Law suit?

We just had our first meeting in over 6 years. WE voted in a temporary board and voted to go with a new management co. to that would get us into compliance with the law. 13 of the 16 properties were represented and 100% in agreement.

We thought everything was great until a member told us he had received a call from the MC who stated that she has been taking care of a law suit for the past 2 years against the HOA. All the members present have been here for years and knew nothing of a law suit.

We have been here less than 1 year and no law suit was disclosed when we purchased the property. We are in CA and the disclosure laws are very strict.

Can this happen? If so do I have any recourse?

Yeah I second what Mathew said. Find out who and why there is a suit. Plus the MC should not be handling it anyways. You have to be represented in court by a lawyer or an assigned representative of your HOA board if you are so brave. The MC should only be issuing the checks to pay the costs per Board request. The lawsuit if it exists shoild transfer.

The MC was to take orders from the board and does not represent the HOA. They are a paid contractor who is paid to assist the board to do their duties. That maybe to pay the bills to writing out violation notices. They may have a lawyer available to the HOA but they should not be the one communicating to them. I always recommend one source for that and it be the President.

You need to look up the corporate records for your association. I think in CA they are maintained by the the Secretary of State. Your filings should name the board members and officers plus the statutory agent.

The statutory agent is a person or other legal entity upon whom legal process may be served. In most states, this does not have to be a lawyer but once the legal papers are in that person's possession then they are considered to be served.

Normally, it is an easy process to change the name of the statutory agent and/or his address. Look on the Secretary of State's website for instructions or forms to do this. You want to be sure that legal notices are no longer going to the MC.

As your association is once again active, you should also update your records with the state.

Recourse means you want something. What do you want? And from who?

So if this is youur first meeting in 6 years and you are on your way to being in compliance with the law, was your HOA dissolved by the state or did an HOA corporate entity exist during the period of no meetings? If the former, how could a lawsuit be levied against the HOA and if there was no board and the MC was running the show without any authorization could they be at fault (assuming they were not the registered agent).

Steve,

I want coverage from the law suit that all.

I'm worried that the HOA has no insurance or is under insured and that I personally will be held responsible for 1/16 of any judgement given. As we did not own the property when the supposed fall and subsequent supposed law suit happened. And nothing about a law suit was disclosed during escrow and in CA everything has to be disclosed.

No one noticed that the insurance coverage provided to our escrow company was from 2002 and not 2012.

I know that the escrow company insures clear title, but is something like this covered?

I have a small pet peeve. Please don't take it personally. It's just when people recommend hiring a lawyer to settle issues with their HOA, where do you think the money is coming from? It's easy to tell someone to hire a lawyer to investigate, fix, threaten, or conduct business. However, they do not work for free.

So when you advise someone to hire a lawyer follow that up with WHO is going to pay for it. The HOA is ONLY funded by it's members FOR it's members. So having the HOA pay for it means the funds have to come from ALL the homeowners. Which may require a special assessment. That is IF it is a HOA direct issue with board approval. Remember the HOA attorney represents the HOA as a "whole" not individuals or the board.

If your a small group similar to this poster who is trying to change things around, then who pays then? It's NOT the HOA as it is being represented by it's own lawyer. It's got to be from the pocket or pockets of those owners who want to change things.

This is why I always say suing your HOA is suing yourself and your neighbors. Not to say that there is NOT a time to indeed hire a lawyer and sue. Just don't go blindly into it without realizing the consequences and damages you and other members will be facing. Are you willing to do this and okay to pay that cost?

I've hired a lawyer before to force my HOA to do a special assessment correctly. The money came from my own pocket with help from a few other members who fought with me. So understand the cost of the attorney may indeed come from your own pocket twice. Don't always think that a HOA is going to pay for your legal bills after all is said and done. It may just be the cost of doing business.

There I said it... I feel better now. Just want to clarify that a blanket statement of hiring a lawyer means more than that. The money has to come from somewhere so understand that before going and hiring a lawyer.

I agree a lawyer and audit is needed. It is WHO is going to pay for it needs defined. This case the HOA if reformed should pay. However, if it is NOT reformed then the OP and company need to pay. It is defining when you hire a lawyer understand what pocket it comes out of and why. Anyone can sue for anything and hire a lawyer. Just know the consequences for doing so and take steps to limit that damage.

Well, win or lose, the members will ultimately pay. This will either be through higher insurance premiums or special assessments to cover legal expenses.

Contracts only work if both sides are willing to comply with the terms of the contract. When one side does not want to comply the only choices are to renegotiate the contract or take the issue to a third party (typically binding mediation or the courts) to force compliance.

