News

Written by: Julie Ladle

You receive a notice from your HOA. According to the letter, you’ve been fined $100 because your trash can was visible from the street.  Your first thought might be: “Can they really do that?”

The answer is generally yes—but only if the HOA follows Utah law and their own governing documents. An HOA’s authority to impose fines is not unlimited, and HOAs that fail to follow the required procedures may find their fines difficult—or impossible—to enforce.

Can an  HOA Fine Owners Simply Because It Wants To?

No.  Before an HOA can assess a fine, the HOA must follow statutory requirements and any additional requirements contained in the HOA’s governing documents.  Statutory requirements stem from the Utah Community Association Act and the Utah Condominium Ownership Act (collectively the “Acts”), as applicable.  The Acts require that a written warning (“Notice of Violation”) be first provided to the offending owner.  The Notice of Violation shall:

1. 1. 1. Describe the violation;
      2. State the provision of the governing documents that the conduct violates;
      3. State the HOA may assess fines against the owner if a violation of the same provision occurs within one (1) year of the Notice of Violation;
      4. In the case of a continuing violation, contain a statement that if the violation is not remedied by a specified compliance deadline (of at least 48 hours), fines may be assessed.

After sending the Notice of Violation, the HOA may impose fines if the violation is repeated any time within a one (1) year period of time after the Notice of Violation is sent or if the violation is not cured or ceased within the time specified in the Notice of Violation. For continuing violations remaining uncured, fines may continue to be assessed every ten (10) days. In the condominium context, the aggregate amount of fines assessed against an owner for violations of the same provision of the governing documents may not exceed $500 in any one calendar month.  All fines must be based on a written schedule of fines that has been adopted by the HOA.

Can Owners Appeal a Fine?

Yes.  Under the Acts, an owner has the right to request an informal hearing with the HOA within thirty (30) days from the date a notice is provided to the owner stating that a fine has been assessed by the HOA. If an Owner timely requests a hearing, no interest or late fees on the fine(s) may accrue until after the hearing and final decision.  At the hearing, the HOA shall provide the owner a reasonable opportunity to present owner’s position to the Board and shall allow all persons involved in the hearing to participate by means of electronic communication.  An owner may appeal an assessed fine by initiating a civil action within 180 days after: (1) if the owner timely requests a hearing, the day on which the owner receives a final decision from the HOA; or (2) if the owner does not timely request a hearing, the day on which the time to request an informal hearing expires.

Are Fines Enforceable? 

Likely yes, provided the HOA follows the Acts and any separate requirements in the HOA’s governing documents.  Fines are enforcement tools to keep the community running smoothly and efficiently.   The HOA Board has the responsibility to consistently enforce the governing documents against all owners in the community.   If not, the community suffers, and the governing documents become meaningless and harder and harder to enforce.   

What If My HOA Has Questions?

The attorneys at Miller Harrison will be happy to discuss any questions and concerns that arise regarding fines and ensure that HOAs are assessing fines correctly.   Feel free to reach out to our office for further information.

Written by: Nathan Westover

If you’re a developer building a new residential community in Utah, or a home buyer purchasing a brand-new house, it’s important to understand the unique relationship that you’re entering into. When a community is first built, the developer essentially wears two hats: they are both the builder of the neighborhood, and they are the initial, controlling board of the Homeowners Association (the “HOA”). For developers, this dual role comes with specific legal responsibilities. For home buyers, understanding these responsibilities is key to knowing what to expect when the neighborhood eventually transitions from developer control to homeowner control.

In 2009, the Utah Supreme Court decided a landmark case called Davencourt at Pilgrims Landing v. Davencourt, LC, which established a clear guideline for developers. In that decision, the court made it clear that, while developers remain in control of the HOA’s board, they owe the association a limited fiduciary duty. For developers, following these guidelines is the best way to prevent lawsuits from aggrieved homeowners. For home buyers, these are the standards you should expect your home’s builder to uphold before they turn the board over to the community.

