JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
Is anyone aware of any case law or examples of special assessments to members to cover expenses/judgements from legal action against the HOA?
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Started by JillS5 • 29 replies • 1880 views
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SteveM9 (Massachusetts)
Posts: 3,699
Posts: 3,699
Posted:
Let me guess, the HOA spent money on a lawyer and now needs a special assessment needs to pay for it? Yes, it rare, but it happens. Typically special assessments are for roofs, structure, but lawyers could fall under this too. Its basically an unplanned expense.
If you dont pay, you could be foreclosed on.
If you dont pay, you could be foreclosed on.
JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
No. That didn't happen, however it would be the same principle. Legal costs are paid through assessments and any in excess of reserves would require an assessment?
My understanding is that an HOA can get sued (obviously). If it does, it can lose. If an insurance company would dispute a claim, and/or not cover costs of a defense, if there were a large deductible, or if a judgement were made in excess of insurance and the costs of defense...is the community responsible for the cost?
It was frequently discussed regarding the Trayvon Martin case. I was just looking for the underlying legal references or some illustrative case law.
My understanding is that an HOA can get sued (obviously). If it does, it can lose. If an insurance company would dispute a claim, and/or not cover costs of a defense, if there were a large deductible, or if a judgement were made in excess of insurance and the costs of defense...is the community responsible for the cost?
It was frequently discussed regarding the Trayvon Martin case. I was just looking for the underlying legal references or some illustrative case law.
BruceF1 (Connecticut)
Posts: 2,535
Posts: 2,535
Posted:
You should be carrying D&O insurance which covers costs of legal defense (insurance company usually supplies the lawyer) and any judgement. The policy usually protects the association and it's directors and officers, and sometimes employees. There may be a deductible and there is usually a limit. Many times the insurance company will settle out of court and sometimes they will split a judgement between the association and the insurance company.
You need to read the terms of your policy carefully and be sure you understand them. The insurance company usually will not cover any claim if the officers and directors knowingly violate the law, or if any reasonable person should have known that their acts were illegal. Best to get legal advice before doing anything you are unsure of.
Of course, if the insurance doesn't pay, then the association (members) would be liable for any costs. And, you can always sue the insurance company (which will also cost the members).
You need to read the terms of your policy carefully and be sure you understand them. The insurance company usually will not cover any claim if the officers and directors knowingly violate the law, or if any reasonable person should have known that their acts were illegal. Best to get legal advice before doing anything you are unsure of.
Of course, if the insurance doesn't pay, then the association (members) would be liable for any costs. And, you can always sue the insurance company (which will also cost the members).
JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
Quote:
Posted By BruceF1 on 10/24/2012 9:29 AM
Of course, if the insurance doesn't pay, then the association (members) would be liable for any costs. And, you can always sue the insurance company (which will also cost the members).
Of course, if the insurance doesn't pay, then the association (members) would be liable for any costs. And, you can always sue the insurance company (which will also cost the members).
This really is a hypothetical. A difference in understanding on how the community system/legal system works.
This quote above is exactly what I'm looking to reference. If for whatever reason, deductibles, judgement exceeds insurance, insurance disputes the claim, etc., it is then passed to the homeowners via assessments?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Jill,
First, check your governing documents, if they are like mine, there is likely a passage in the CC&Rs that says something like [emphasis added]:
The Association shall have the power to:
fix, levy, collect, and enforce payment by lawful means, all charges or assessments pursuant to the terms of the Declaration; to pay all expenses in connection therewith and all office and other expenses incident to the conduct of the business of the Association, including all licenses, taxes, or governmental charges levied or imposed against the property of the Association;
Therefore, the Board has the authority to increase assessments and/or adopt a special assessment OR borrow money to pay any legal costs incurred.
Also see: VA § 55-514. Authority to levy special assessments.
Additionally: VA § 55-514.1. Reserves for capital components implies that any money set aside in the Reserve may only be used for the purpose the money was set aside for. Hence, the Association may borrow from the Reserves to pay the legal bills but they must put in place a methodology to pay back the money borrowed, otherwise they may not use the Reserve funds (except for what they were set aside for).
