Lawsuits - How Prevalent

I have seen many posts about making sure you CYA because of potential lawsuits over things that IMHO are fairly trivial.

So I was wondering how many HOAs have actually been involved in lawsuits, how long ago, and how big a deal was it.

I'll start. We were sued about 10 years ago over a parking enforcement issue. We lost. The judge decided that our rule was too vague. We changed the rule. That's it.

If we went before that same judge with our revised parking rule, we would probably lose again because, while it isn't vague any more, that judge wasn't interested in dealing with chronic problems.

From time to time, we get threats that some homeowner or another will take an issue to a lawyer, but that never seem to go anywhere.

Over the years we have dealt with several lawsuits.

In most cases when property owners don't get their way and attempt to use the legal system to get what they want.

Sad reality is most courts are unfamiliar with the operations of an HOA, the governing documents, etc. And most won't bother to educate themselves or consider the consequences of their decisions on the HOA going forward.

IMO the courts I have dealt with fall miserably short in handing out justice with any degree of common sense and more importantly in a timely fashion. Courts, lawyers (both theirs and YOURS) have no interest in settling matters quickly. The most simple of cases or claims can drag on for YEARS allowing both lawyers to line their pockets while failing to serve the interests of either party.

For the lawyers any lawsuits are a win-win. Win or lose they make money. The longer the better.

If you go to court thinking common sense and rational thought will prevail be prepared for a huge disapppointment.

Sometime ago I was in court and listened to a traffic case. 16 YEARS this traffic ticket matter had not ben settled. That day it was called again! The fine $25. The plea guilty!
You would think perhaps it was going to get completed that day. Well the lawyer for the offender ( now get this) when asked if the fine, no interest or fees after 16 years added,
would be paid that day?????????? The lawyer asked for more time so the offender could raise the money! 16 years was simply not enough. And guess what the judge granted a one month extension! And the tax payers foot the bill for all that work that has gone into one traffic ticket for more than 16 years. Multiply that by millions of legal issues and you get the expensive, unproductive, dysfunctional legal system that serves no one but those with money and those who work within the system.

Well said.

Tally so far:
Np - 1 in 28 years.
Rw - 0 in 28 years.
Jon - A few.
JohnB - Unknown.
Melissa - Unknown.

Filed by my HOA:

8 since 2008

HOA sued by a homeowner:

2 since 2008

1 win for the HOA. They have yet to collect on that judgment. The rest settled out of court.

You should only "prevent" if your guilty or it is the right thing to do. Otherwise it is knee jerking reacting due to preconceived falacies. Sometimes the best prevention is to be sued. The damages resulting may be less than consulting and jumping through hoops.,

Unless it is complete outragous situation that causes severe damage, the court system ONLY makes you "Whole". Consultation charges are not necessarily recoverable or emotional distress. Most of the time emotional distress claims are tossed out depending on the nature of the suit. Again that being based on complete outrageous behavior dtermined by the court. The court decides who must pay legal costs. It only takes 51% of doubt to win.

Check with your insurance company to find lawsuit payout caps. A million $ policy does NOT equal a million $ payout. It is surprising but it may just be 80 to 100K. Hence, why I advise checking out your worst case scenerio. Which is usually the insurance cap as lawsuits tend to work like insurance claims in the end...

Why spend more on unnecessary consulting fees at every empty threat? Costs rack up quick. I say untill called to appear in court, I am not running to a lawyer.

We did have 1 lawsuit in 20 years in our HOA that I was aware of. It happened before my time. Apparently, there was a contract with a lawncare company for like $40K a year. The developer or HOA decided to go with someone else after signing the contract with them. Our HOA's ONLY responsibility is to provide lawncare. So not sure the result but I believe the original company was successful. Ironically, I used to drive by the office of that company that had been defunct for years. So never did get the full story considering it was 20 years after the fact.

I had to testify in a lawsuit due to the foreclosure I did. The renter was evicted by the owner after having a "rent to own" contract in place. They tried to make the renter pay the foreclosure costs. It was quite a mess. The renter won. So it was not against the HOA but we were involved.

3 Condo (multi units building) Associations and 3 HOA (standalone homes) over 40 years.

Lawsuit threats, hundreds.

Polite lawyer letters back and forth, 100 or so.

Nasty lawyer letters back and forth, 50 or so.

