## Facts

- Kite Hill was a planned residential community governed by recorded CC&Rs enforced by a homeowners’ association and an architectural committee.
- Kenneth Cohen and his spouse bought a premium “view” lot and paid more for the panoramic view; as owners, they were mandatory members of the association and subject to assessments.
- The CC&Rs imposed detailed architectural and fencing restrictions, including different fence types for lots with views versus lots without views, and required prior written approval for improvements.
- The Cohens submitted plans and received approval for a conforming fence (slump stone base with wrought iron) designated for a side yard with a view.
- The association later approved a neighboring owner’s solid slump stone fence immediately adjacent to the Cohens’ fence, a type designated for a side yard without a view.
- The Cohens objected that the approved solid fence materially obstructed their view and diminished property value, and alleged the association approved a nonconforming fence contrary to the CC&Rs.
- The Cohens alleged the association had duties under the CC&Rs to preserve aesthetics and property values and to enforce the architectural scheme, and that it acted arbitrarily and in bad faith.
- The CC&Rs included exculpatory provisions the association invoked as shielding it from liability for enforcement-related decisions, including actions taken in good faith.

## Issues

1. Whether the fourth amended complaint stated a cause of action against the association for arbitrary or bad-faith approval of a nonconforming fence and failure to enforce the CC&Rs.
2. Whether the CC&Rs and the association’s role impose a duty to exercise architectural-control discretion reasonably and in good faith.
3. Whether exculpatory provisions in the CC&Rs can bar claims alleging arbitrary, capricious, or bad-faith conduct by the association.

## Decision

- The Court of Appeal reversed the judgment of dismissal entered after the trial court sustained the association’s demurrer without leave to amend.
- The court held the fourth amended complaint sufficiently pleaded a cause of action based on alleged arbitrary and bad-faith administration and enforcement of the CC&Rs.
- The court recognized the association’s duty to exercise discretionary enforcement and approval powers reasonably, non-arbitrarily, and in good faith.
- The court held exculpatory CC&R provisions were unenforceable to the extent they were construed to bar claims alleging the association acted arbitrarily or in bad faith.
- The matter was remanded for further proceedings.

## Legal Principles

- Recorded CC&Rs in a common-interest development create enforceable obligations governing owners and the association charged with administration and enforcement.
- A homeowners’ association vested with discretionary architectural-control powers must exercise those powers reasonably, consistently with the governing restrictions, and in good faith.
- Judicial review is available where an owner alleges the association acted arbitrarily, capriciously, or in bad faith in applying architectural restrictions.
- Exculpatory provisions cannot be enforced to immunize an association from liability for arbitrary or bad-faith conduct in administering and enforcing CC&Rs, as such insulation is contrary to public policy.

## Conclusion

The appellate court held that homeowners stated a claim where they alleged an association approved a nonconforming, view-obstructing fence in violation of detailed CC&Rs, and it limited exculpatory provisions by refusing to permit contractual immunity for arbitrary or bad-faith enforcement decisions.


Cohen v. Kite Hill Cmty. Ass’n, 191 Cal. Rptr. 209 (Cal. Ct. App. 1983)