First, check your governing documents, if they are like mine, there is likely a passage in the CC&Rs that says something like [emphasis added]:
The Association shall have the power to:
fix, levy, collect, and enforce payment by lawful means, all charges or assessments pursuant to the terms of the Declaration; to pay all expenses in connection therewith and all office and other expenses incident to the conduct of the business of the Association, including all licenses, taxes, or governmental charges levied or imposed against the property of the Association;
Therefore, the Board has the authority to increase assessments and/or adopt a special assessment OR borrow money to pay any legal costs incurred.
Also see: VA § 55-514. Authority to levy special assessments.
Additionally: VA § 55-514.1. Reserves for capital components implies that any money set aside in the Reserve may only be used for the purpose the money was set aside for. Hence, the Association may borrow from the Reserves to pay the legal bills but they must put in place a methodology to pay back the money borrowed, otherwise they may not use the Reserve funds (except for what they were set aside for).
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I have always said that if you sue your HOA, your suing yourself and your neighbors. Simply because the HOA has to have a lawyer to represent them in court as a corporation. (Caveat to this is that competent person the board approves to represent them can but still who wouldn't want a lawyer?) You as a HOA member are a member of this corporation. Your own assessment/dues goes to pay for their defense. So you will be paying for BOTH sides of your case if you as an INDIVIDUAL decide to sue your HOA. Plus you do put your HOA at risk of going broke thus causing them to raise dues or have a special assessment of which you will have to pay.
There is a misunderstanding about HOA insurance. A million dollar policy is NOT a million dollar payout. The insurance company has a cap on what they will pay out. Ours was about $80K in damages. After that, it was the HOA's responsibility to cover the difference in the judgement awarded by the court. That difference would be what the members of the HOA could be subjected to a special assessment or raised dues to pay out. A real life example would be our clubhouse. It was only insured for $80K after it was built 25 years ago. If it were to burn down, it could cost about $100K for a similar building in today's costs. That's a $20K difference. That would have to be split up 107 different ways equally. Which does reduce some burden on individuals but then you have many that would not pay the special assessment. That then turns into more legal money paid out to collect on putting out liens.
A lawsuit just brings a judgement not any real cash for a long time. It's not like the judge awards the decision and the HOA has to rush out to the bank. The person who won may have to wait until the HOA can collect the amount to pay out. The HOA may appeal and request a lower judgement. There are still many details to work out after a decision. It can take years before seeing a dime. If the homeowner wins, they have to partake in paying in the special assessment of the HOA to pay their judgement, they can't skip out of it. (Unless allowed by the court). If they don't pay their share of the assessment then they are subject to lien/foreclosure for it.
The case you are refering to is more of a criminal case/civil. Kind of like the OJ Case where he was found innoncent in criminal court but guilty by the family's lawsuit. The HOA is in the latter of the civil case. Which I hope they are smart enough to countersue instead of just being sued. This case should be interesting in the outcome for ALL HOA. Especially those who don't keep their Neighborhood watch programs separate from the HOA. That is the issue here. The HOA should have never been maintaining it's own neighborhood watch. That program should have been separate and not using the HOA money. I would say those HOA members may indeed have to pay some money. How much will yet to be determined after the dust settles...
There is a misunderstanding about HOA insurance. A million dollar policy is NOT a million dollar payout. The insurance company has a cap on what they will pay out. Ours was about $80K in damages. After that, it was the HOA's responsibility to cover the difference in the judgement awarded by the court. That difference would be what the members of the HOA could be subjected to a special assessment or raised dues to pay out. A real life example would be our clubhouse. It was only insured for $80K after it was built 25 years ago. If it were to burn down, it could cost about $100K for a similar building in today's costs. That's a $20K difference. That would have to be split up 107 different ways equally. Which does reduce some burden on individuals but then you have many that would not pay the special assessment. That then turns into more legal money paid out to collect on putting out liens.
A lawsuit just brings a judgement not any real cash for a long time. It's not like the judge awards the decision and the HOA has to rush out to the bank. The person who won may have to wait until the HOA can collect the amount to pay out. The HOA may appeal and request a lower judgement. There are still many details to work out after a decision. It can take years before seeing a dime. If the homeowner wins, they have to partake in paying in the special assessment of the HOA to pay their judgement, they can't skip out of it. (Unless allowed by the court). If they don't pay their share of the assessment then they are subject to lien/foreclosure for it.
