Pres. of HOA

Started by BB5 • 16 replies • 2033 views

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BB5 (Missouri)
Posts: 145

Posted:

The Pres. of our HOA has a nephew who is an attorney, a lawsuit has been filed by a homeowner against the HOA wouldn't it be a conflict of interest for a family member to represent the Pres.(HOA) The HOA hired an attorney several years ago and paid a retainer.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BB5 on 09/17/2011 11:40 AM
The Pres. of our HOA has a nephew who is an attorney, a lawsuit has been filed by a homeowner against the HOA wouldn't it be a conflict of interest for a family member to represent the Pres.(HOA) The HOA hired an attorney several years ago and paid a retainer.

Assuming the HOA has D&O insurance I would think the defense attorney for the HOA in this case would be the insurance company's choice since it is they who would be paying for the defense.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

BB5,

I might add that attempting to use one's own attorney and failing to notify the D&O insurance company of the lawsuit against the HOA might violate the terms of the policy and the insurance company could refuse to pay for any defense and/or the costs of settlement, should there be any.

BB5 (Missouri)
Posts: 145

Posted:

To the best of my knowledge our ins. does not cover this. Another question do the officers (Pres.)have the obligation to let the membership know there has been a suit filed.

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BB5 on 09/17/2011 1:44 PM
To the best of my knowledge our ins. does not cover this. Another question do the officers (Pres.)have the obligation to let the membership know there has been a suit filed.

Are you saying you don't have D&O insurance? I wouldn't even consider running for the board in an HOA that didn't have D&O insurance.

Of course the members should be informed of the existence of the lawsuit. It's public knowledge once the suit has been filed in court anyway. It's better to hear from the president than for them to find out on their own. However, they don't have to know all the details, especially details that would be considered protected by attorney-client privilege.

BB5 (Missouri)
Posts: 145

Posted:

As far as I know Ins. covers liability (if someone is hurt) and damage to the wellhouse /pumps the HOA does not own the road (according to attorney) & could be liable for not maintaining. Road maint. is the responsibility of the HOA per by-laws. The whole suit stems from the officers giving breaks on dues/assessments holding a vote to do this three years later then filing a lein on owner they claim didn't pay their share of a capital improvement. We have nothing that allows "capital improvements"

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BB5 on 09/17/2011 2:55 PM
As far as I know Ins. covers liability (if someone is hurt) and damage to the wellhouse /pumps the HOA does not own the road (according to attorney) & could be liable for not maintaining. Road maint. is the responsibility of the HOA per by-laws. The whole suit stems from the officers giving breaks on dues/assessments holding a vote to do this three years later then filing a lein on owner they claim didn't pay their share of a capital improvement. We have nothing that allows "capital improvements"

Ouch!

D&O insurance covers "errors and omissions" committed by the board (directors and officers) acting as a unit and as individuals in their official capacity. Without it, they're on their own.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Yes. Once a suit is actually filed, anyone who is currently selling their house or plans to sell their house needs to disclose it to their buyers because it will come up during financing or closing. Bad thing is, banks dont lend to associations with pending litigation, so the buyers would likely need to be cash buyers.

PS. It likely you do have D/O Insurance. You will need to actually look at the policy.

Good luck!

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

To answer your original question I don't think it would be a conflict for him to represent just the president, if he was representing the entire hoa then yes it would be

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You got some really good advice from the other posters. The Insurance company usually has a cap on how much is paid out. It's NOT the million dollars or the amount the insurance is for. I think ours was only 60-80 K payout. The policy amount is a bit misleading...

This lawsuit is exactly why it is NOT adviceable to ever give "breaks" on dues payments EVER. If someone does work for the HOA, do NOT allow them to skip their HOA dues payment for the work. Pay them the amount of the HOA dues instead. My new board decided that if there was a death, that month of the death the dues would be waived. This is a considerate action but the solution should have been the members should have given money to cover the dues payment instead. It takes 6 or more months for a property to go through probate court and a dead person doesn't pay dues. That skipped dues makes it difficult to collect upon later after probate runs it's course.

Just wanted to post that information so one can understand why this may cause the lawsuit that was filed. As far as the lawyer, they represent the WHOLE membership. It should be voted on to allow to pay this attorney by the board. The relationship may be irrelevant as long as it is approved. Everyone is someone's relative/friend somewhere.

