The Koll Center Newport is a master-planned, mixed-use development area approximately 117 acres in size adjacent to John Wayne Airport in Newport Beach. The Koll Center is subject to CC&Rs that were drafted in 1972 by the original declarant, Koll Center Newport, L.P., and recorded in 1973 over the vacant land which later became the Koll Center. Over decades, the Koll Center was developed and the CC&Rs were amended several times. Plaintiff Olen Properties Corporation became the owner of a four-story office building at the Koll Center.  Defendant, KCN A MANAGEMENT, LLC (“KCN”) became the successor declarant under the CC&Rs.

In July 2022, KCN approved the proposal of TPG Acquisition, LLC (“TPG”) for the construction of a five-story, 312-unit apartment complex with 273 basement parking spaces beneath the apartment building, a one-acre public park, and a four-level free standing parking structure (“TPG Project”) adjacent to the building owned by Olen. The proposed development site included 6.216 acres of common parking area used by Olen and other owners. 

Olen filed a lawsuit alleging the TPG Project and KCN’s approval of it violated several provisions of the CC&Rs. The trial court agreed and granted an injunction requiring TPG and KCN to follow the CC&Rs’ approval process, including but not limited to, providing complete working drawings and to require that the 452 parking spaces lost to Olen by the proposed development not be reduced below limits required in the CC&Rs.

The court of appeal upheld the trial court’s injunction in certain ways and ordered that the trial court fix the injunction to be consistent with the CC&Rs and its opinion.  Notably, the court held that KCN as successor declarant owed fiduciary duties to the owners of real property like Olen at the Koll Center.  Further, even if acting in good faith, the court determined that KCN cannot make decisions that violate the CC&Rs.  The CC&Rs did not permit the TPG Project to go forward, as designed, because the 273 subterranean parking spots beneath the project did not replace the common parking areas that would be lost to Olen by the proposed development, among other reasons.

TAKEAWAY: A successor declarant who exercises control over the approval process for improvements in a master-planned community owes fiduciary duties under the CC&Rs to property owners in the community.