In Davencourt, the Court articulated the following duties owed by developers prior to turnover of the HOA:

(1) to use reasonable care and prudence in managing and maintaining the common property;

(2) to establish a sound fiscal basis for the association by imposing and collecting assessments and establishing reserves for the maintenance and replacement of common property;

(3) to disclose the amount by which the developer is providing or subsidizing services that the association is or will be obligated to provide;

(4) to maintain records and to account for the financial affairs of the association from its inception;

(5) to comply with and enforce the terms of the governing documents, including design controls, land-use restrictions, and the payment of assessments;

(6) to disclose all material facts and circumstances affecting the condition of the property that the association is responsible for maintaining; and

(7) to disclose all material facts and circumstances affecting the financial condition of the association, including the interest of the developer and the developer’s affiliates in any contract, lease, or other agreement entered into by the association.

While these duties exist largely to protect homeowners, understanding and complying with them is vital for protecting developers from potential lawsuits. For example, in order to attract buyers, it may be tempting for a developer to subsidize certain HOA amenities so that the HOA dues remain low. However, this can create a real problem for homeowners after turnover when they discover that their dues will suddenly skyrocket because those subsidies are no longer around.

To avoid this trap, developers must establish a sound, realistic fiscal basis for the HOA from day one. If a developer chooses to subsidize costs to help with sales, they have a strict legal duty to fully and transparently disclose those subsidies to the buyers. Homeowners should understand the real costs of the HOA – such as the costs for maintaining the clubhouse, the pool, or landscaping – so that they can make an informed decision.

Additionally, Davencourt requires that developers run the association in a manner that can be replicated by the HOA’s actual board after turnover. As such, it is vital to keep clean, transparent accounting records to help ensure that when the homeowners take over, they aren’t left untangling years of messy accounting. Further, while it is common for developers to hire affiliated companies to work on the community, those relationships must be openly disclosed to the association. Developers should avoid binding HOA communities to long-term contracts, as those will likely be challenged in the future if better options are discovered later.

Developers also have a duty to take care of the HOA’s common areas. While they are in charge, they are responsible for using reasonable care to maintain the parks, roads, and clubhouses. If there are material issues with the property that the HOA is going to inherit, the developer has a duty to disclose this to potential buyers. Importantly, developers must also play by their own rules and enforce the community’s Covenants, Conditions, and Restrictions (CC&Rs) consistently, even while construction is still ongoing. Failing to do so can cause issues with future boards who will have to enforce the CC&Rs as written, but will have no track record of doing so to back them up.

If you are a developer, these duties might sound like a heavy burden, but they can actually protect you from lawsuits if you fulfill your obligations. In Utah, the Economic Loss Rule generally prevents owners from suing a developer under tort theories, such as negligence, when the damages suffered by the owner are purely economic. With limited exceptions, any duty owed by the developer must be spelled out in writing in a contract between the parties. However, if a developer breaches their Davencourt duties, they open the door for plaintiffs’ attorneys to bypass the Economic Loss Rule and bring tort claims (such as breach of fiduciary duty). By strictly treating the Davencourt duties as a compliance checklist, developers can protect themselves from costly post-transition lawsuits while setting the new community up for long-term success.

The transition from developer control to homeowner control doesn’t have to be a battleground. When developers act proactively and home buyers know what to expect, turnovers can be smooth and conflict-free. Whether you are a developer looking to prevent turnover-based lawsuits, a property manager, or a newly formed board learning to manage your HOA, proactive legal guidance is your best asset. Reach out to the team at Miller Harrison today to discuss how we can help safeguard your community’s transition.

Written by: Peter Harrison

Utah homeowners’ associations rarely find themselves in legal trouble because someone forgot the secret HOA handshake. More often, disputes arise from familiar issues: inconsistent enforcement, confusing assessments, unanswered records requests, poorly documented board decisions, and rules adopted without following the proper procedure.

