‘Grossly out of proportion’: HOA can’t tear down noncompliant homes

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The Western District of Virginia held that it would be “grossly out of proportion” to allow a homeowner’s association, or HOA, to destroy three homes that were built without approval of its architectural review board that didn’t exist at the time.

Although its president knew of the construction, the HOA claimed the owners breached the declaration and bylaws by not seeking proper approval and building noncompliant structures.

But U.S. District Judge Norman K. Moon said that, even if the owners had breached the declaration and bylaws, tearing down the homes was improper.

“As Defendants point out and Plaintiff acknowledges, replacing the supposedly non-conforming mailboxes, wood decks and windows does not require demolishing the houses. Indeed, it would be wasteful to do so,” Moon wrote.

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

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

Noncompliant homes

Mansour and Nick Etemadipour bought three lots within Thomas Jefferson Crossings subdivision in Forest, each of which was subject to the covenants and restrictions set forth in the HOA’s declarations and bylaws.

Those covenants and restrictions empowered an architectural review board to evaluate new construction in the HOA properties and required lot owners submit plans for approval.

However, the review board didn’t exist when the Etemadipours bought their lots.

The Etemadipours built homes on the lots, kept the HOA president informed of their progress and offered inspections during the process. Despite using the original neighborhood developer’s plans, the homes were built with noncompliant decks, windows and basements.

The HOA sued for breach of contract, citing the covenants and restrictions of the HOA declaration and bylaws, which the parties acknowledged was a binding contract.

The Etemadipours argued they were entitled to summary judgment; it was impossible for them to comply with the HOA’s covenants and restrictions, and the remedies sought were improper.

Having transferred title of the properties to JUD Management, the Etemadipours also said the HOA failed to join a required party. The HOA responded that they weren’t notified of the transfer.

Prevention doctrine

The Etemadipours didn’t dispute that they owed a legal duty to the HOA but claimed their performance was prevented because the HOA hadn’t established its architectural review board.

The HOA admitted it had no records showing adequate review systems were in place at the time.

“As a general rule, ‘[t]here is an implied condition of every contract that one party will not prevent performance by the other party,’” Moon pointed out. “This ‘so-called prevention doctrine’ can be used either offensively — i.e., to recover damages — or defensively — i.e., to excuse nonperformance of a contract.”

Offensive use requires a plaintiff to show that the other party’s preventative conduct was both wrongful and in excess of their legal rights, while “specific malevolent intent need not be shown when the doctrine is applied defensively,” the judge explained.

Yet, the nonperforming party must still show that “‘the preventing party … deliberately [took] steps to impede performance or [] arbitrarily impaired the[ir] ability to perform’” the contract, even when using the doctrine defensively, Moon noted.

Here, the judge concluded there was a dispute of material fact about whether the architectural review board was the only entity capable of approving building plans.

“Plaintiff cannot neglect to form an Architectural Review Board and then complain that Defendants did not make use of that non-existent entity,” he wrote. “Such bad faith would surely count as ‘arbitrarily impair[ing]’ Defendants’ ability to perform on the contract.”

While the parties’ contract listed the HOA board as also being able to approve building plans, Moon said it was unclear whether the board actually performed that function. The HOA offered no evidence that it ever approved plans; its former president indicated they had never done so.

Hardship defense

The HOA sought an injunction pursuant to Code § 55.1-1828(A) to prevent further construction or maintenance of the noncompliant improvements, as well as $450,000 to return the Etemadipours’ lots to their “previous unimproved condition.”

Although § 55.1-1828(A) allows for relief when an owner fails to comply with a property owner’s association’s declaration, Moon said “in cases involving a violation of a real covenant, an injunction is granted almost as a matter of course’ unless a defendant can meet an exception.”

“Important here, Virginia courts have recognized an exception for when an injunction ‘would create a hardship or injustice that is out of proportion to the relief sought’ — i.e., a hardship defense,” the judge wrote.

Without having clearly identified what level of hardship or injustice was required to meet this exception, courts have determined that it must exceed mere inconvenience. Moon said the hardship doctrine was appropriate in this case.

“Even assuming that Plaintiff has suffered an injury from Defendants’ alleged violations of TJCHOA’s Declaration and Bylaws, demolition of their homes would be grossly out of proportion with the relief sought,” the judge wrote.

Here, the parties acknowledged that replacing the supposedly non-conforming improvements didn’t require demolishing the houses. “Indeed, it would be wasteful to do so,” Moon agreed.

The judge wasn’t convinced that the noncompliant slab basements warranted demolition because it wasn’t clear whether the HOA’s regulatory power was limited to a home’s external appearance and no evidence was shown that slab basements were mandatory.

And even if the HOA had that regulatory power, Moon still would refuse to order demolition.

“It is surely more than a mere inconvenience to have one’s home destroyed because of a largely indiscernible deviation in design plans; such a remedy should be considered “‘“oppressive or otherwise inequitable,”’” he wrote.

Moon then denied summary judgment regarding the HOA’s other requests for relief.

“Unlike with the destruction of Defendants’ homes, an injunction to ‘prevent further construction or maintenance of unapproved improvements’ is far narrower,” he explained. “It follows that if Plaintiff can demonstrate that Defendants violated TJCHOA’s Declaration, an injunction may be warranted.”

Finally, Moon found that the HOA hadn’t identified any prejudice which may result from allowing the Etemadipours to join JUD Management as a defendant.

Global settlement

Brenda Castañeda of Home Opportunities Made Equal of Virginia has represented the Etemadipours in multiple cases against the HOA. Amended complaints recently filed by the HOA were never served on her clients, Castañeda told Virginia Lawyers Weekly.

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