By Matt D. Ober, Esq.
Q: How can our association protect itself from liability associated with home businesses operated by owners, such as a day care or a bookkeeping service, that may have clients occasionally or regularly visiting the community? How can we address other problems, such as noise or wear and tear on association common areas? —Anaheim, Calif.
A: The analysis begins with the association's governing documents. The CC&Rs may contain restrictions regulating the business use of a home or commercial operations in separate interests, such as, "No owner shall occupy or use his or her unit for any purpose other than a private single-family residence without board approval."
But today's residential reality suggests these types of business-use restrictions likely were adopted before the widespread acceptance of the home office. Many people—from psychologists and computer software creators to artists, massage therapists and lawyers—use their homes for business. Most residents have home computers, and many use them for work. A total prohibition of any business use of a home may be unrealistic.
That doesn't mean all businesses must be permitted. Business-use restrictions in governing documents provide the board with considerable authority to limit the separate interest to residential use. Any business that creates an unreasonable risk of liability to the association, excessive noise, foot traffic or other interference with the use and enjoyment of the property, or places any resident's health, safety or welfare at risk can and should be regulated. The board can adopt a policy or a set of rules that focus on the factors that impact the quiet enjoyment of the other residents, unreasonably burden the property, or otherwise create a nuisance or interference.
The association's rules should identify the general conditions upon which any commercial or business use will be approved and identify the conditions that are prohibited, such as excessive noise, late hours of operation and loitering of "clients" in the common area. If the governing documents so provide, the board can require an application for any residential business use. Approval can be subject to additional conditions, such as proof of liability and property damage insurance, prohibiting employees on-site, or regulating package shipment and deliveries, vehicle parking and hours of operation. Finally, any conditional approval or rule should require the owner to pay for any damage to common areas resulting from the nonresidential use.
Some business uses, including day care and rehabilitation centers, are protected, but reasonable restrictions are permitted. They may include licensing, compliance with state and local laws, indemnifying the association from liability, and, at least for day care operations, requiring supervision throughout common areas and recreational facilities.
Matt D. Ober is a partner at Richardson Harman Ober, based in Pasadena, Calif., and a member of CAI's College of Community Association Lawyers (CCAL).
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