“Grossly Disproportionate”: The HOA cannot demolish disproportionate homes

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The Western District of Virginia held that it would be “grossly disproportionate” to allow a homeowners association, or HOA, to demolish three homes built without approval of its own architectural review board, which did not exist at the time.

Although its president was aware of the construction, the HOA claimed the owners violated the declaration and bylaws by failing to obtain proper approval and building noncompliant structures.

But U.S. District Judge Norman K. Moon said that even if homeowners violate the declaration and regulations, demolishing homes is inappropriate.

“As Defendants point out and Plaintiff acknowledges, replacing supposedly nonconforming mailboxes, wood decks, and windows does not require demolition of the homes. In fact, it would be wasteful to do so,” Moon wrote.

Whether the HOA had a viable alternative means of architectural approval was a question of material fact, and if so, the judge said a narrower injunction to prevent further construction or maintenance might be justified.

The opinion is Thomas Jefferson Crossings Homeowners’ Association Inc. v. Etemadipour, et al. (At LW 023-3-649).

Incompatible homes

Mansour and Nick Etemadi purchased three parcels of land within the Thomas Jefferson Crossings subdivision in Forrest, each of which was subject to the covenants and restrictions set forth in the HOA declarations and bylaws.

These covenants and restrictions have enabled the Architectural Review Board to evaluate new construction on HOA properties and require lot owners to submit plans for approval.

However, the review board did not exist when the Etemadipurs bought their plots.

The Etemadipurs built homes on the lots, kept the HOA president informed of progress and offered inspections during the process. Despite using the neighborhood developer’s original plans, the homes were built with non-compliant roofs, windows, and basements.

The HOA sued for breach of contract, citing covenants and restrictions in the HOA’s declaration and bylaws, which both parties acknowledged were a binding contract.

The Etemadipours argued that they were entitled to summary judgment; It was impossible for them to adhere to the HOA’s conventions and restrictions, and the remedies required were inadequate.

After transferring ownership of the properties to JUD management, Etemadipours also said that the HOA failed to join the required party. The HOA responded that they had not been notified of the transfer.

The doctrine of prevention

The Etemadipours did not dispute that they owed a legal duty to the HOA, but they claimed that their performance was prevented because the HOA had not established its own architectural review board.

The HOA acknowledged that it had no records showing proper audit systems were in place at the time.

“As a general rule, there is an implied condition in every contract that neither party shall prevent its performance by the other party,” Moon noted. “This so-called prevention principle can be used either offensively – i.e. to obtain damages – or defensively – i.e. to justify non-performance of the contract.”

The judge explained that offensive use requires a plaintiff to prove that the other party’s protective conduct was unlawful and exceeded his or her legal rights, while “no specific malicious intent need be shown when applying the principle defensively.”

However, the non-enforcing party must still show that “the blocking party… (took) willfully steps to obstruct performance or (to) arbitrarily impair the ability to perform,” even when using the doctrine defensively, Moon noted.

Here, the judge concluded that there was a dispute of material fact as to whether the Architectural Review Board was the only body capable of approving building plans.

“Plaintiff cannot neglect to form an Architectural Review Board and then complain that Defendants did not benefit from this non-existent entity,” he wrote. “Such bad faith would certainly amount to an arbitrary impairment of the defendants’ ability to enforce the contract.”

While the parties’ contract stipulates that the HOA’s board of directors is also able to approve building plans, Moon said it’s unclear whether the board actually fulfills that function. The HOA provided no evidence that it ever approved the plans; Their former boss noted that they never did.

Hardship defense

The HOA requested an injunction pursuant to Code § 55.1-1828(A) to prevent further construction or maintenance of the non-compliant improvements, as well as $450,000 to restore the Etemadipurs’ lots to their “prior unimproved condition.”

Although Section 55.1-1828(a) allows for relief when a landlord fails to comply with a landlord association declaration, Moon said “in cases involving a breach of an actual covenant, injunctive relief is granted almost as a matter of course” unless the defendant can meet exception.”

“It is important here that Virginia courts have recognized an exception when an injunction would result in a ‘hardship or injustice disproportionate to the relief sought’ — i.e., a hardship defense,” the judge wrote.

Without clearly defining the level of hardship or unfairness required to satisfy this exception, courts have determined that it must go beyond mere inconvenience. Moon said the hardship doctrine is appropriate in this case.

“Even assuming that Plaintiff suffered injury due to Defendants’ alleged violations of the TJCHOA Declaration and Regulations, the demolition of their homes would be grossly disproportionate to the relief sought,” the judge wrote.

Here, both parties acknowledged that replacing supposedly nonconforming improvements does not require demolition of the homes. “Actually, it would be wasteful to do so,” Moon agreed.

The judge was not convinced that the non-compliant basements warranted demolition because it was not clear whether the HOA’s regulatory authority was limited to the exterior of the home and no evidence had emerged that slab basements were mandatory.

Even if the Horn of Africa had that regulatory authority, Moon would still refuse to order the demolition.

“Certainly the destruction of one’s home is more than a mere inconvenience caused by a largely indistinguishable deviation in the design plans; such a remedy should be viewed as ‘oppressive or unjust,'” he wrote.

Moon then denied summary judgment with respect to the HOA’s other requests for relief.

“Unlike with the destruction of the defendants’ homes, the injunction to ‘prevent further construction or maintenance of unapproved improvements’ is much narrower,” he explained. “It follows that if the plaintiff can prove that the defendants violated the TJCHOA declaration, an injunction may be warranted.”

Finally, Moon found that the HOA had not identified any bias that would have resulted from allowing the Etemadipours to join JUD’s administration as a defendant.

Global settlement

Brenda Castañeda of Home Opportunities Made Equal of Virginia has represented the Etemadipours in multiple cases against the HOA. Castañeda told Virginia Lawyers Weekly that the amended complaints the HOA recently filed were never served to its customers.

“After the summary judgment hearing, the judge referred us to mediation, which was successful,” Castañeda said. “All multiple related lawsuits have been settled.”