DE Court Says Architectural Restrictions Were Applied Arbitrarily & Unreasonably & Are Unenforceable

Delaware Court of Chancery decision (December 22, 2014)

This case involved a dispute between a condominium owner and her homeowners association over the owners attempted modifications to her separate interest property that the association contended were in violation of the association’s governing documents. Specifically, the unit owner sought to extend a deck and enclose her porch using large windows on the rear side of the unit, rather than the sliding glass doors which were utilized when the unit was constructed. The homeowners association (governing council) denied the requested modifications on the basis that the applicable restrictions mandated that the desired improvements be “substantially similar to the original construction” and that meant the owner had to use sliding glass doors.

In reviewing the case, the court commented that restrictions in an association’s governing documents like those relied upon by the governing council are generally upheld as valid, but are viewed with suspicion due to the tendency of such review to be arbitrary, capricious, and therefore unreasonable. Because settled Delaware law requires strict construction of such covenants, when an architectural review covenant is vague, imprecise, or unclear, the grant of authority normally is not enforceable. Applying these standards, the court concluded that the governing council’s denial of the owner’s requested modifications rested on an interpretation of the governing documents that was unreasonable and unsupportable. Because the sections of the governing documents that required approval of the council for improvements to a unit did not contain any standard articulating the factors the council should apply in evaluating a request, the court determined that the sections were unenforceable under Delaware law.

The court further found that, even if were required to be substantially similar to the original construction, the council applied the standard arbitrarily in its rejection of the owner’s requested modifications. The undisputed facts showed that the council did not apply the required standard to its review of the owner’s application and that the council had previously approved similar modifications by other owners. Accordingly, the denial of the owner’s application was arbitrary and unreasonable. The court further stated that the standard the council relied upon was so vague and imprecise as to be unenforceable.

Having determined that the applicable provisions contained in the association’s governing documents were vague and unenforceable, the court concluded that the homeowner was entitled to a declaratory judgment that those sections of the governing documents requiring the council’s prior approval of additions, alterations, or improvements were unenforceable and as such, the homeowner could proceed with her improvements without the governing council’s approval.

See case decision: Benner_v._Council_of_the_Nar