The case you are refering to is more of a criminal case/civil. Kind of like the OJ Case where he was found innoncent in criminal court but guilty by the family's lawsuit. The HOA is in the latter of the civil case. Which I hope they are smart enough to countersue instead of just being sued. This case should be interesting in the outcome for ALL HOA. Especially those who don't keep their Neighborhood watch programs separate from the HOA. That is the issue here. The HOA should have never been maintaining it's own neighborhood watch. That program should have been separate and not using the HOA money. I would say those HOA members may indeed have to pay some money. How much will yet to be determined after the dust settles...
Former HOA President
JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
Great analysis and information. Thanks Tim and Melissa. Tim you're a wealth of information and thanks for laying out the trail of regulatory references. I completely forgot about the standard blurb in the covenants.
Thanks Melissa. I've seen several cases where HOAs lost legal judgements, several with insurance companies. One even regarding D&O coverage and I was trying to think how that could occur but I think that was explained above. I never see any discussion or reports as to what the final impact was to the HOA members themselves.
Melissa, I hear on and off whether the family will or will not sue the HOA in the Trayvon Martin case. The legal analysis I heard was they could likely be found negligent for establishing a Neighborhood Watch, identifying a Watch Captain, yet having no written policy and procedures to guide it.
Thanks Melissa. I've seen several cases where HOAs lost legal judgements, several with insurance companies. One even regarding D&O coverage and I was trying to think how that could occur but I think that was explained above. I never see any discussion or reports as to what the final impact was to the HOA members themselves.
Melissa, I hear on and off whether the family will or will not sue the HOA in the Trayvon Martin case. The legal analysis I heard was they could likely be found negligent for establishing a Neighborhood Watch, identifying a Watch Captain, yet having no written policy and procedures to guide it.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
We had a Neighborhood watch in our HOA. I even established it. However, it was known that the neighborhood watch was NOT part of the HOA nor funded by it in any way. Same people in the HOA as would be in the neighborhood watch naturally but with a seperation. Renters could participate in the neighborhood watch where they could not participate in the HOA business. It was all volunteer and just a general watch out for the neighbor kind of thing. Nothing really formal except for a sign at the entrance.
This case the Neighborhood watch was part of the HOA. Which makes the HOA a party to any legal actions brought by the victims. Whether or not it's a valid case is to be seen. Many variables in laws like Good Samitarian and Volunteer standing are a big factor. I would expect the HOA/Neighborhood Watch to get sued. It makes good headlines. However, I have to say if the case is won in court is a different story. Not sure where the individual responsibility ends and the group begins. Like was there gun training provided or weapons given to patrols volunteers? Did the Neighbhood Watch have it's own insurance. What was it's policies? Too many questions and too little right answers given by the media on this one.
I took a few legal courses in college...So this case to me will most likely be a case study for future students for a long time...
This case the Neighborhood watch was part of the HOA. Which makes the HOA a party to any legal actions brought by the victims. Whether or not it's a valid case is to be seen. Many variables in laws like Good Samitarian and Volunteer standing are a big factor. I would expect the HOA/Neighborhood Watch to get sued. It makes good headlines. However, I have to say if the case is won in court is a different story. Not sure where the individual responsibility ends and the group begins. Like was there gun training provided or weapons given to patrols volunteers? Did the Neighbhood Watch have it's own insurance. What was it's policies? Too many questions and too little right answers given by the media on this one.
I took a few legal courses in college...So this case to me will most likely be a case study for future students for a long time...
Former HOA President
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Actually, lets be honest.
If anything happens on the common area, a good attorney will include the Association in an legal action (as there may be some small percentage of responsibility). The attorney will let the courts decide if the case against the Association has merit or not. Therefore, even if the Association is blameless, they will likely incur costs defending themselves and proving that they are blameless.
I had a friend who owned a business who said it's not if I get sued it's when. Therefore, he circled the wagons ahead of time and invested in a good attorney and insurance to minimize any exposure to legal actions.
I think that this is prudent for any business, including Associations.
The Better Associations will actually have a fund started to pay or defray an insurance deductible. Unfortunately, if an Association has such a fund, many Directors will see the fund being available for other costs.
If anything happens on the common area, a good attorney will include the Association in an legal action (as there may be some small percentage of responsibility). The attorney will let the courts decide if the case against the Association has merit or not. Therefore, even if the Association is blameless, they will likely incur costs defending themselves and proving that they are blameless.
