Establishing Reasonableness of Legal Fees

I am the treasurer of our HOA in MD and am reviewing the contract we have with our attorney for various fixed fees for legal services. There has been a recent ruling in MD that states the HOA must provide proof as to the reasonableness of legal fees being sought from delinquent homeowners. I am talking about costs for preparing lien statements, recording liens, sending warning letters etc.

We have a case where initial legal fees are 160% of original balance.

How do other HOA's determine if their contracted attorney fee structure is "reasonable"?

My understanding is if the HOA doesn't get this right, when in court the judge may only allow a much smaller amount to be paid by the debtor and the HOA would have to eat the difference.

Looking forward to hearing about peoples experiences.

Mike

Thanks for the quick reply,

Our current situation is that the delinquent homeowners is appealing the collections process based on the grounds that the attorney fees are unreasonable. I should be clear, the accumulated legal fees are now 160% of the original unpaid balance.

These fees have been racked up at each escalation of the collections process (i.e. lien statement prep, lien statement recordation, letter of final warning etc.) She has the right to dispute these in court on the grounds that they are unreasonable (i.e. she could contest the lien amount) Judges in MD frown upon accumulated legal fees greater than the original balance and have recently been stripping them down.

I am asking how after looking at the agreement with the attorney can I determine if the rates are reasonable? The lawyer and association may feel they are reasonable but a judge may not.

The court case that I looked at says judges often will determine a fee is unreasonable if tasks for which the flat fees were assigned "have no component of labor expended and could have been performed by administrative assistants or paraprofessionals".

In the absence of having a judge to talk to, how do I determine what a judge would consider a reasonable amount to perform

1.) Preparation of Notice to Create a Lien
2.) Review of property title
3.) Preparation of Lien
4.) Filing/Recording of the Lien
5.) Preparation of final chance to avoid lawsuit letter

Thanks!

It looks like your HOA is actualy overpaying your attorney for some unnecessary services. The owner does have a right to contest these inflated prices. However, the HOA has a reason to also question why they are paying this. I'll try to address them individually.

1.) Preparation of Notice to Create a Lien - Why does a lawyer need to draft this notice? A simple form letter should subfice. We just sent out our own letter stating that if the owner didn't pay up they could face a lien being placed on their property. It also gave them a chance to contact the BOD to negotiate. We didn't start the lien process until after 6 months of unpaid dues. Which was an established rule we voted on.

2.) Review of property title - Why? It doesn't matter if the owner has 10 liens or 1. The HOA still has the right to line up and put their lien on. I don't even see a purpose in needing a review even for that. If it's to verify ownership of the property...that can be done for free through tax records. A simple phone call...

3.) Preparation of Lien - What prep work? Honestly, since your the treasurer and responsible for monitoring where the money comes and go, what expense is associated with this? Treasurer is usually a volunteer position. Even if you use a management company, they should just have the records of collections available at any time. No costs there.

4.) Filing/Recording of the Lien - This actually may have a cost. It ranges from "Free" to maybe a couple hundred dollars. Call your courthouse and verify what they charge for admin fees for filing a lien. You don't even need an attorney in some cases to file a lien. You may want to ask that as well if it's required.

5.) Preparation of final chance to avoid lawsuit letter - Our lawyer used the PUBLIC NOTICES in the classified section of the newspaper to give out official public notices. How much does a classified ad cost? $5 - $10? The same goes with writing your own final letter notifying the process has begun. The cost of a certified letter at most.

There are ways to cut costs when dealing with lawyer. The best way is to understand what your paying for and why. Short of going to law school yourself, use free lawyer advice numbers/sites. I also recommend maybe calling the Bar association. They may direct you to resources which list standard charges for services. Lawyers are much like contractors for a HOA. Why not get different bids like you would on lawncare? That's about the best you can do to find out if your HOA is over paying.

As for the judge thing...It's a crap shoot and it matter your lawyer asks for court costs in a case. It's the judge that awards court costs. If you don't ask for it, doesn't mean you get it. Plus the judge may not agree with the amount charged by the attorney. This may open the door for the HOA to sue the attorney if they decide to pursue. No one said they can't be sued....