You may also want to consider a counter-suit. It's cheaper to file and you can file it for any amount of damage your HOA may have experienced. This could be legal fees. The HOA wants to make sure those are either paid by each party or the winning party pays. Another issue to be included, is that IF a special assessment has to be done to raise money for the lawsuit, that the suing party is NOT excluded from paying that special assessment. Suing your HOA is suing yourself and your neighbors. You want to make sure they are paying their fair share to sue!

Former HOA President

BB5 (Missouri)
Posts: 145

Posted:

All of these homes/property are privately owned would that make a difference in being able to get a loan ?

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By BB5 on 09/18/2011 8:37 AM
All of these homes/property are privately owned would that make a difference in being able to get a loan ?

No. You are all members of the same association.

BB5 (Missouri)
Posts: 145

Posted:

Hiring an attorney was not discussed with anyone. And quite frankly I don't blame these people as one of the H.O.'s that got/gets a break on dues etc. is the VP. We know this for a fact.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

one of the H.O.'s that got/gets a break on dues etc. is the VP.

Its likely your board of directors does not have the authority to offer discounted dues. With most all associations everyone owes dues, period. So someday a new board will be elected and that former VP will owe all the back dues. Yep, happens all the time.

ST2
Posts: 22

Posted:

At what point in the process of a lawsuit are the HOA Members to be notified of the pending litigation? This is FLORIDA HOA. Our HOA was served 2 days ago and according to reports, will be undergoing a 30 mediation period. The settlement is likely to be a huge dollar amount. If it goes to court, the decision will probably go against us and the penalty will be crippling. In deep doodoo here...

Our Members (mostly northern snowbirds many in Canada) have not yet been told about this and we have MANY people trying to sell their homes both as individuals and through real estate agents. Our communication is a virtual blackout with an "absent Board" and a defensive and combative Management Company. A few Residents are trying to help our Members protect themselves in the absence of effective leadership.

When, Who, How and by what statute does the duty to give notice to Membership occur in the process of a lawsuit against an HOA? I have been researching now for a couple days and cannot find anything under Real Estate Statutes, Homeowner Association Statutes or CAM licensing statute.

Help lead me in the right direction! And thanks!

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

At what point in the process of a lawsuit are the HOA Members to be notified of the pending litigation?

I would notify the membership immediately, but thats just me. Why keep something a secret from your members? Just keep it simple and state what is going on. We have been served papers and a date has been set for mediation. Let the homeowner decide what they want to do with the info.

Mediation can be different things. Some cases both sides agree on a decision and sign the paperwork, other times you both sign paperwork to go with the mediators decision no matter what they decide and give up rights to court.

Quote:

When, Who, How and by what statute does the duty to give notice to Membership occur in the process of a lawsuit against an HOA?

I'm sure its different in every state, but again, why keep this from your members? Lets say a sale falls through on one of the houses up for sale and the reason stated is this mediation/lawsuit. If the membership was kept in the dark about this, you can expect another lawsuit from the homeowner who lost the sale including damages.

MichaelK11 (Texas)
Posts: 432

Posted:

Your HOA should have both D&O insurance and liability insurance. Your HOA probably got insurance through an agency. The Board should call the insurance agency, tell them about the lawsuit, and ask which coverage applies.

Since this is a lawsuit against the HOA, the liability insurance may cover it (even though it's not about a physical injury). That depends on the details of the liability policy.

Since this lawsuit alleges inappropriate and self-serving actions by individual Directors who may eventually be found liable, D&O insurance probably also covers it.

My HOA recently defended a lawsuit, in which both our D&O and liability insurance hired attorneys for us. The insurance companies argued with each other about who was responsible for coverage and how to proceed with the case. These arguments did not involve us, because both insurance companies agreed we were covered and only had to pay our deductible.

As other have said, the HOA could be further liable if it does not disclose the lawsuit to its Members and they suffer damages on real estate transactions (or perhaps sue for illegal failure to disclose). Is your HOA a mandatory HOA? If so, the Members could be individually liable for payout or attorney’s fees in this lawsuit. Have you had an election for your Board of Directors, in which Members voted for Directors or ran for the Board without being fully informed of the lawsuit? It sounds like this is a recent event, but won't you eventually have an election?

When our lawsuit started, the Board told the Membership it would only cost $15,000. We were consistently told this over subsequent months, during which it was obvious more than $15K of legal activity took place. Eventually, the Board admitted costs had risen to $90K, but blamed it all on the homeowner who was the other party. We ended up paying over $150K to lawyers BEFORE we wised up and got our insurance involved.

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