I had a friend who owned a business who said it's not if I get sued it's when. Therefore, he circled the wagons ahead of time and invested in a good attorney and insurance to minimize any exposure to legal actions.
I think that this is prudent for any business, including Associations.
The Better Associations will actually have a fund started to pay or defray an insurance deductible. Unfortunately, if an Association has such a fund, many Directors will see the fund being available for other costs.
LarryB13 (Arizona)
Posts: 4,099
Posts: 4,099
Posted:
Quote:
Posted By JillS5 on 10/24/2012 9:10 AM
I was just looking for the underlying legal references or some illustrative case law.
I was just looking for the underlying legal references or some illustrative case law.
Case law may be difficult to find. In order to have case law, someone must appeal from losing a lawsuit (or not winning big enough) and the appellate court must issue an opinion (as a opposed to a memorandum decision).
I think few homeowners have the financial capability of taking a case that far, although I have seen sillier cases taken much further. Example: In Phoenix, one owner in an HOA sued another because the texture of the stucco on the back of the house was different from the front.
Overall, I think it is much like driving with minimal insurance. In AZ we are required to carry only $15,000 liability coverage. Even a fender-bender can exhaust that coverage in a hurry. Once your insurance has reached its limit, you are on the hook for the balance. The association is in much the same situation: exhaust the coverage and the balance of the judgment has to come from the members.
JohnB26 (South Carolina)
Posts: 1,569
Posts: 1,569
Posted:
or
the CORPORATION can default on the judgement and lose the corporate assets (common elements) w/o incurring personal liability of the MEMBERS (except, possibly, their home value depending on how the docs are written)
this is WHY it is a good idea to incorporate
eg:
assoc of 50 homes is successfully sued for $15,000,000
ins. covers 2,000,000
assets of corp = pool (150,00) + clubhouse/parking lot (200,000) + misc. (200,000)
after these assets are lost to judgement ? homeowners 'walk away' w/o PERSONAL liability
approx 12,000,000 would become uncolectable while everyone keeps their home
ps. remember that there is a constructive easement of access to one's home even if the roads were private corporate assets
inconvenient truths are true none-the-less
CAVEAT EMPTOR
the CORPORATION can default on the judgement and lose the corporate assets (common elements) w/o incurring personal liability of the MEMBERS (except, possibly, their home value depending on how the docs are written)
this is WHY it is a good idea to incorporate
eg:
assoc of 50 homes is successfully sued for $15,000,000
ins. covers 2,000,000
assets of corp = pool (150,00) + clubhouse/parking lot (200,000) + misc. (200,000)
after these assets are lost to judgement ? homeowners 'walk away' w/o PERSONAL liability
approx 12,000,000 would become uncolectable while everyone keeps their home
ps. remember that there is a constructive easement of access to one's home even if the roads were private corporate assets
inconvenient truths are true none-the-less
CAVEAT EMPTOR
JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
Oh, learned a lot (including I didn't really know what case law was 
)
So, if it were a major judgement, the corporation would really protect the homeowners from major losses. Where in the covenants (general section assuming a standard structure) does it address how this might impact whether you lose your home? I can't recall seeing that addressed but maybe I'm just not recognizing the technical terms. What if it is not addressed?
) So, if it were a major judgement, the corporation would really protect the homeowners from major losses. Where in the covenants (general section assuming a standard structure) does it address how this might impact whether you lose your home? I can't recall seeing that addressed but maybe I'm just not recognizing the technical terms. What if it is not addressed?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Quote:
Posted By JillS5 on 10/25/2012 7:32 AM
Where in the covenants (general section assuming a standard structure) does it address how this might impact whether you lose your home?
Where in the covenants (general section assuming a standard structure) does it address how this might impact whether you lose your home?
This isn't directly spelled out in the CC&Rs.
What the CC&Rs do is:
a) Requires the member to pay assessments (for mandatory associations)
b) Authorizes the Board to set the level of assessment
c) Authorizes the Board to use any legal method to collect assessments
So, if we look at the issue you started with:
Lets say there are 100 lots.
Association lost a legal action and must pay damages, attorney fees and court costs in the amount of 1 million dollars.
