An Open Letter to the LSM Community

The letter below appeared in the June 2019 Quail Call.  After the Quail Call was prepared for publication the plaintiff mentioned below submitted another application which is currently under review by the ACC. 


You have asked the LSMCA board to keep you informed of our progress with regards to the enforcement of the CC&Rs. It is with that in mind that we offer the following:

OUR COMMUNITY COVENANTS

Background

It is no secret that Lake San Marcos is facing tough decisions regarding the enforcement of some of its covenants – the covenants, conditions and restrictions in many of our deeds (also called deed restrictions) that have helped maintain an orderly community for more than six decades. The CC&Rs apply to approximately 800 households in the neighborhood. The CC&Rs establish rules for the improvement and maintenance of residential properties. Originally, it was the developer who enforced the rules set forth by the restrictions. Then the developer transferred enforcement authority to the Lake San Marcos Community Association. The LSMCA formed a subsidiary group – the Architectural Control Committee – to apply and enforce the regulations. Since then, the ACC has done its job, resulting in the stable community we know today. 

Lawsuits

In the ‘90s the CC&Rs were tested in court. Without ACC approvals, one property owner began the construction of a 30’ mid-rise structure that failed the test of general conformance with community standards; in fact, it stuck out like a sore thumb. The LSMCA acted and funded the suit against the property owner. Rulings in both the trial court and the Court of Appeal upheld the CC&Rs. In that instance, it was the LSMCA that took the affirmative action to enforce the covenants. Because there was no funding mechanism in the covenants (and still isn’t), the cost of litigation had to be met by voluntary contributions. Community fund-raisers saved the day.

Then, in the last couple of years, the litigation picture changed. Instead of being the plaintiff in a lawsuit to enforce the restrictions, the LSMCA became a defendant – it was sued for acting to enforce the covenant. Because it was a defendant, the LSMCA had the option of turning the defense of the lawsuit over to its insurance carrier. The carrier retained a law firm at its expense and the enforcement of the covenant was upheld, but the cost of the litigation (the lawsuit was settled at the direction and order of the insurance company) became a liability – the insurance market raised future premiums in anticipation of exposure to more litigation. While the LSMCA has been able to obtain insurance coverage, the premiums are high, and the deductible amounts of the coverage have gone up dramatically. The cost of insurance coverage appears unsustainable without a funding source. The LSMCA cannot operate without insurance.

Reaction/Solution

Earlier this year, the LSMCA Board took the problem to the community in the form of a poll. Householders were asked two questions. Would you be willing to pay an annual assessment allowing the LSMCA to continue its enforcement responsibilities? Or, would you prefer that the LSMCA transfer enforcement duties to the homeowners? Of those who responded, a majority favored paying an annual assessment, making it possible for the Association to do the job. But the survey results were unclear. So few people responded that the commitment to pay an assessment was unconvincing. At a community forum, the results were disclosed, and an alternative was suggested. At least two attendees suggested that enforcement responsibilities be turned over to another community entity, to be formed for the purpose. However, that entity would have the same liability as the ACC currently has.

Another Lawsuit

Amid this funding dilemma, the LSMCA was served with a new lawsuit, which is now pending. The new case challenged the legal right of the LSMCA to enforce the CC&R’s. The challenge was accompanied by the plaintiff’s plan submittal for a home remodeling project that has since been denied by the ACC. As was the case in the ‘90’s, the plan for the project was rejected as being wholly out of character with, and incompatible with, the community design standards. A graphic rendering of the plaintiff’s proposed plan was made available to the community by the plaintiff on Nextdoor but was quickly taken down. The proposed structure, as evidenced by story poles, and the denial by the ACC, speak for themselves.

LSMCA tendered the lawsuit to its insurance carrier, but the insurer did not pick it up. We learned in the last instance that the LSMCA loses control of the litigation when the carrier takes over. More to the point, because of the high deductible figure, the LSMCA would bear the cost of the litigation even if the insurance company were to be involved.

Solution; Short Term

The LSMCA believes that the pending lawsuit must be defended, and the denial of the subject project be upheld. In the view of the ACC, the project proposed by the plaintiff is a violation of the covenant. If built, it would alter the entire character of the community and open the door to uncontrolled construction. The very stability of the neighborhood is placed in question.

Setting aside (for the moment) the need for a long-term solution to covenant enforcement, we must focus our attention on the immediate issue at hand. Is the proposed project going to be allowed in the community? We are “back to the future.” As we did in the ‘90’s, we must fund the defense of the new lawsuit. The only solution is to invite voluntary contributions from the community. With enough contributions of $100 or more, or contributions in any amount, LSMCA can pursue the lawsuit to a successful conclusion over the course of the next year. The entire community will be kept closely informed of progress on the lawsuit. If, upon successful completion of the case, there is money left over, it will be placed in a separate legal fund.

It is time to step up. Your contributions made payable to the LSMCA legal fund, will allow us to preserve our community character. The $48 LSMCA membership fee, simply does not provide us with enough money to defend lawsuits so we are asking you, the community to help. It is your community we are trying to protect.

Since the Quail Call reaches only our LSMCA members, we will be making a community wide appeal, through direct email, posting this letter on our website and on Nextdoor. Talk to your friends and neighbors about this important topic and consider our appeal. Thank you in advance for your generosity.

The LSMCA Board of Directors