Fees for Review of Plans

Utah law prohibits an association from charging a fee for review and approval of an owner's construction plans that exceeds the actual costs of reviewing and approving the plans.  See Sections 57-8-6.7 and 57-8a-109.

Discretionary design controls must be reasonably exercised

Discretionary design controls, that is, open-ended controls that lack objective standards or guidelines, create two kinds of risks for property owners. They may not be able to develop in accordance with their expectations because they cannot predict how the controls will be applied.  Second, property owners may be subject to arbitrary or discriminatory treatment because there are no standards against which the appropriateness of the power’s exercise can be measured.¹  Because design controls are as likely to increase property values by preventing aesthetic nuisances, however, courts have responded to these concerns by imposing a reasonableness requirement on the exercise of design controls, rather than by invalidating them.²

1.  For how the Utah Court of Appeals addressed the argument by one party that an HOA's requirement was arbitrary and not subject to any standard, see Rapoport v. Four Lakes Village Homeowners Ass'n., 2013 UT App 78, 300 P. 3d 327, at ¶ 17.

2.  See, e.g., Norris v. Phillips, 626 P.2d 717 (Colo.Ct.App.1980) (standard for review of architectural-control-committee decisions is reasonableness and good faith; it applies to both refusals and approvals). Citing Rhue v. Cheyenne Homes, Inc., 168 Colo. 6, 449 P.2d 361 (1969) for refusals, and Rywalt v. Writer Corp., 34 Colo.App. 334, 526 P.2d 316 (1974) for approvals.  See also Riss v. Angel, 934 P.2d 669 (Wash.1997) (en banc) (approval standards like conformity and harmony of external design and general quality with existing standards of the neighborhood are upheld, but become unenforceable if applied so inconsistently as to result in a wide variety of buildings; authority must be exercised reasonably and in good faith).  See also Restatement Third, Property (Servitudes) § 6.9 d, e.

As the legitimacy and utility of design controls have become more widely accepted, courts have tended to increase the amount of deference they give to decisions reached by architectural-control committees or other design-control authorities.  Earlier cases in which courts appeared to review disapproval decisions de novo and to substitute their judgment for that of the review committee have generally been displaced by a review that focuses more on the process than the substance of the decision.  If the committee informs itself of the facts and is consistent in its treatment of community members, its decisions are usually upheld even though the court may not agree with the aesthetic judgment made by the committee.

Lack of criteria for approval, inconsistent application of criteria, and failure to consider relevant facts or to permit interested property owners to present relevant information³ can combine to establish that a decision is not fair and reasonable.  Decisions made pursuant to written guidelines consistently applied throughout a community are nearly always upheld if within the scope of the design-control power granted by the declaration.  Decisions made without deliberation and articulation of reasons for the decision, decisions based on irrelevant criteria or erroneous information, and decisions that violate association guidelines are nearly always held unreasonable.

3.  For an analysis by the Utah Court of Appeals of an association's requirement to obtain neighbor approval for an architectural request, see Rapoport v. Four Lakes Village Homeowners Ass'n., 2013 UT App 78, 300 P. 3d 327, at ¶ 17, 18.

Key points:

• Approval of plans that violate the CC&Rs is unreasonable.  See, e.g., Castonguay v. Plourde, 699 A.2d 226 (Conn.Ct.App.1997), certif. denied, 701 A.2d 660 (Conn.1997) (developer’s approval of house location ineffective where house would substantially interfere with panoramic view of other lot owners; covenant provided that location of buildings was subject to written approval of developer or its successors “to preserve the view of other lot owners”).  See also Smith v. Butler Mountain Estates, 324 N.C. 80, 375 S.E.2d 905 (1989) (committee has no power to waive minimum-square-footage requirement included in covenants).
• Reasonableness may be largely a question of process.  See, e.g., Ironwood Owners Ass’n IX v. Solomon, 224 Cal.Rptr. 18 (Ct.App.1986) (key issue was whether association had shown that it had followed its own standards and procedures, that procedures were fair and reasonable, and that substantive decision was made in good faith and was reasonable and not arbitrary or capricious).

The Community Association Act prohibits board-adopted rules or design criteria (as opposed to the CC&Rs) from divesting a lot owner of the right to proceed in accordance with a completed application for design review, or to proceed in accordance with another approval process, under the terms of the governing documents in existence at the time the completed application was submitted by the owner for review.  See Section 57-8a-218(13).  The act also prohibits a rule or design criterion from requiring a lot owner to dispose of personal property that was on a lot before adoption of the rule if the item was in compliance with governing documents previously in force (but the rule does apply to a subsequent lot owner, so that the subsequent owner may be required to remove the item).  See Section 57-8a-218(10).  The CC&Rs may override these provisions of the act, however.  See 57-8a-218(19).