Suing our builder

LauraR5 (Tennessee)
Posts: 220

Posted:

So, some of my neighbors have decided they want to sue the builder of our community for negligence. I told them, as HOA president, that they were more than welcome to band together and have a class action suit, but that I didn't foresee the HOA as an entity joining their fight.

The chief instigator has sent me an email requesting that the HOA cut a check for $1500 to put some sort of engineer on retainer. She has also contacted the association attorney (she used to be on the board) and racked up who knows how much in bills to talk to him about this.

Should I run this past the other board members or just shut it down? I also sent a message to our PM telling him that I am 110% not on board with the association being involved whatsoever. I'm guessing I need to also contact our attorney and remind him he works for the current board and our management company and not every homeowner who calls.

I am too old for this nonsense. Advice please? What would y'all do?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A little more details. It may or may not be a HOA issue. something to establish first for all involved. It is a HOA issue IF the lawsuit involves common property like clubhouse leaks or the pool is not up to code. That means ALL the members have an i terest. Which then is a HOA vs developer.

Now if it is because their own individual home has occurred damage by faulty material etc... Then not so much HOa lawsuit and you are correct to leave HOa out of it. However, there are a few lines there that we have to split hairs over.

Let's say the developer used chinese wallboard. All the members are effected but not the HOA. You all would have a class action lawsuit as homeowners but not as the HOa. You are doing correct thing here with keeping it separate.

Yes, you are correct to keep the lawyer at bay. they represent the WHOLE of the HOA and NOT individual. We always kept it to one person to talk to the lawyer but discussed it with all BOD and members. That limited expenses and confusion.

Suing your HOA is suing yourself and your neighbors. A HOA suing the ex developer? Is using every members money to do so like a class action lawsuit but with it has to drag all members along.

Former HOA President

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

My advice about builders..... many builders are very good at protecting their assets. So even if you go to court and "win" you only win a judgement and typically the company has no assets. If the judgement is large enough, the company simply goes bankrupt and you receive nothing. And you still have legal bills to pay.

FredS7 (Arizona)
Posts: 927

Posted:

Disagree with Steve. I am aware of at least one case where action against a builder has been very successful.

A "request" means that you can, if you wish, bring this up before the board for action. Since owners are allowed to speak to the board anyway you may want to just go ahead and bring it up yourself. Or consider whether delay may be the best strateby.

You only owe legal fees if the board or its representative authorizes a request to the lawyer. If you get a bill you should send it back with a note saying that this expenditure was unauthorized and should properly be paid by the requester.

Does the issue impact a large portion of the community? Is there a reasonable chance of recovery of damages? These questions need to be considered before authorizing expenditure.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Posted By FredS7 on 01/28/2014 11:01 AM
Disagree with Steve. I am aware of at least one case where action against a builder has been very successful.

Well of course, that outcome really depends on who you are suing. Do your research first.

JonD1
Posts: 2,350

Posted:

Why or how would a home owner be allowed to use the services of the HOA c lawyer?

That should not have happened nor should any such bills be paid from HOA funds.

And the attorney should be told as much ASAP.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Laura,

I assume that the HOA does not own any of the property that was allegedly defective. In that case, the HOA would not have standing to sue the builder. Even if every home in your association, including your own, suffers from defects the HOA has no legal right to represent the homeowners.

RichardP13 (California)
Posts: 1,767

Posted:

Google "Construction Defect Attorneys". They are as abundant as ambulance chasers. I would say they work 99% of the time on a contingency basis, if they decide to take your case.

The cases they will take on involve condo, townhouses and their favorite, condo conversions. The common element is the units are all connected, one way or the other, side by side or units above and below one another.

Because, in many cases, the HOA has a responsibility for the maintenance of the areas that may or may have been constructed poorly, they usually are drawn in whether they like to or not.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By LauraR5 on 01/28/2014 8:56 AM
So, some of my neighbors have decided they want to sue the builder of our community for negligence. I told them, as HOA president, that they were more than welcome to band together and have a class action suit, but that I didn't foresee the HOA as an entity joining their fight.

The chief instigator has sent me an email requesting that the HOA cut a check for $1500 to put some sort of engineer on retainer. She has also contacted the association attorney (she used to be on the board) and racked up who knows how much in bills to talk to him about this.

Should I run this past the other board members or just shut it down? I also sent a message to our PM telling him that I am 110% not on board with the association being involved whatsoever. I'm guessing I need to also contact our attorney and remind him he works for the current board and our management company and not every homeowner who calls.

I am too old for this nonsense. Advice please? What would y'all do?

Of course this should be run by the BOD. Let them decide how to handle. That said, a bill out of nowhere to the HOA for services not authorized by the BOD is not worth the paper it was written on.