Insurance will pay 500,000 but there is a $50,000 deductible. Therefore, the Association now owes $550,000.
In order to pay the legal costs, the Board sets a special assessment of $55,000 per lot ($550,000 divided by 100)
Member is required to pay assessment but can not.
Board takes legal action by placing a lien on the home.
Board forecloses the lien in a desperate attempt to pay the legal bills.
Yep, an extreme example to illustrate how a member can lose their home if the Association isn't properly managed and/or doesn't have enough insurance.
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
OOPs bad math day.
Special assessment would be $5,500 per lot
However, if you can't pay an assessment (regular or special) you are always in danger of having an HOA file a lien and then take additional legal action to collect the lien.
Hope this helped.
Tim
Special assessment would be $5,500 per lot
However, if you can't pay an assessment (regular or special) you are always in danger of having an HOA file a lien and then take additional legal action to collect the lien.
Hope this helped.
Tim
JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
I completely understand. Thanks!
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Tim
I wonder if a good bankruptcy attorney could not find a way for the "association corporation" to file for bankruptcy?
ABC Homeowner Association Inc. files bankrupcy and comes back as New ABC Homeowners Association Inc.
More then one way to skin a cat....LOL
I wonder if a good bankruptcy attorney could not find a way for the "association corporation" to file for bankruptcy?
ABC Homeowner Association Inc. files bankrupcy and comes back as New ABC Homeowners Association Inc.
More then one way to skin a cat....LOL
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
If other companies can file for bankruptcy and reorganize, I suppose this may be possible for companies known as HOA Inc.
However, I don't know enough about bankruptcy laws to say anything other than it sounds logical enough to pass the common sense test as an option.
However, I don't know enough about bankruptcy laws to say anything other than it sounds logical enough to pass the common sense test as an option.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I am sure that a HOA could possibly file for bankruptsy depending on it's setup. It's really in the ramifications of them doing so. Meaning what do they lose in the process? We as individual lose our rights to credit cards for a period of time for example if we file bankruptsy. If a HOA does it, then it very well could be put in a deeper hole. Less people would want to buy in a HOA that had filed bankruptsy. Insurance would be nearly impossible to get, maintain, or pay increased amounts. The ability to offer a variety of loan programs to buyers would take a HUGE hit. That could increase the number of rentals as owners try to get out of the sinking ship. Plus mortgage companies would shy away from such properties or offer increased loan rates to that HOA.
It wouldn't be the money the HOA would be getting out of paying if they did file bankruptsy. The long run would be the damage to maintaining home values, low rental rates, and bringing in more potential buyers. It's a coin that most HOA's don't want to toss up in the air...
It wouldn't be the money the HOA would be getting out of paying if they did file bankruptsy. The long run would be the damage to maintaining home values, low rental rates, and bringing in more potential buyers. It's a coin that most HOA's don't want to toss up in the air...
Former HOA President
JohnB26 (South Carolina)
Posts: 1,569
Posts: 1,569
Posted:
y'all are missing my point
after the bankruptcy the HOA assets are NO MORE .... the plaintiffs now own them
the individual HOs are free and clear
now .... let the plaintiffs maintain the retention pond and the 'landscaping'
so what if no pool ? .... NO ASSOCIATED EXPENSE EITHER
ain't capiyalism great ?
after the bankruptcy the HOA assets are NO MORE .... the plaintiffs now own them
the individual HOs are free and clear
now .... let the plaintiffs maintain the retention pond and the 'landscaping'
so what if no pool ? .... NO ASSOCIATED EXPENSE EITHER
ain't capiyalism great ?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
John,
I'm not sure the Association has any assets (except bank accounts).
The land is common property, owned by all members not the corporation. The Corporation known as HOA,Inc. only manages the property.
I'm not sure the Association has any assets (except bank accounts).
The land is common property, owned by all members not the corporation. The Corporation known as HOA,Inc. only manages the property.
BradP (Kansas)
Posts: 2,640
Posts: 2,640
Posted:
i am surely no bankruptcy expert but if there were no other options most likely you would file Chapter 11 unless there was no common property and assets and I guess Chapter 7 would be an option. This would not be desirable but in terms of mounting debt there aren't many desirable actions. At this point the HOA would be run by a court appointed trustee, their debt load would be rearranged and organized in a way that they could repay it feasible. I don't think there is a way an HOA can just shed debt unless it ceases to exists and files Chapter 7, but i am not sure if you have common property if that is even an option?