In this case, it appears that the MC does not want to comply. Therefore, Tammy can either continue to run into brick walls or seek out that third party. Sometimes that third party can be a simple letter from an attorney. If the MC has to be licensed, the licensing board can be the third party (via threat to report them and to follow through with the report if the threat fails). Sometimes the third party can be public opinion through the press. There are options but they are limited and all have their own unique set of consequences.

Personally, I'd try the following:

1) show up as the board and simply say we are here to collect our records. If the response is they aren't all available, the Board should take what is available and arrange a time the next day or later that day to collect the rest. It's far far more difficult to say no to a group of people in person then in correspondence or over the phone.

2) If the MC is licensed, explain that failure to provide the documents by mm/dd/yyyy will result in a complaint to the licensing board. If the MC has other clients, losing their a complaint to that board can be a huge motivator.

3) A letter from the Association attorney (shouldn't cost more than $600). The threat of legal action can also be a great motivator. However, you should never make any threat you are unwilling to follow through on.

I think most would agree that if these actions failed to produce the records, the only other option would be full legal action.

Did I miss any of the options?

Are you asking if you personally would be exempt from any responsibility since the lawsuit against the HOA was not disclosed when you purchased your property? And are you asking if your title insurance would protect you from responsibility if the lawsuit were to result in a judgement against the HOA?

If so, I would read your title insurance policy and call them directly. Do you have any details about the lawsuit? Is 1/16 more than what you might spend on an attorney? Attorneys are very, very expensive. It may cost more to defend it versus just paying 1/16 of the judgement. Just a thought.

Who in your HOA pays this PM, Tammy??

And you say she's not even a certified PM? Just a realtor?

Tim's list is a good one.

I agree with others that you find out if there really is a lawsuit against your HOA and why.

As I wrote in a reply in your earlier or earliest post, please, with others from your HOA, get an attorney! An audit's important too!

Matthew,

I just went to the Secretary of State website. Our HOA was not listed, so I typed in the MC. What does it mean when the status is suspended?

And you guys are right about hiring an attorney. There are so many things needing to be fixed and we know there isn't going to be any money turned over to us. The audit alone is $3000. The new MC says that they contact the old MC and they slowly shift everything so the the Current MC closes out the books for the month. We will be paying for the set-up fees and the cost of the studies ourselves. There are only 11 owners and 4 of them did not vote. So the cost to the rest of us just to get this going is considerable.

I will call the insurance co. tomorrow although it probably isn't the current company.
She has also changed banks several times.

Carol,

The PM we chose has a staff of 3 in the department for the 27 HOA's they manage and page of references. Two are certified. They have a very good reputation.

As far as I know The MC is the only person on the signature card. She changed banks a few years ago. I know what bank so we will see tomorrow. According to the statement she sent out at the first of this month (to only 1 owner) it claims we have a $10,000 CD but it is not listed on that bank statement or the last 3 he received.

She called people at 6 am trying to get them to stay home and not go to our meeting. She is trying to hold on too hard.

Do you know what it means if the status of her corporation is suspended? I found this on the CA Secretary of State page.

We are unincorporated, maybe that's why we were not listed.

I am strongly against a PM or MC being on the signature card.

You do not have to be on the signature card to make deposits.

Tammy,

If you are not incorporated then the story about a lawsuit becomes even less credible. My understanding is that if someone sues an unincorporated association that they must sue each and every member individually. That means all 16 of your owners should have been served with a summons and complaint in person by an officer of the court.

Having a process server show up at your doorstep is a pretty memorable incident, so I find it hard to believe that your MC is the only one who knows about a lawsuit.

I think it's great that you found a MC with good references.

What I don't understand is that with only 16 lots, why you don't save the money and become self managed. Yes, it can be a lot of work and difficult if people aren't willing to become involved. However, it's a way to control costs.

My husband was elected to the board along with 2 others. We had 7 owners that own 12 of the 16 properties volunteer to be on the board as long as my husband dealt with the old MC. She has been a little unprofessional for the last few days calling some of the owners and letting off steam. My husband and another of the new board met with her this afternoon. They let her go on for 2 hours, only stopping her when she said our meeting was illegal. In the end she resigned and promised to turn over the records and bank account to the new MC within 30 days.

She also said we were insured for the law suite not to worry about. If what Matthew said is true we wouldn't have been served but one member has lived here for years so he would have been served. I think you are right, she is blowing smoke.

Everyone thinks having another business as a go between may keep us out of court. If after a year watching this new MC we hope to step into self-management.