Association initiated lawsuits that ended in court (other then liens), none.

Owner initiated lawsuits that ended in court, none.

That said, insurance is worth it as it takes only one expensive settlement to break ones back.

Based on records, there have been 4 legal actions (all initiated by the Association) over a 34 year time frame. 2 for assessments (filing liens) 2 for covenant enforcement. The two for covenant enforcement never saw trial as an agreement was reached ahead of time.

Of the two for assessments, 1 was stopped due to foreclosure by the bank. 1 is currently in progress.

Tally so far:
Np (81 units) - 1 in 28 years. HOA lost at trial. *
Rw - 0 in 28 years.
Jon - A few.
JohnB - Unknown.
Melissa - 0 in 10 years. **
Banks - 2 in 6 years.*
Kerry (211 units) - 0 in 13 years.
Larry (1600 parcels) - 0 in XX years. "
JohnC (6 associations) - 0 in 40 years.
Tim - 2 in 34 years. No trial yet. *

* Assessment collections excluded.
** Contractor claims excluded.

Last 5 years, two lawsuits, one a vendor, the other a neighbor to neighbor dispute, both losses for the HOA = $230K (priceless)

Long story..

3 associations since 1994--20 years, one in California, two in Texas. No lawsuits, attorney letters for past due assessments (as usual) and one covenant violation not yet resolved. The current Texas association is a sub-association (no lawsuits), the master association (8000+ homes) seems to have one or more suits pending at any time for one reason or another.

Tally so far:
Np (81 units) - 1 in 28 years. HOA lost at trial. *
Rw - 0 in 28 years.
Jon - A few.
JohnB - Unstated.
Melissa - 0 in 10 years. **
Banks - 4 in 6 years.*
Kerry (211 units) - 0 in 13 years.
Larry (1600 parcels) - 0 in XX years. *
JohnC (6 associations) - 0 in 40 years.
Tim - 2 in 34 years. No trial yet. *
Dorothy - 1 in 22 years. **
Richard - 1 in 5 years. HOA lost. **
Bill (3 associations) - 0 in 20 years. (Master association of 8,000 has 1 or 2 lawsuits pending at all times).

* Assessment collections excluded.
** Vendor & other non-HO claims excluded.

Not a lot of lawsuits - especially considering how often lawsuits get talked about.

I've seen that Kerry and I agree with you.

But I wasn't thinking about the random I'm-gonna-get-my-day-in-court visitors to this forum. I was thinking about the regulars. It seemed to me that there are excessive concerns about being sued over trivial matters - which these numbers don't seem to support.

Huh??? A HOA is ONLY funded by it's members for it's members. That logic does not make sense... When you sue your HOA you are suing yourself and your neighbors. The HOA board is NOT a separate entitity. They are also members and responsible for defending the members. They have to do that by using the HOA money. The money which you as a member are responsible to contribute to. Otherwise, you get foreclosed on and no longer a member. which if no longer a member you have no lawsuit as you are not a member anymore...

I wish people would realize the board is one of you and selected by you. Stop treating the board as "They/Them"...

6 years ago my wife and I moved into my HOA. At the time I was a Financial Analyst with Countrywide Home Loans, and while I helped approve some of the condo projects under Fannie Mae guidelines, I didn't fully realize what I had moved into. A year after we moved in, we started to get involved with the HOA. My wife joined an events committee and I built the community's first website, with full knowledge of both the PM and Board. What happened afterwards I officially found out the detail after I became President of the Association. All the evidence is 5 feet away from me in a file cabinet in my office.

It turned out two neighbors who lived next door to each other didn't like one another and the issues were racially motivated. The management company at the time and the attorney told the parties they needed to settle on their own as it didn't financially involve the Association. The one neighbor went out and contacted a management company who had a relationship with the home builder. Three homeowners got together, blackmailed the Board and told them " either you sue so and so or the three of us will sue the Association". Two weeks later this company was hired as the management company, and they and the same attorney started legal proceeding against the neighbor. I started asking questions because the financials didn't look right. The Board was clueless. There was never an "official vote" to take action and I have all the minutes of General and Executive Sessions since the inception of the community. The two parties rigged and fixed an election to keep me from the Board. In 5 years they spent over $18K in attorney fees to shut me up. They spent $200K in legal fees on the one homeowner, and $50K on bogus collection fees. The PM with the help of the attorney and the three homeowners tried to recall me while I was the Board President.

