HOA Being Sued by Homeowner

First of all, I want to thank you for this forum. I have been searching for a forum just like this so I can discuss issues about HOAs, homeowners, managment companies, etc.

A little background. I am the president of our HOA. We have 60+ single family homes (we used to be larger but split in half from other homes in our association. I have been on the board for 5 years and been president for the last 2 1/2 or so. The association has been in existance for the last 7-8 years or so.

Now our problem: we have a homeowner that have been involved in the assocation since it's inception. He was the previous board president. His wife served on a sub-committee that reported to the board. Now, he is off the board and she was removed from her position for cause.

Over the last 3+ years, they have received a total of 15 violation letters. The violations have ranged from general clutter, using common association property as their own property, having unapproved structures, etc. The violations are issued by our management company. The board does not and has not ever issued a violation. Finally, over the past few months their situation and violations have become extreme. The board finally decided to have our attorney send them a letter to clean up their property or face the established fine process (all according to our rules). We granted them a hearing and they still hadn't complied with fixing their violations. They were fined $25. Then they were fined another $50 for further non-compliance. They are now in compliance. We passed on our legal costs for drafting the initial letter. They have paid the fines but not the legal fees. They have a current balance equal to the legal fees (a tad shy of $1000).

Last month, they decided to sue the assocation in small claims court. However, in their claim they only named our management company and not the association. They also asked for reimbursement or a credit of the legal fees they are supposed to pay.

We immediately engaged our lawyer and he filed the response with the court (a copy was sent to the homeowner as required).

A few days ago, we had our court date. The homeowner refused mediation offered by the court and when approached by our lawyer, refused to settle. The judge admonished the homeowner for suing the wrong entity. She said they should have sued the assocation not the management company. In addition, she said they could not ask for a credit for legal fees (or have the fees voided). When asked where they got their legal advice, they said the internet and some pro bono advice from a lawyer friend. The judge said they got terrible advice. The judge had no recourse but to dismiss their case. The homeowners were crushed.

Our lawyer approached them after the case dismissal and offered to half his fees for the day if they would agree to drop the entire matter. In other words, his fees for prep work and appearance in court was roughly $1000. The lawyer said he would only pass on $500 of those fees if they agreed to drop the matter completely. The husband agreed but his wife adamantly refused the offer. Our laywer said take a few days to think about it. If they were to re-file their claim, they would still lose and be responsible for further legal costs.

Have any of you dealt with a stubborn/hard-headed homeowner like this? The homeowners have completely alienated themselves from their immediate neighbors and a majority of the association for their past antics. The wife likes to claim victim status and takes it upon herself to badmouth the board, the assocation and anyone that does not support them. She went as far to start her own anti-association Facebook page so she could continue her anti-association campaign (after 2 1/2 months, she remains the only member).

The board was really hoping the homeowners would accept the lawyer's generous offer. It looks like our saga will continue.

Thank you for allowing me to vent and a place to have a discussion with other members. Sorry for the length of this post.

Jerry,

Part of this tale troubles me. The part about the lawyer.

You wrote that the homeowner sued the management company instead of the association but that the association's lawyer appeared in court. Was he there to represent the management company? If he represents both the MC and the HOA there is a potential conflict of interest. If the MC has its own attorney (as it should), that attorney should have appeared and sought a judgment against the homeowners for the costs of the MC's defense. If the lawyer represents only the HOA then his presence was not required as the HOA was not a defendant.

You wrote that the HOA had its lawyer draft a letter to the homeowner and, "We passed on our legal costs for drafting the initial letter." What is your authority for doing that? Is there something in your CC&R's that states if the association requests an attorney to write a letter to a member that the member agrees to pay whatever amount the association wishes to charge?

In my state, an attorney may not seek payment from anyone other than his client except by order of a court. "Reasonable attorney fees" are awarded by a court and may not exceed the amount actually paid. If you are seeking $1,000 as reimbursement for the cost of having the attorney write the letter, you will need to show the court that you actually paid this amount to the attorney. The fact that the attorney is now negotiating with the homeowners regarding how much he will accept suggests very strongly that you paid him nothing and his intent was to collect from the homeowners.

A letter from an attorney has no weight in any legal proceeding. Your association could have sent the same letter making the identical demands your attorney did. In fact, should the homeowners sue the association (as they should have) your attorney could become a witness and be ordered to testify about the letter. By seeking payment from a non-client you have waived any lawyer-client privilege regarding the letter. An attorney cannot represent a client and be a witness in the same proceeding, so you would need another attorney should your own lawyer find himself on the witness chair.

Since your association is not a law firm, it may not even be legal for you to collect fees even if you paid them. Only a lawyer can collect fees for legal services and, as stated above, only from his client.

As a past board member my experiences with attorneys specializing in HOA law is that they are generally worthless and lazy. I think this is because HOA boards tend to be comprised of ordinary folks with little of no significant experience with business, law, or management. They are not in a position to know when they are being given bad advice. You should look into whether this attorney is violation of the canons of ethics for representing clients where there is a potential conflict of interest and for seeking payment from non-clients.

First, thanks for the thoughtful responses. Hopefully I can clarify some of the issues.

Yes, the lawyer technically represented the management company in small claims court. I was just there so I could see how the process worked. The homeowner mistakenly named the MC as a defendent because they were given wrong legal advice. The judge did tell them that the MC was only an agent for the association and that is the entity that should have been sued. The homeowners now understand that. The MC just used our lawyer because it involved our association (I assume). I assume the lawyer filed whatever is required with the court to get those fees reimbursed by the homeowner since they had their case dismissed.

