Article Courtesy of The National Law Review
By Allen N. Trask and Amy H. Wooten
Published February 21, 2021
Residents of planned communities often must obtain approval
prior to making any modifications to their homes and lots.
Through their declaration of covenants, conditions, and restrictions - commonly
referred to as the "declaration" for short – homeowners' associations commonly
specify an approval procedure for homeowners to follow and complete prior to
making such modifications. This process is often described in declarations as
"architectural review." Examples of modifications often subject to architectural
review include constructing an addition, altering permanent landscaping,
building a shed, adding a fence, or building a deck/patio to name a few.
While homeowners' associations are governed by a board of directors, the board
itself is rarely charged with administering the architectural review process.
Rather, most declarations provide for the establishment of a separate group,
typically a committee of the Association, often made up of volunteers or
appointees from the community membership, whose express and sole purpose is to
oversee the community's architectural review process. The declaration in your
community may refer to this group as the architectural review committee ("ARC"),
the architectural control committee ("ACC"), or the architectural review board
("ARB"). Whether dubbed an ARC, ACC, or an ARB, these committees are the body
politic whom receive, consider, and render decisions on lot modification
requests made pursuant to the community's architectural review process.
These committees play an important role in maintaining a community's character
and aesthetic community-wide-standards. In fulfilling this role, they act as
gatekeepers to aesthetic changes to homesites in the community, and they, again
in theory, are bound by the requirements of the declaration. By way of example,
if the declaration says all houses have to be a similar exterior color and the
color scheme in the neighborhood is neutral colors, it follows then that the
committee/board should reject a resident's application to paint the exterior of
a house neon green.
What legal duty do these committee members owe? And to whom or what? We have
written on fiduciary duties in the Community Association context in the past.
Must these committee members exercise fiduciary duties? While the state-level
appellate courts have not yet ruled on the issue, the North Carolina Business
Court was recently asked to tackle this question, and in answering it, the Court
held that such committees do not owe a fiduciary duty to individual homeowners
when reviewing architectural applications. Instead, the Court found that such
committees/boards do—and only—owe the homeowners association (the corporate
entity) itself a duty, specifically, to act reasonably and in good faith in
evaluating applications under the requirements specified in the community's
declaration. See Pittenger v. Gleneagles Homes Association, No. 18 CVS 11280,
2020 WL 7059356 (N.C. Super. Ct. Dec. 1, 2020).
In Pittenger, Mr. and Mrs. Pittenger took issue with various changes that the
ARC approved to be made to their neighbors' lot. The Pittengers' complaints
included that the ARC approved the construction of a five-car garage (in lieu of
a four-car garage) and did not enforce the height limitation set in the
declaration for structures. When their concerns were not resolved, the
Pittengers sued the association, the members of the ARC, and their neighbors
claiming that the approved changes violated the declaration and constituted a
nuisance. They also contended that the ARC members owed them individually
fiduciary duties, which they had breached.
In considering the Pittengers' claims, the Court noted that the declaration
vested authority in the ARC to approve design plans for the community, and it
concluded that it must defer to the ARC's decision in the absence of evidence
that the ARC had acted arbitrarily and capriciously in exercising its authority.
That is, if the ARC's decision was made reasonably and in good faith, it would
not be disturbed by the court. As the Pittengers failed to come forward with
evidence demonstrating that the ARC's decisions were arbitrary and capricious,
the court declined to set its decisions aside.
On the issue of whether the ARC members owed a fiduciary duty to the Pittengers,
the Pittengers maintained that the ARC members owed them a fiduciary duty
because the ARC had "total domination and control" over property owners' rights
concerning design and construction matters per the declaration and because
homeowners were mandatory members of the association whose property was subject
to foreclosure if assessments were unpaid. Pittenger, No. 18 CVS 11280, 2020
WL 7059356 *9-10 (N.C. Super. Ct. Dec. 1, 2020). The Court rejected the
Pittengers' argument, finding instead that members of the ARC owed no fiduciary
duties directly to individual homeowners, but rather owed a duty to the
association to implement the declarations' requirements in good faith and
reasonably. In reaching its conclusion, the Court cited well-established North
Carolina law confirming that the fiduciary duties of directors and officers of a
homeowner's association are owed to the association they represent. The Court
also noted that because the ARC members had been delegated the authority to act
on behalf of the association's board of directors, their duty was to adhere to
the requirements of N.C. Gen. Stat. § 55A-8-30, which requires directors to
discharge their duties "in good faith, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances and in a
manner the director reasonably believes to be in the best interests of the
The Court's ruling is an important first step in defining the fiduciary duties
owed by architectural review committees in North Carolina. It
stands for the proposition that members of architectural review committees do
not owe greater duties than the board of directors themselves owe – duties to
the association and not to individual homeowners. And as case law on the issue
is not yet well-developed, other North Carolina courts may look to and follow
the Court's ruling when faced with the questions of what duties do architectural
review committees/boards owe and to whom.