Association getting sued

Started by ChristineW5 • 19 replies • 1513 views

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ChristineW5 (Illinois)
Posts: 2

Posted:

Hi Everyone!

I need a little guidance, but first let me give you some background information.

I bought a house in Oct, 2016. I am one of 9 town home owners. We are for the most part all new owners, all but 2 purchased in 2016 and 2 are still up for sale. The original developer went bankrupt. The bank took control of the properties and then a new developer purchased them and finished the ones that were not completed. During the time that the bank owned them there were renters living in the finished ones. Apparently in Feb. 2015, someone got hurt in the common space (a gutter fell on them). The association was served today. The person is suing the association and the bank. The association paperwork was filed years ago, but there was no acting association at the time and no dues were being collected. As new owner we are very frustrated because we just started collecting dues this year and don't have the reserves necessary to hire an attorney to even fight this, which means there will need to be a special assessment. I'm trying to determine if an association that is not up and running at the time of the incident can even be sued. This is such a sticky situation, since these properties have changed so many hands...trying to make sense of it all.

Thanks!

SueW6 (Michigan)
Posts: 814

Posted:

The issue is whether or not the development was 'turned over" at the time by the Owner.

You should be able to find that out.

Is there a Board of homeowners or is there still a Developer/Owner board?

In any case, usually EVERYONE gets sued in a case like this.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Call your insurance company. They may be able to handle this if you have one. Will have to pay the deductible and or face higher rates or cancellation.

Plus file a countersuit for legal expenses. This could be a frivoulous case. Which a countersuit will get money back for costs and does not cost to do it. If you all win the case, this would be best choice.

Former HOA President

MarkM31 (Washington)
Posts: 494

Posted:

The insurance in force during the event is on the hook.

You may have to scrimp up your pennies and hire a lawyer, but this shouldn't go very far.

Was anybody living there in 2015?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By MarkM31 on 12/01/2016 8:22 PM
The insurance in force during the event is on the hook.

Yep, I'd simply turn the issue over to them.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Keep in mind not every situation or lawsuit bears any fruit. This person really has to prove their case and bring evidence. Which by the way the HOA/Bank being sued is to have access to. It's called "Discovery". Plus what does a gutter falling on someone in a common area mean a lawsuit against the HOA/Bank? Is the HOA in the gutter owning business?

This really is an insurance claim. The insurance company will hire their own lawyer to represent if it goes that far. I would still see if the HOA can put a counter claim in response to the suit. That way they can collect any damages/cost incurred.

Honestly, this lawsuit sounds like a lot of bunk. Is the person a member of the HOA? Who owned the gutter? Was it on a house or being installed? Who is this person suing and their history with the HOA? Too much here sounds like the HOA just does not need to panic and just hand over money. Stay the course and don't fall off into fear.

Former HOA President

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By MelissaP1 on 12/01/2016 9:17 PM
Plus what does a gutter falling on someone in a common area mean a lawsuit against the HOA/Bank? Is the HOA in the gutter owning business?

Most likely each owner has a one-ninth undivided property interest in the gutter but the declaration makes the association responsible for exterior maintenance.

Quote:

This really is an insurance claim. The insurance company will hire their own lawyer to represent if it goes that far. I would still see if the HOA can put a counter claim in response to the suit. That way they can collect any damages/cost incurred.

There is no need to file a countersuit in most states because the prevailing party recovers his costs as a matter of law.

Quote:

Honestly, this lawsuit sounds like a lot of bunk. Is the person a member of the HOA? Who owned the gutter? Was it on a house or being installed? Who is this person suing and their history with the HOA? Too much here sounds like the HOA just does not need to panic and just hand over money. Stay the course and don't fall off into fear.

I would start off with the assumption that the plaintiff is represented by an attorney licensed to practice law in Illinois and that he is far more aware of the applicable law than any of us. Gutters are foreign objects where I live but I can imagine an improperly installed gutter filling with water and then freezing would create quite a hazard for anyone below. This should be turned over to the insurance carrier ASAP.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

The association paperwork was filed years ago, but there was no acting association at the time and no dues were being collected.

Association was legally created years ago. Period.

Quote:

As new owner we are very frustrated because we just started collecting dues this year and don't have the reserves necessary to hire an attorney to even fight this, which means there will need to be a special assessment.

What are you collecting dues for? Is one of the expenses insurance? If yes, hand the case over to them. That is what your pay for. If the answer is no insurance, you need a lawyer. Quick.

Quote:

I'm trying to determine if an association that is not up and running at the time of the incident can even be sued.

Doesn't matter if dues were collected or people sat on thier hands. Association was legally responsible when it was created. So yes, it can be sued.