MissyP (Alabama)
Posts: 63

Posted:

Word for the wise. Your already dealing with some "sue happy" people here. Be prepared for them to threaten a lawsuit against the HOA for not paying the legal bill. You have to know that is coming. Don't knee jerk react and run to the attorney. You should be running to the attorney in this case just to establish that YOU are the HOA president and the ONLY contact they are to get direction or advice to/from. All others unless authorized, are NOT permitted to represent the HOA. Your lawyer should have known this already. Which puts up red flags you may want to change lawyers and get yourself one that specializes in HOA, contractual, or corporate laws. (NOT a Real estate attorney).

Anyways, if they threaten you with a lawsuit, let them. Your better off counter-suing anyways if they do bring a suit. Which I doubt in the first place. Let them know the HOA attorney is NOT the individual owner's lawyer. They are responsible for the bill. If that doesn't work, then tell them that the HOA has no signed contract or approvals with the attorney for this matter and thus can not be found liable to pay their bill. If they want the HOA to sue, then they must present the idea to the entire HOA to vote on to pursue. Which if you have a strong enough argument, that could be struck down.

All in all, you may want to review how you all deal with the HOA lawyer. Establish the policy that only you the President or appointee can talk to the lawyer. The BOD is to discuss the matter to make a decision on what to do, but the President is to be the actual messenger to the lawyer on their behalf. This may solve your issue.

JoK2 (California)
Posts: 198

Posted:

Quote:

Posted By LauraR5 on 01/28/2014 8:56 AM
So, some of my neighbors have decided they want to sue the builder of our community for negligence. I told them, as HOA president, that they were more than welcome to band together and have a class action suit, but that I didn't foresee the HOA as an entity joining their fight.

The chief instigator has sent me an email requesting that the HOA cut a check for $1500 to put some sort of engineer on retainer. She has also contacted the association attorney (she used to be on the board) and racked up who knows how much in bills to talk to him about this.

Should I run this past the other board members or just shut it down? I also sent a message to our PM telling him that I am 110% not on board with the association being involved whatsoever. I'm guessing I need to also contact our attorney and remind him he works for the current board and our management company and not every homeowner who calls.

I am too old for this nonsense. Advice please? What would y'all do?

I would get the board on this asap, you may have the authority to shut it down, but you should get the thoughts from the other board members before you act. Why wouldn't you include the rest of the board anyway before any action on your part? It may be that one of them has added to that whole conversation, whether willingly or not.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By JoK2 on 01/29/2014 4:45 AM

Posted By LauraR5 on 01/28/2014 8:56 AM
So, some of my neighbors have decided they want to sue the builder of our community for negligence. I told them, as HOA president, that they were more than welcome to band together and have a class action suit, but that I didn't foresee the HOA as an entity joining their fight.

The chief instigator has sent me an email requesting that the HOA cut a check for $1500 to put some sort of engineer on retainer. She has also contacted the association attorney (she used to be on the board) and racked up who knows how much in bills to talk to him about this.

Should I run this past the other board members or just shut it down? I also sent a message to our PM telling him that I am 110% not on board with the association being involved whatsoever. I'm guessing I need to also contact our attorney and remind him he works for the current board and our management company and not every homeowner who calls.

I am too old for this nonsense. Advice please? What would y'all do?

I would get the board on this asap, you may have the authority to shut it down, but you should get the thoughts from the other board members before you act. Why wouldn't you include the rest of the board anyway before any action on your part? It may be that one of them has added to that whole conversation, whether willingly or not.

Jo,

Laura has no duty to bring this matter to the board. If those who wish to sue want money or anything else from the association they should bring their request to the board and not just the president. The president would not normally have the authority to grant or deny requests for board involvement. It is not her fight and those who wish to persuade the board to act should address the board. Let the proponents of this lawsuit present their own case to the board.

As I said previously, if the association does not own the allegedly defective properties it would have no standing to sue the builder. The association is not a law firm and cannot represent the owners in court.

FredS7 (Arizona)
Posts: 927

Posted:

A (possibly theoretical) question:

>if the association does not own the allegedly defective properties it would have no standing to sue the builder.

Suppose the association was responsible for maintenance (exterior painting, for example). Would they then have the standing to sue?

LarryB13 (Arizona)
Posts: 4,099

Posted:

Fred,

Even in a condo the association typically has no deed. Each owner has an undivided share in the common-area real estate.I assumed, perhaps wrongly, that these were single-family residences and that the "defects" were not on common areas owned by the HOA.

You asked, "Suppose the association was responsible for maintenance (exterior painting, for example). Would they then have the standing to sue?" If I entered into a contract with a third party to maintain my property would he have standing to sue my builder? I think you know the answer to that but the smart course of action would be to consult an attorney experience with defect litigation.