is important to remember that there is no right or wrong answer in this case. Ultimately the Board must use its business judgment as to how it wants to proceed. As I told the Board’s president, every year the members elect someone like yourself to make these big decisions. However, the Board must treat all of its members uniformly, and not make decisions in an arbitrary and capricious manner. Additionally, the Board should keep in mind that this is a community, and it is best to try and work things out with its members in a neighborly fashion. Above all, the golden rule is to be reasonable.
Here, the Board decided to give the homeowner a 12 month extension to have her house repainted. It also decided to send out a notice to the members reminding them of the Association’s architectural guidelines. The Board determined that the best, and most reasonable, action was to give their neighbor a chance to catch up on her finances and make things right.