Recent data provided by the Utah HOA Ombudsman’s Office illustrates the point. Of 146 opinions submitted during the reporting period, the leading issues were:

• Compliance with and enforcement of governing documents: 27.2%
• Fees and assessments: 11.4%
• Records requests: 10.5%
• Board authority and conduct: 10.5%
• Budgets: 9.6%
• Fines and enforcement procedures: 7.9%
• Rule adoption: 7%
• Amendments to governing documents: 5.3%
• Meeting notices: 5.3%
• Board or management committee meetings: 5.3%

Those numbers tell a fairly clear story: most HOA disputes are preventable.

As Ted Lasso reminds us, “Be curious, not judgmental.” That is excellent advice for soccer coaches, HOA boards, owners, and lawyers. Before assuming an owner is unreasonable—or that the board is operating a miniature dictatorship—ask what the governing documents actually say, what procedures were followed, and whether everyone received the same information.  Let’s examine the 5 biggest trouble spots.

1. Enforcement Is the Biggest Source of Disputes

More than one-quarter of the Ombudsman opinions concerned compliance with or enforcement of governing documents. That should surprise no one. Enforcement becomes combustible when one owner receives a violation letter while another owner’s identical violation is ignored.

Utah law generally requires similarly situated owners to be treated similarly. An association should therefore avoid selective enforcement, personal exceptions, informal “handshake” deals, and rules that exist only in the institutional memory of the longest-serving board member.

Before enforcing a restriction, the board should confirm:

1. The restriction actually appears in an enforceable governing document or properly adopted rule.
2. The association has authority to enforce it.
3. The restriction has been applied consistently.
4. The notice accurately identifies the violation and the controlling provision.
5. The owner receives any hearing or cure rights required by statute or the governing documents.

Utah courts generally interpret recorded covenants under ordinary principles of contract interpretation. If the language is unambiguous, courts apply its plain meaning rather than rewriting it to produce the result one side prefers. See Fort Pierce Industrial Park Phases II, III & IV Owners Association v. Shakespeare, 2016 UT 28; Gables at Sterling Village Homeowners Association v. Castlewood-Sterling Village I, LLC, 2018 UT 04.

That means a board should read the documents before sending the violation letter—not after the owner responds with a seven-page email copied to the entire neighborhood.

2. Fees and Assessments Require More Than a Spreadsheet

Fees and assessments accounted for 11.4% of the opinions. Assessments are essential: roofs, roads, insurance, landscaping, water systems, and snow removal are not paid for with goodwill and leftover refreshments from the annual meeting.

But assessments must be imposed under the declaration, bylaws, and applicable statutes. Boards should document:

• The authority for the assessment;
• The board action approving it;
• The allocation among owners;
• The due date and payment schedule;
• The notice delivered to owners;
• The account ledger for each owner; and
• The statutory and contractual basis for late fees, interest, collection costs, and attorney fees.

Utah law currently limits late fees in community associations to the greater of 10% of the assessment or $50, and permits interest of up to 1.5% per month, provided the board has adopted and distributed the required fee schedule. Associations should review older collection policies rather than assuming that a fee adopted years ago remains enforceable.

In Hi-Country Estates Homeowners Association v. MountainTop Properties, LLC, 2023 UT 8, the Utah Supreme Court upheld an HOA’s ability to recover assessments where the association’s authority had been ratified. The case also demonstrates why associations should maintain clear records establishing the source of their assessment authority and the calculation of the amount claimed.

3. Treat Records Requests as a Compliance Function

Records requests represented 10.5% of the Ombudsman opinions, including the very first opinion issued by the office. Many of these disputes could be avoided by having a written records-request procedure and one designated person responsible for administering it.

