In an unpublished decision out of San Diego County, Varga v. Lomas Serenas Property Owners Association (2025 WL 3652728), the appellate court sifted through a long, contentious dispute regarding architectural control and approval between a homeowner's association and a homeowner. Ultimately, the court affirmed the trial court's judgment that the Lomas Serenas Property Owners Association's (“Association”) heavy-handed approach and inadequate investigation constituted a breach of its fiduciary duty. Moreover, the personal animosity that arose between the Association's directors and the homeowner led to a judgment for a civil assault against one director.
The Association is a planned development in Escondido, California. Tibor and Ligia Varga (“Vargas”) are owners within the Association. In 2002, the Vargas submitted plans to the Association for a substantial remodel of their home (the “Project”). The Association approved the plans in early 2003. Vargas' neighbor appealed for approval of the Project, claiming it would interfere with his view. Although the Board rejected the appeal, Vargas postponed the Project for other reasons. In 2009, the Vargas sought “reapproval” of their Project, modifying their previous plans, which were again approved pending City permit approval.
Finally, in 2011, the City granted permits, and construction on the Vargas Project began in September of that year. Unfortunately, plans changed. The Vargas' revised their plans to include a pond and an access trail from the top of their property to the bottom, eliminating a planned swimming pool. The Association and the City approved the revised plans.
As construction continued, Vargas provided an update at the Association's request. The update included mention of the pond and access trail that the Association previously approved. However, when the Vargas began pouring concrete under those plans, the Association issued a cease-and-desist order, claiming that the concrete work exceeded the scope of the approved plans.
After meeting with the Association several times over the next few weeks, Vargas submitted a second revision to satisfy the Association's requests. The Association withheld its approval and kept the cease-and-desist order in place until the City approved Vargas' second revision. The City subsequently approved the plans, but the Association refused to lift the cease-and-desist order.
The parties went to IDR and allegedly entered into a verbal agreement. However, Vargas thereafter refused to sign a proposed written agreement, claiming it did not reflect the parties' agreement in the IDR. Vargas eventually completed the Project in February 2015, and the Association levied a $75 fine against them in September 2015. The Vargas initiated litigation in 2018 over the dispute and obtained a trial court judgment in their favor on their causes of action for breach of fiduciary duty, civil assault, and declaratory relief. The court awarded them damages of $337,060.90 and $32,260.98 in attorney's fees.
The appellate court affirmed the trial court's judgment, concluding that the Association and its individual directors breached their fiduciary duties to the Vargas by repeatedly forcing them to jump through hoops, then failing to lift the cease-and-desist order when the Vargas complied. In short, the appellate court found ample evidence to suggest that the Association was not entitled to the protections of the business judgment rule and judicial deference because the Association's directors failed to act in good faith.
The takeaway is that once an Association provides an owner with clear direction regarding an architectural application, it cannot then move the goalposts to prevent the owner from completing their construction. Once the owner meets the Association's imposed conditions, the Association must act in good faith by allowing the owner to proceed. Otherwise, the Association could be in a world of hurt.