Our declarations does allow for the association to recover legal fees. That is why we passed on our initial fees to begin with. I would say that I am not totally happy with the law firm/lawyer. There were a couple of spelling mistakes and gave several of us board members reasons to think twice. In hindsight, I think the management company could have done the same letter (or even drafted by one of the board memebers). It wasn't any great piece of work (but did get the homeowner's attention). The MC is responsible for recovering fees for the court procedures. They can not just add it to their overdue homeowner account. It has to be a separate collection action. They have indicated they will go directly to collections (if the homeowners do not agree to the reduced fees for dropping the matter completely).

We can assume if the homeowners go through round 2 in court, the association will be represented by the same lawyer. We will not exercise our D&O policy because of the limited amount involved. We have a $2500 deductible for that policy. We have only used the policy once (a slip/fall by one of the residents; settled for 6 figures).

The board as a whole is trying to get this matter put behind us as quickly as possible. They are pretty apathetic themselves. I would say I am the most active of the board. I am the one that goes on property walk throughs with the landscaping company and the management company. Then again, I have a very flexible schedule whereas the other board members do not. I don't mind. I find it fascinating. Though dealing with this particular homeowner has been extremely stressful.

Thanks again for allowing me to join the group. I plan to spend time to read through the different threads for posts that might be helpful.

Repeat after me... Suing your HOA is suing yourself and your neighbors... You may want to use that phrase. It is a FACT. The HOA does need to have a lawyer to represent them in court unless you know anyone else you would trust on the board to do it. The HOA should then counter-sue for the legal fees.

The HOA should instead turn the legal fees owed into a LIEN and NOT a lawsuit. A lien is also a form of a judgment. It's much stronger in my opinion than a legal judgment by the court. Considering one can not sell their home until it is paid off. A lawsuit judgment the person can simply sell, move, and never pay a dime. Plus it has to be renewed every 7 years to keep able to collect. A lien does not typically need to be renewed and accumulates overtime. However, if you decide to turn this into a counter-suit you can't have it both ways until the court awards the decision.

I found people don't sue if they know that they are suing themselves, they will be countersued, and could face a lien...

the HOA was NOT sued by a homeowner

a separate entity, employed by the HOA, was sued

the case was dismissed by the presiding judge

there is NO issue for the HOA to address

any attorney fees would be a matter between the litigants ONLY

the HOA presumably did not incur any legal fees as they were not part of the litigation

therefor:

the HOA should MYIOB

Jerry's question "Have any of you dealt with a stubborn/hard-headed homeowner like this ? ..."

This dispute with a former President, is a reminder that it is a VERY short distance in skillsets & corrigibility between being on or off the Board. Perspective should not be lost

"Stubborn" and "hard headed' were probably also thrown at the owners whose Texas Board applied a mere grass-cutting/debris cleanup by-law to unbelievably demolish their home and bill them $80K. That was struck down by the Texas Court of Appeals in Nov 2013 (Evans v Casey Davis & Happy Hide-A-way Civic Club Inc)

"Stubborn" and "hard headed' were probably also thrown at the group of condo owners whose Board was been held in contempt for flat out defying a court order involving a common element change in BOILY v CCC # 145. The Court of Appeal here has reduced the rogue Director's PERSONAL penalties from $24K each to a mere $7500 each. The flat-out contemnor Directors appear also to have slope-shouldered their collective $ 109 K in legal defence costs before the Appeal decision onto the general owners, but sounds pretty stubborn and hard headed to me. If they get away with such, too bad that the general owners are victimized again.

This is not Director bashing, but respectfully there is often - maybe usually -a VERY short distance between what sits on the Board and what does not.

Being hardheaded/difficult is a common trait among many homeowners, especially in our association. I suspect 75% of the homeowners are apathetic and could care less anything is happening in the association unless our monthly dues are increasing. We don't have any issues with any other homeowners. This particular homeowner is the extreme example. I can assure any action taken against them is not retalitory.

I can assure anyone inside and outside our association, the board is doing their best to handle this particular homeowner. We are extremely conscience about double checking all of our rules and declarations to make sure any action taken against them is by the book.

As previously mentioned, the husband has been on the board until last year. The wife was on a sub-committee until the board removed her for cause. Together, they ruled the association. If her committee had an issue with her, she complained to the husband. If she had an issue with the other committee members, she complained to her husband. Fortunately, we saw through her act and always sided with the other committee members.

The bottom line is that in the past, they exerted so much power and pressure to their advantage. Now that they have no power, they have turned their focus on the board, almost to the point of harrassment. Even after discussing their issues ad nasuem at board meetings, she continues to email the MC and the board with inane topics and complaints.

Fortunately for the board and the association, we have all of our documentation ready to present to the judge if the homeowners decide to go round 2 with the small claims court action.

Every Association has a Chief Complaining Officer.
The Association should calmly request that all complaints be in writing and that they will follow up on any written complaint. Then treat each written complaint the same, dealing with each one on the complaints merit.
We like to respond to written complaints letting the complainer know if the Board considered the complaint valid and how it's going to be addressed, or if the complaint is invalid and why it is invalid (citing applicable sections of the governing documents or State Statutes as needed). Over time, the complaints should slow.