Utah law requires associations to maintain and make available specified records, including governing documents, approved minutes, budgets, financial statements, reserve analyses, insurance certificates, recent board minutes, profit-and-loss statements, and balance sheets.   These records are likely to change in the near future, always pay attention to the new legislation.  Certain information—including Social Security numbers, bank account numbers, and privileged communications—may be redacted.

Associations should:

• Date-stamp every request;
• Identify the records requested;
• Determine which records must be produced;
• Identify lawful redactions or exclusions;
• Respond within the statutory period;
• Keep a copy of the production; and
• Document when and how access was provided.

Ignoring the request is rarely the winning strategy, particularly when you could have statutory damages and be liable for attorney fees. Producing 1,500 pages without an index and announcing “it’s somewhere in there” is only marginally better.  Good counsel can help distinguish between a legitimate statutory request, duplicative demands, privileged information, personnel records, owner-specific information, and discovery requests that should proceed through pending litigation.

4. Board Authority Must Be Exercised Through Board Action

Board issues accounted for another 10.5% of opinions. The board normally manages the association’s affairs, but authority must be exercised in accordance with the declaration, bylaws, statutes, and proper meeting procedures.

Board members should understand the difference between:

• A director and an officer;
• Board authority and membership authority;
• Regular assessments and special assessments;
• Rules and amendments;
• Open sessions and properly closed sessions;
• Individual director preferences and formal board decisions.

Meeting minutes should identify attendance, motions, seconds, votes, recusals, and the substance of material decisions. Remember they are minutes, not an extended Phish jam session, but they should allow a future board, owner, judge, or auditor to understand what happened.

In Behar v. Johnson, 2024 UT App 129, a dispute arose over whether fellow directors had authority to remove an HOA board member. The Court found that the HOA members did not follow their Declaration when they removed Behar from the Board, and ultimately awarded attorney fees against the HOA.  The litigation illustrates that governance procedures are not mere technicalities. When the governing documents assign a decision to the membership, the board cannot simply take it over because holding an owner meeting seems inconvenient.

5. Budgets Are Governance Documents, Not Just Accounting Documents

Budget questions accounted for 9.6% of the opinions. Utah law generally requires a community association board to prepare and adopt an annual budget and present it to the members. Owners may disapprove the budget through the statutory process if the required voting threshold is reached.

Boards should connect the budget to:

• Historical operating expenses;
• Current contracts;
• Insurance increases;
• Reserve-study recommendations;
• Anticipated repairs;
• Delinquencies;
• Inflation; and
• Contingency planning.

A budget should not be created by taking last year’s total, adding an amount that “feels about right,” and hoping the roof remains emotionally committed to the building for another twelve months.

Reserve studies should also be updated when required. Even when reserve recommendations are not binding, they provide evidence that the board investigated long-term needs and made an informed decision.

The Ombudsman data demonstrates that Utah’s leading HOA disputes arise from repeatable governance problems. Associations can substantially reduce their risk by following their governing documents, applying rules consistently, maintaining accurate records, documenting board decisions, and communicating clearly.

Boards should be curious:

• What authority permits this action?
• What procedure applies?
• Have similar owners been treated similarly?
• What documents support the decision?
• How will this look to a neutral judge two years from now?

That approach is better than assuming bad motives on either side. It also makes meetings shorter, records cleaner, and legal bills considerably less dramatic.  Be curious, not judgmental—and keep the association’s governance from drifting toward the dark side of the moon.

By Gavin Wenzel

You may have heard about ChatGPT but not really know what it is or what it does. “ChatGPT[a] is an artificial intelligence chatbot developed by OpenAI and launched in November 2022.”[i] But what is an artificial intelligence chatbot? I am not a computer programmer, but from my non-technical perspective, it is an interactive computer-based chatroom. A user can have a conversation with ChatGPT, or even ask it to perform tasks. As at least one college professer observed, ChatGPT could be “the greatest cheating tool I’ve ever seen.”[ii] Educators are concerned about the ease with which students can complete assignments without engaging in the work and learning required to produce an assignment.[iii]

I recently tried ChatGPT for the first time and decided to find out what computers think about homeowners associations. As Thomas Kuhn has been attributed as saying, The answers you get depend on the questions you ask.” So if you like HOAs, you may get positive answers. If you don’t like HOAs, I’m sure ChatGPT can help validate your concerns. Below are three prompts I inputted to ChatGPT and the responses I received. Enjoy.