I could have sued my HOA and gotten a huge hunk of change. I didn't do it because "I was suing myself", I didn't do it because the most important thing was not to ever let it happen here. After the mortgage meltdown, I got involved in Association management to make sure what happened here didn't repeat itself elsewhere.

I see things on a daily basis that would make most people's head spin. Management companies have too much power because the majority of Board don't know, don't have time and don't care. The homeowners that complain don't have time either, just want someone else to solve their dilemmas. I have been involved in over 100 different associations in the past 3 years, and I truly have to say the group we have on my own association Board has to be the hardest group of individuals I have worked with in this industry, but it didn't come with a lot of heartaches and a good friend name Jack.

That's my story and I am sticking with it!

The only ones we've where the Association was sued concerned slip and fall incidents, but they were all settled out of court. One lady had her attorney send a nasty gram over a sewer line repair, but in reviewing the incident, we found both her and the Association were partially to blame, so we settled the matter without a lawsuit at all (and no, we didn't pay her attorneys fees).

While you won't always prevent a lawsuit, I think frequent and candid communication between the Board, homeowners and property manager (if you have one) can prevent the majority of problems before they start. Doing one's due diligence before running off half cocked and being willing to LISTEN is also critical. If the homeowner insists on suing anyway, make sure you've done everything you were supposed to, go to court and let the chips fall where they may. Let the homeowner explain to the judge why he/she didn't read the CCRs, failed to submit an exterior change request without all the requested information, pay his/her fees on time, didn't call the property manager to request a payment plan, and so on.

Whenever I read about some homeowner going to the media about not being able to display his flag (because he wants to put a HUGE one in front of the house) or owning a pot bellied pig, I always wonder why didn't these people go to the Board first and explain what they wanted to do in an adult manner without stomping away like a child (It's MY FRIGGIN HOUSE and I'll do what I DAMN WELL PLEASE!!!) Likewise, some Boards get themselves into trouble because they really are unreasonable and don't stop to look at the problem from all angles to work out a solution because "we are the BOARD and therefore we are".

Excellent point Sheila. The Board must be very careful about spending the Association's money on lawsuits. Attorney's are very expensive. Don't assume the HOA will be awarded attorney fees. In Iowa, these cases are typically tried as contract cases and attorney fees are rarely awarded in contract cases. Of course I am not a lawyer and am basing my opinion by two Iowa attorneys and my own research.

Excellent points!

Legal advice should be funded by the HOA budget. It obviously could not be through the HOA lawyer. It would need to be a separate entity that reviews claims and advises members. I might also see this person acting as a mediator with the HOA attorney to resolve issues that must be escalated beyond the board when the board is not entertaining comments or dissent.

I'm not clear what you are trying to say here. Are you suggesting that an HOA should work with two attorneys? One that's the official "HOW Lawyer" and another to "review claims", "advise members", and also to act as a liaison between the HOA and the HOA lawyer?

I say use common sense. If your HOA is doing something wrong and it is pointed out, then the HOA should fix. If the HOA is not doing something wrong and someone wants to bring suit, let them. All of this "prevention" or negotiation crap is just ego soothing waste of time and money.

The answers are IN your documents. Do not like a rule? The documents allow you to change and adopt a rule change. It takes hard work and majority vote of OWNERS. The board doing a terrible job? Owners can get together and vote them out. The documents allow for special meetings called by members in many cases. MAJORITY RULES in a HOA.

The general rule of thumb... If the issue effects multiple members, then a rule change should be considered. If only one member has issue, then it is most likely an annoyance issue.

It makes no sense to spend thousands of dollars to a lawyer at every little threat or concern for a lawsuit. Consultations rack of money and for what? Your going to be sued anyways? Better spend the money on fighting the suit than worrying about it.

People are going to threaten to sue ALL the time. Let them. Once it becomes a reality, then analyze if it is valid or not. Not valid, court will toss it out. If it is valid, then look at the solution your going to be forced to do if they win. Look at worst case and stop with the preventing it....

Many BOD Members (myself included many tears back) get on the BOD as they have a personal agenda. Covenants, laws, budgets be damned. They want what they want.

We are in the middle of experiencing those issue in our turnover from Declarant to owners.