JayP3 (Florida)
Posts: 154
Posts: 154
Posted:
Quote:
Posted By JillS5 on 10/25/2012 7:32 AM
Oh, learned a lot (including I didn't really know what case law was
)
So, if it were a major judgement, the corporation would really protect the homeowners from major losses. Where in the covenants (general section assuming a standard structure) does it address how this might impact whether you lose your home? I can't recall seeing that addressed but maybe I'm just not recognizing the technical terms. What if it is not addressed?
Oh, learned a lot (including I didn't really know what case law was
) So, if it were a major judgement, the corporation would really protect the homeowners from major losses. Where in the covenants (general section assuming a standard structure) does it address how this might impact whether you lose your home? I can't recall seeing that addressed but maybe I'm just not recognizing the technical terms. What if it is not addressed?
No you cannot lose your home if the HOA files for bankruptcy. An HOA cannot file for Chapter 7, liquidation bankruptcy. They can, however, file for a reorganization, usually using Chapter 11 (similar to Chapter 13, but it has a higher debt ceiling). The intent of the bankruptcy is to get an automatic stay on all debts while the association formulates a reorganization plan that will allow it to recover financially.
JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
Thank you Jay. I'm not completely familiar with "obtaining a stay on debts". I did look it up in a legal reference. I'm still unclear. Do the debts go away in a Chapter 11 bankruptcy? Would they be required to be repaid? The legal definition referenced "repaying a feasible percentage or in full". Does the court decide?
JayP3 (Florida)
Posts: 154
Posts: 154
Posted:
Google "Chapter 11 bankruptcy" or similar. I can't add to what you'll find.
JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Jill
I do not think you are keeping this subject going for idle reasons.
While informative, what is your underlying reason?
Thanks
I do not think you are keeping this subject going for idle reasons.
While informative, what is your underlying reason?
Thanks
JillS5 (Virginia)
Posts: 29
Posts: 29
Posted:
As I stated above, this is purely a hypothetical and the result of a discussion I had with another homeowner with a differing opinion.
JohnB26 (South Carolina)
Posts: 1,569
Posts: 1,569
Posted:
Quote:
Posted By TimB4 on 10/26/2012 9:31 AM
John,
I'm not sure the Association has any assets (except bank accounts).
The land is common property, owned by all members not the corporation. The Corporation known as HOA,Inc. only manages the property.
John,
I'm not sure the Association has any assets (except bank accounts).
The land is common property, owned by all members not the corporation. The Corporation known as HOA,Inc. only manages the property.
i stand corrected
DOH
mea stupido ~ maximo stupida
KellyM3 (North Carolina)
Posts: 2,239
Posts: 2,239
Posted:
I could certainly see a judge encumbering a portion of the HOA's monthly cash flow to pay defaulted fees over a set period of time, leaving the HOA to approach its owners as to whether an assessment is smart.
You don't want your HOA board talking "big" about hiring lawyers. I've grown to hate that sentiment and read it on this forum quite often. Dues payers suffer at day's end.
JM10 (California)
Posts: 503
Posts: 503
Posted:
Quote:
Posted By JillS5 on 10/24/2012 8:43 AM
Is anyone aware of any case law or examples of special assessments to members to cover expenses/judgements from legal action against the HOA?
Is anyone aware of any case law or examples of special assessments to members to cover expenses/judgements from legal action against the HOA?
You should thoroughly read your insurance policy. Ours didn't cover willful misconduct or cases where the HOA was found to be breaking the state/federal/city laws.
In that case, the insurance wouldn't cover the cost of the litigation and if there had been a payout, the insurance company might look to collect.
Here's a case where the 119 owner/members might have to help pay the cost of the judgment against them.
http://themolokainews.com/2012/03/27/ke-nani-kai-residents-receive-3-87-million-jury-award-against-condo-association/
Now, some of those previous board members, including Phil Schutte, Bruce Blough and Michael Preiss are being held responsible for a portion of the monetary damages, according to the Canadys.
The judgment against the association means the 119 owners of the units may also be liable for the damages. Although the association has three different insurance policies, it is still unclear if the individual owners may have to pay.
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