First Prompt: what is ChatGPT

I am ChatGPT, a language model developed by OpenAI. I am designed to understand natural language and generate responses that are intended to be human-like. I use a complex algorithm called a transformer neural network to analyze text inputs and generate text outputs. My goal is to help people find answers to their questions and engage in conversations on a wide range of topics.

Second Prompt: write an essay about the best reasons to live in an HOA

A Homeowners Association (HOA) is a community organization that is responsible for managing and regulating the common areas and amenities of a residential neighborhood. HOAs are becoming increasingly popular in many parts of the world, especially in the United States. While some people may view HOAs as a nuisance, there are many compelling reasons why living in an HOA can be beneficial. In this essay, I will discuss some of the best reasons to live in an HOA.

First and foremost, HOAs help to maintain property values. The HOA is responsible for ensuring that all homes in the community are kept in good condition, and that any changes made to the exterior of the homes are in compliance with the community’s architectural guidelines. This helps to ensure that the neighborhood remains attractive and well-maintained, which can help to increase property values over time. Additionally, the HOA is responsible for maintaining common areas such as parks, playgrounds, and swimming pools, which can also add value to the neighborhood.

Secondly, living in an HOA can provide a sense of community. HOAs often host social events and activities, such as block parties, holiday celebrations, and community service projects. This can help residents to get to know their neighbors and feel more connected to the community. Additionally, HOAs often have committees that residents can join to help shape the direction of the community, which can give residents a sense of ownership and pride in their neighborhood.

Another advantage of living in an HOA is that it can help to resolve disputes between neighbors. The HOA is responsible for enforcing the community’s rules and regulations, which can help to prevent conflicts from arising in the first place. If a dispute does arise, the HOA can help to mediate the situation and find a resolution that is fair to all parties involved.

Furthermore, living in an HOA can provide access to amenities that would be too expensive for an individual homeowner to afford on their own. For example, the HOA may have a clubhouse, fitness center, or tennis courts that are available to all residents. These amenities can be enjoyed by everyone in the community, regardless of their individual financial means.

Lastly, HOAs can provide a sense of security. HOAs often have security measures in place, such as gated entrances and security patrols, that can help to deter crime in the neighborhood. Additionally, the HOA may have rules in place that restrict parking on the streets or limit access to the community, which can help to keep unwanted visitors out.

In conclusion, while HOAs may not be for everyone, there are many compelling reasons why living in an HOA can be beneficial. From maintaining property values to fostering a sense of community, an HOA can provide many advantages to homeowners. If you are considering purchasing a home in an HOA, it is important to carefully review the community’s rules and regulations to ensure that they align with your individual needs and preferences.

Although my third prompt was intended to be a neutral question, ChatGPT’s version of humor (at least in the HOA context) is decidedly snarky.

Third Prompt: write me a funny essay about home owners associations

Home Owners Associations (HOAs) are a funny thing. They are like that one strict teacher you had in high school who never let you have any fun. You know the one who always made you follow the rules and never let you have any creative freedom. Well, that’s exactly what HOAs are, except they are for your house.

For those who are not familiar with HOAs, they are basically a group of people who make sure that your house and yard look perfect all the time. They have a list of rules that you have to follow, and if you don’t, they will fine you. They are like the fashion police, but for your lawn.

One of the funniest things about HOAs is the ridiculous rules they have. For example, in some HOAs, you are not allowed to park your car in your own driveway overnight. Yes, you read that right. You can’t even park your own car in your own driveway. This is like telling a bird it’s not allowed to fly.

