Order to stop risky HOA lawsuit?

Started by RZ • 6 replies • 1639 views

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RZ (Arizona)
Posts: 51

Posted:

Here are the facts:

The HOA in executive session authorized a lawsuit against a former resident over parking fines. This law suit has questionable merits and I think the HOA thought they would bluff the ex-resident into making. I also think the HOA attorney loves to incur fees. It appears to have backfired and now we have racked up 4k in attorney fees over this and rising.(and we are paying as we go) This is way more than the fines were in the first place. To get paid back, everything now rests on winning a judgment and then actually collecting- should we even win.

Now, with fees and fines we are asking for close to 10k. No settlement in sight and now a counter suit is filed. Keep in mind; we are a small community with less than 20k in expendable reserves.

My question is: anyone ever heard of the community over-riding the board and ordering the HOA attorney to drop the suit or settle? I know there are dynamics involved but the HOA has opened a Pandora’s box, primarily because (in my opinion) the board president really disliked this ex resident and (since AZ law does not allow liens for fines) wanted a pound of flesh after he sold. Now she had put the whole community at financial risk for a small and highly questionable parking fine.

I have demanded an accounting of this but the Board is standing behind the exceptions in the open meeting law, thus making this very difficult to hold them accountable. I however have a copy of the lawsuit and all the facts I need are contained in it.

Anyone ever heard of a community taking action on such an issue? This literally could break the meager financial reserves we have. Seems wrong that the community must just sit by and watch this happen. Even if everything goes our way, the most we stand to gain is a few thousand in fines- hardly seems worth the risk but if we stop now, we are out 4k minimum. I think the community should make the call on this, not the board.

TimB4 (Tennessee)
Posts: 21,059

Posted:

RZ,

I have no first hand knowledge of the membership or a new board dropping a legal action started by a previous board. I do have first hand knowledge of a new board changing an interpretation of a previous board thereby stopping legal action from being initiated.

It's a hard and slippery rope that Board must walk. They are tasked with enforcing the covenants and can end up setting precedence causing others to believe that they can violate the covenants if they don't enforce them or allow one member to be in violation. Unfortunately, human nature tends to be that once backed into a corner heels dig in and your in for a real fight - no matter the outcome. Therefore, it's best if a Board tries all other avenues prior to initiating legal action.

If you truly believe that the legal action is not worth the expense, then you need to gather enough like minded individuals together. Actively solicit proxies and get yourself elected to the Board. Once elected, the decision to continue with the legal action or not will be in the hands of you and the new board. Of course you will also need to answer the questions:

If we stop legal action will it be more difficult in the future to enforce similar violations?

Will stopping the lawsuit send a message to the violator that they can ignore all the covenants because once the Association reaches a certain dollar amount in legal fees they will stop the enforcement process?

Will stopping the lawsuit send the message to the membership that the Association won't enforce the covenants?

Tim

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

I think the community should make the call on this, not the board.

Then let the community make the call. If its over a parking fine, and the person is no longer a member of the HOA, let it go. Send a letter out to every member of the HOA letting them know what is going on and ask them to write the board asking them to drop it.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Majority rules in a HOA. The board is elected to represent that majority. However, if they aren't doing it, then the majority needs to come to it and out vote them. You may also need to use some kind of logic to see the error in their ways.

Here's the logic: A lawsuit is no good for a HOA to pursue. A lawsuit judgment and a lien are similar as far as being court judgements. However, a lawsuit court judgement allow the owner to sell their property and move without paying. A judgement doesn't guarantee the money in your hands once awarded by the courts. It can take 7 years for someone to pay back a judgement. If they don't pay then, the HOA would have to re-file to pursue again. Plus it costs money to garnish wages or get back property that is worth as much as owed.

Of course a lien would force the owner to pay up if they ever wanted to sell their property. The owner could still rent their property out indefinetely but the money owed still accumulates. As you stated, a lien isn't a possibility for fines. It is only for dues owed. Which leads me to ask if the owner in the lawsuit is up to date with their dues? If not, then the HOA may want to do some adjustments to the lawsuit or use of the lawyer.

I've always said that suing your HOA is suing yourself and your neighbors...This should be a good stand by point to make with your board for them to realize the money they are spending on this suit, is coming out of their pockets...Plus you may want to point out that unless the rules give authority for the HOA to fine people with violations, it's most likely NOT legal to enforce...

Former HOA President

ValerieS2 (Michigan)
Posts: 244

Posted:

Read your bylaws carefully. Many state that a 2/3 majority of owners must agree to the commencement of any civil action. I know it seems like you are heavily invested at this point but a litigation evaluation meeting in which your attorney gives an estimate of how much MORE this could cost before it is over and the odds of actually collecting on a judgement in the associations favor. I may well be time to cut your losses.

RogerB (Colorado)
Posts: 5,067

Posted:

RZ, IMO your Board apparently does not know the best procedures for handling this type problem. We would never advise going to an attorney or going to court over such a matter. The governing documents need to allow the Board to establish fines and to place liens against properties. With those procedures in place , I think this problem could have been resolved with only minor expenditures which would be charged to the owner's property.

FionaC (California)
Posts: 212

Posted:

OH my...
Suing your HOA is like suing yourself... and indeed lawyers for HOA"s love to incure fees. Even on suits of this level. I'd try hard to drop it. It's only going to cost the community more than it's really worth.

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