Must HOA disclose legal fees?

Started by RZ • 6 replies • 1991 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

RZ (Arizona)
Posts: 51

Posted:

Looking for feedback: I find nothing in the CC&R's that really address this:

Our HOA has quietly sued a former resident for unpaid violation fees. They are suing for close to 10k of which $7500 constitute legal fees already incurred in the process.

I would like to know specifically what the fee structure is for this suit. I would like to know if we, as the community, actually would owe this money to the attorney should we lose or if the attorney is working on some sort of contingency.

I think as an owner I have a right to know and this is not some state secret. Disclosing a fee structure seems to be a financial obligation undertaken by the Board and there is no valid reason to keep it in hiding. The suit is already a public record so anyone can see the facts…what right do they have to keep the potential fee liability (or lack of) under wraps?
Maybe I’m wrong…

The Board seems to think this is an executive matter and not a matter of disclosure.

Any thoughts or has anyone ever had a similar situation

TimB4 (Tennessee)
Posts: 21,059

Posted:

RZ,

Typically, legal issues and litigation are considered items that can be withheld from the membership. They still need to account for legal fees in the budget. Therefore, you should request to see the financials or a summary of expenses for the year. Expecting that they have legal fees broken out as a separate line item, this will give you an idea of what the Association has spent already.

Asking for specific issues, even legal costs, associated with a case currently in litigation will probably get you the response you received.

AZ 33-1804 specifies what issues can be withheld from the membership at meetings. With legal matters, the Board has the option of releasing but does not have to.

AZ 33-1805 specifies what records can be withheld from the membership. Again, it's the Boards choice but they do not have to release anything that deals with pending litigation.

Tim

JonD1
Posts: 2,350

Posted:

Is this ongoing litigation or is this case settled?

Perhaps you should wait to see what side wins and this might all be a mute point.

Some details involving legal issues should not be provided as the release of this information serves no useful purpose.

What is YOUR role in this?

How many units are there on your property?

I would hope you board is operating with good legal advice as to the possibility of collecting legal fees on as you say "violations".

Not knowing your documents or state laws I can only tell you that would not be a wise action here in NY. As a former resident and in reagrds to "violations" the court may not award legal fees under the law.

Once the suit is settled if you go through the financials or audit you should be able to determine what the legal costs were for yourself.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

They should let the membership know they have filed a lawsuit. They may decide not to discuss legal details that could effect the case or the identity of the person. However, the membership has a right to know where their money is going.

A HOA is only funded by it's members for it's members. The members are like stockholders in a corporation. Which if you ever read a stock holder's report (Perspectus?), they have to reveal positive/negatives about the company. A HOA is a corporation and should do the same thing. It's every member's money and the purpose of the ELECTED board is to handle the money on the behalf of the general membership.

I would be concerned about this lawsuit and the legal costs associated with it. The HOA isn't guaranteed to get their legal costs back unless the court rules it. Plus the court may reduce the fees if they deem them outrageous. The result of the lawsuit is still going to be a JUDGEMENT against the member if the HOA wins. Which doesn't mean a whole lot as the owner/member can sell/move their property and NOT pay for years. A lien is also a judgement but the owner/member can't sell their property unless they pay up.

Many states don't allow fines to be the basis of a lien or foreclosure. Fines have to be documented and fairly enforced. If your HOA doesn't have a fines schedule for violations in existence, it's going to be a difficult court case to prove and win. So be careful...

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi RZ:

Are you asking about the homeowner’s attorney fees or the HOA attorney fees?

It appears you may be referencing the homeowner’s attorney when you stated “contingency”. If that is the case and the HOA looses then they possibly will owe attorney fees. The general rule in most states regarding litigation pertaining to HOA statutes is the loosing party pays attorneys. Even if the attorney has a contingency agreement with the homeowner the attorney would still be tracking the hours spent on the case regarding attorney fees and also generally has a somewhat publicized hourly rate. So you could call the attorney’s office and inquire about the hourly rate; however, you will not know until after final judgment possibly how many hours were charged or may not know at all, if to remain confidential by the terms of any agreement.

Tim provided some great information links. If I look at the statutes the items which stand out when I read them are as noted in bold. In essence “pending or contemplated” so once a lawsuit is filed it no longer is pending nor contemplated. The other item was “final” resolution if it is to remain confidential by the terms. From what I read here anything in between the pending and final potentially would be open information and final would be open unless to remain confidential by the terms of the agreement. One reason then can be open to members is because as you noted once a lawsuit is filed then it generally becomes open records; therefore, no need for HOA to protect individual names for privacy purposes after that point.

33-1804. Open meetings; exceptions

1. Legal advice from an attorney for the board or the association. On final resolution of any matter for which the board received legal advice or that concerned pending or contemplated litigation, the board may disclose information about that matter in an open meeting except for matters that are required to remain confidential by the terms of a settlement agreement or judgment.

2. Pending or contemplated litigation.

Not an attorney and that is just my two cents.

RZ (Arizona)
Posts: 51

Posted:

Thanks all- I appreciate the excellent responses.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

FYI: Most banks are now requiring disclosure of any current lawsuit your hoa, condo, etc may be involved in. This could be a deal breaker for anyone buying or selling their house.

Lawsuit is the kiss of death for a seller.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here