Another hilarious rule is that you have to get approval from the HOA before you can change the color of your house. I mean, who cares what color your house is? It’s not like it’s going to offend anyone. Unless you paint it hot pink, then maybe you deserve a fine.

The best part about HOAs is the meetings. It’s like watching a bunch of adults argue over who has the prettiest flowers in their yard. It’s like a beauty pageant, but for houses. And let’s not forget about the election process. It’s like running for class president in middle school all over again, but this time it’s for the position of “lawn chairperson”.

The worst part about HOAs is that they can be very strict. You can’t have too many decorations in your yard, you can’t have weeds, and you can’t have a trampoline. What kind of life is that? No decorations, no weeds, and no trampoline? That’s like telling a kid they can’t have ice cream.

In conclusion, HOAs are like that one strict teacher you had in high school, but for your house. They have ridiculous rules, funny meetings, and can be very strict. But hey, if you follow their rules, your lawn will look great. Just don’t forget to hide your trampoline.

[i] https://en.wikipedia.org/wiki/ChatGPT

[ii] https://www.ksl.com/article/50576821/once-in-a-lifetime-opportunity-how-one-college-professor-is-leaning-into-ai-and-chatgpt

[iii] Id.

By Tyler S. LaMarr

Attorney with Miller Harrison LLC

If you’ve ever worked with a Condo Association to obtain project approval for FHA financing, you are aware that the process can be cumbersome.  It involves gathering and presenting governing documents, financial statements, and insurance policies, among other required documentation and certifications. 

Sometimes, applications are denied on inconsistent bases and additional documents are requested by the Department of Housing and Urban Development (“HUD”) before approval is granted.  An association must prove it has adequate reserves and at times demonstrate it has kept up on appropriate maintenance for the age of the project.

On August 14, 2019 HUD announced publication of the long-awaited final regulation, and policy implementation guidance, which establish a new condominium approval process.[1] The new guidelines are intended to streamline the process and increase the number of FHA loans.

HUD recognizes that condominium projects have become a source of affordable homeownership and HUD secretary Ben Carson desires to encourage and facilitate homeownership by facilitating more FHA loans.

Here are the key points to be aware of:

·      The new policy went into effect on October 15, 2019;

·      The new policy introduces a new single-unit approval process to make it easier for individual condominium units to be eligible;

o   Individual units may be eligible so long as no more than 10% of individual units are FHA insured (no more than 2 in a project with 10 or fewer units)

·      The new policy will allow for approval of more mixed-use projects (buildings with both commercial and residential units). The new policy offers flexibility to adapt to market conditions. Deviations from the long-standing guidelines will be published in reaction to varying market conditions. This allows HUD discretion to approve projects even if:

o   Owner-occupancy status is less than 50%

o   FHA concentration of loans in the project exceeds 50%

o   Or reserve contributions are less than 10% of the annual budget

·      The new policy provides that any unit that is occupied by the owner as his or her place of abode for any portion of the calendar year other than as a principal residence and that is not rented for a majority of the calendar year shall count towards the total number of owner occupied units.

Although the new policy will allow spot approval of an individual condo unit in an otherwise unapproved project, most condominium associations will still desire to pursue project wide approval so that the concentration of loans exceed 10%. 

The final rule also publishes helpful HUD responses to public comments that provide insight on HUD’s approval process and general eligibility for FHA approval.

[1] https://www.hud.gov/press/press_releases_media_advisories/HUD_No_19_121

Importance of Contract Review

Some time ago we posted an article by Tyler LaMarr with a checklist of essential terms for HOA contracts. 

A recent Utah Supreme Court ruling involving an HOA underscores how important contracts can be to protecting an HOA from liability and exposure to damages. The case is called  Mounter Enterprises, Inc., v. Homeowners Association for the Colony at White Pine Canyon, 2018 UT 23. 

