Understanding When Governing Documents Apply to Home Business

Understanding When Governing Documents Apply to Home Business

With the increasing trend of workers telecommuting to jobs with companies and the proliferation of online shops whose sellers make or store their merchandise at home, associations have had to deal with the issues surrounding so-called “home businesses.” This is a tricky issue, which is controlled in many associations by the communities governing documents. But even if governing documents prohibit businesses or commercial use of homes or condos, be aware that there still are circumstances under which the association you manage can’t interfere.

A recent court case dealing with the dispute between an association that prohibited businesses and the owners of a home in that community highlights this. There, two homeowners cultivated a vineyard on their land in a planned community for the purpose of making wine to be sold to the public. The association’s CC&Rs didn’t prohibit the cultivation of a vineyard for this purpose, but they did prohibit “any business or commercial activity.” Several other homeowners objected to the operation of what they considered to be a commercial vineyard in violation of the prohibition against any business or commercial activity. They asked the association to stop the operation of the vineyard. The association refused. The association asserted that the operation of the vineyard didn’t constitute “business or commercial activity” in the literal sense of that term.

The group of homeowners sued the association. A trial court ruled in favor of the association. The group of homeowners appealed. A California appeals court upheld the decision of the lower court.

The appeals court agreed with the trial court that the operation of the vineyard wasn’t a prohibited business or commercial use because it didn’t affect the community's residential character. The appeals court determined that, in the alternative, because the wine was made, bottled, and sold commercially offsite, there was no business or commercial activity within the meaning of the CC&Rs. The association board acted within its discretion in allowing the continued operation of the vineyard, the appeals court concluded [Eith v. Ketelhut, December 2018].