## Facts

- Steven and Doris Pertzsch owned residential lakeside property on Upper Oconomowoc Lake subject to recorded restrictive covenants.
- The covenants limited lots to residential use and generally allowed only a single-family dwelling and private garage, but stated that “a boat house may be permitted with consent of the Architectural Control Committee.”
- The covenants required committee approval of construction plans as to workmanship/materials, harmony of external design with existing structures, and location factors including topography, grade, setbacks, and related placement considerations.
- In 1999, the Pertzsches submitted plans for a residence and a detached lakeside boathouse.
- The Architectural Control Committee approved the house but denied the boathouse, stating it was not in conformity or harmony with existing structures and raising topography and setback concerns.
- It was undisputed that the boathouse plans satisfied the covenants’ specific, stated standards, including setback requirements.
- The committee’s only factual basis for denial was that no other detached boathouses existed on the lake.
- The circuit court reversed the committee’s denial as arbitrary and capricious; the association appealed.

## Issues

1. Whether covenants providing that a “boat house may be permitted with consent of the Architectural Control Committee” contemplate detached boathouses, or allow the committee to effectively prohibit them.
2. Whether an architectural control committee acts arbitrarily and capriciously by denying a covenant-authorized structure solely because no similar structures yet exist, despite compliance with stated standards.

## Decision

- The Wisconsin Court of Appeals affirmed the circuit court’s order reversing the committee’s denial.
- The court held the covenants expressly contemplate boathouses as permissible structures subject to committee consent.
- The court rejected the association’s position that the covenant limited boathouses to attached or integrated designs, noting the covenants expressly required attached garages but imposed no similar limitation on boathouses.
- The court concluded the denial was arbitrary and capricious because it rested only on the absence of prior detached boathouses and not on a violation of any objective, covenant-based criteria.
- The committee’s reliance on “harmony” could not be used to negate an expressly permitted structure where the only asserted disharmony was lack of precedent.

## Legal Principles

- Restrictive covenants are construed based on their text; an approving authority cannot add limitations that the covenants do not state.
- An architectural control committee’s discretion must be exercised consistently with the express terms and purposes of the covenants.
- A committee may not use generalized design-review standards (such as “harmony”) to impose a de facto blanket prohibition on a category of structure that the covenants expressly allow.
- A denial lacking an objective basis tied to the covenants’ stated criteria, and effectively nullifying an express covenant permission, is arbitrary and capricious and is unenforceable.

## Conclusion

Because the covenants contemplated boathouses and the Pertzsches’ proposal met the stated standards, the committee’s denial based solely on the fact that no detached boathouses yet existed was arbitrary and capricious; the order reversing the denial was affirmed.


Pertzsch v. Upper Oconomowoc Lake Ass’n, 248 Wis. 2d 219, 635 N.W.2d 829 (Wis. Ct. App. 2001)