 The Mounteer case shows how Utah law strongly favors the enforcement of specific clauses contained within a contract.  As a disclaimer, I have strong feelings on this case as I was personally named as a defendant by Mounteer Enterprises when the case was filed for engaging in an alleged civil conspiracy.  I was immediately dismissed from the case in a summary judgment proceeding because there were no facts supporting the civil conspiracy nor was there any legal basis for bringing such a claim against me. 

 The facts of the case are pretty straight forward.  Mounteer and the Colony entered a contract for snow removal services.  The contract required that Mounteer maintain $7 million in aggregate insurance coverage. The contract provided that if Mounteer failed to purchase the necessary insurance the HOA could immediately terminate the contract, withhold payments until Mounteer cured the default, or purchase the required insurance and deduct the premiums from payments due to Mounteer. The contract also contained an anti-waiver provision. That provision stated that “[f]ailure of the [HOA] to demand such certificate or other evidence of full compliance with these insurance requirements or failure of the [HOA] to identify a deficiency in the form that is provided shall not be construed as a waiver of Mounteer’s obligation to maintain such insurance.”

During the four-year period of the initial contract Mounteer only had insurance in an aggregate of $5 million.  However, despite the failure to comply with the express terms of the contract the Colony paid Mounteer for all services rendered.  The Colony then entered a new four year contract with substantially similar terms.  Three months into the new contract a conflict arose and the Colony, after providing Mounteer with multiple opportunities to comply with the insurance requirement, terminated the contract for failure to maintain adequate insurance. 

Mounteer sued for breach of contract and breach of the implied covenant of good faith and fair dealing. It asserted that the HOA had implicitly waived its right to require strict compliance with the insurance provision when the HOA approved the certificates of insurance and paid Mounteer every billing cycle. And it claimed that this conduct was enough to overcome the existence of the anti-waiver provision.

The jury found the HOA liable for breach of contract and awarded Mounteer $578,000 in damages. The district court then awarded Mounteer attorney fees and costs as the prevailing party.

The jury verdict was appealed by the Colony and the Utah Supreme Court examined the express language of the contract to determine whether the Colony had waived their right to require that Mounteer strictly comply with the terms of the contract. 

The Utah Supreme Court looked at the question of what a party must show to establish waiver of both the underlying provision and the anti-waiver clause. It is settled law that an express waiver of a contractual right is sufficient to waive both provisions. Calhoun v. Universal Credit Co., 146 P.2d 284, 285–86 (Utah 1944). The Utah Supreme Court concluded that the mere failure to insist on performance of an underlying contract provision is insufficient to establish the intentional relinquishment of a party’s rights under the antiwaiver provision. The Court determined that because the failure to insist on performance after breach is entirely consistent with the rights set out in the anti-waiver provision—rights of flexibility that often benefit the otherwise-breaching party. And a finding of waiver in such circumstances would thus render the antiwaiver provision meaningless.

When Mounteer failed to acquire sufficient insurance it ran the risk that the HOA would discover the deficiency and terminate the contract. And the HOA was thus within its rights in terminating Mounteer for its failure to secure the liability insurance required by the contract. The Court reversed on this basis. 

Because the Utah Supreme Court reversed the trial court and found the Colony to be the prevailing party, they were awarded all of their attorney fees and costs and Mounteer was not entitled to any damages.  Both the anti-waiver provision and the termination for failure to provide insurance may have appeared to be minor or boilerplate clauses contained in a multi-page contract.  However, literally millions of dollars turned on the outcome of those two clauses. 

It is a sound business practice to consult with its legal counsel prior to entering any contract and doing so affords an HOA the protections of the Business Judgment Rule.  An effective review of your service contracts will ensure that the necessary clauses are included in your contracts. Remember that An Ounce of Prevention is Worth a Pound of Cure  particularly when it comes to avoiding costly litigation.