LarryB13 (Arizona)
Posts: 4,099

Posted:

I find it hard to believe that anyone could obtain a mortgage in a development where there was neither an association nor an insurance policy.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

True, last time I knew you need a copy of the master policy insurance rider to provide the mortgage company.

BobD4 (up north)
Posts: 1,002

Posted:

Quote:

Posted By ChristineW5 . . . I bought a house in Oct, 2016. I am one of 9 town home owners. Apparently in Feb. 2015, someone got hurt in the common space (a gutter fell on them). The association was served today. The person is suing the association and the bank. . . . trying to make sense of it all.

ChristineW5 (Illinois) Respectfully, the premises liability (aka occupiers liability )claim if you have correctly described it, targets a breach of duty or want of due care by whatever the title documents show was owner of record for the common area venue / external building envelope. That such claim is historical but timely may not be relevant to the victim's right to recover against funding by current & future owners.

I respectfully doubt there is any defence available like : "One or more of our unit owners think we were inactive like an Ostrich with head in sand. So therefor our civil victims are & will be out of luck even if they have a totally valid injury claim !"

I would check into the diligence & transfer documents you obtained as a new purchaser including whether there were disclosures in any estoppelling-type certificates you would have been well to purchase.

If you separately bought Title Insurance look closely at the wording to see if any such construes coverage for some sort of title marketability impairment which might have been a decision-changer or a 'back to negotiations' trigger.

If you wanted to sell now, I wonder what your lawyer would want your association to disclose or estoppel to prospective buyers on demand about the claim. That may indicate what you should have been told if there had been some sort of (constructive) awareness by the common lands' owner of record before you bought. Hope association insurance was in place.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I would like to know more about what they have a case about. They are only entitled to their actual damages such as medical expenses. Would it not be cheaper just to pay their medical bill? The court is ONLY going to make one "Whole" and not a profit.

Did the person approach the HOA/Bank with their damages prior to filing the suit? The court might like to know if the HOA/Bank refused to agree to terms prior to being sued. If not, that doesn't necessarily paint the other party in a good light. The first step should have been they approached the HOA/Bank with their claim and request their expense/damages be paid. There should be steps taken to remediate the issue before it goes to a courtroom.

Honestly, it sounds more like a person trying to take advantage of the HOA/Bank thinking they have full pockets. Let the insurance company know the situation and then decide if it's cheaper to just pay the bill than hire the lawyer or file a claim. Suing your HOA is suing yourself and your neighbors. That special assessment you may need to put in place for this lawsuit and they are a member, they will have to pay it too. They aren't exempt from the special assessment...

Former HOA President

BobD4 (up north)
Posts: 1,002

Posted:

Quote:

Posted By MelissaP1 . . . . Suing your HOA is suing yourself & your neighbors.

MelisssP1 Respectfully this is one scenario where such perhaps may not apply. The victim(s) may be NON-owners on the premises for any lawful reason whatever.

Premises (aka occupiers) liability is a discipline against carelessness that may make a victim somewhat whole again instead of relying on the general taxpayers or relatives. I also understood, perhaps wrongly, that American civil juries may be very responsive to pain & suffering & economic loss ( business income interrupted ). . . .

Can't say I have heard of many 'fallen gutter' injuries except to the poor schmucks trying to clean them out. But if installation is recent there may be some aspect of a construction defect or component defect that could allow the community to try to ensnare deeper pockets from outside . . .

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Bob just trying to figure out the scenario. We don't know who the person was the was injured. What their relationship is to the HOA, bank, or the contractor. Are they a HOA member? Did they work for the contractor? How did the gutter injure them? They don't fall from skies for no reason.

The situation is unclear on the lawsuit. It all screams "insurance claim" but exactly who's insurance? Did they work for the contractor and it happened on the job site? Were they doing repairs for an owner or a renter? Then this could fall under that owner's homeowner's policy.

An accident happening on common area does not necessarily make it HOA responsibility. What if a person is on the common area, a car has an accidents and hits that person on the common area? Is the HOA responsible? Is it the car owner?

A gutter is either being installed or being cleaned. It's not floating in the sky waiting to drop on someone's head. Hence why it's necessary to know the scenario of why the lawsuit. Plus they are only entitled to their expenses not necessarily the expense of hiring a lawyer to sue. Hiring a lawyer can be a bit of a two pointed sword in these scenarios. The court is always looking at what actions were taken to mitigate your costs/damages. Hiring a lawyer when all one had to do is submit a claim, isn't necessarily one of those ways...

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Christine

My initial reaction is contact your association's attorney.

That said, assuming your HOA had insurance at the time, I expect the attorney will advise you to turn the matter over to them (the insurance company at the time of the event) even if they are not the present insurance company. If advised other, I might want a 2nd opinion.

Do not allow others posting, nor yourself/BOD, to play "out house attorney".

ChristineW5 (Illinois)
Posts: 2

Posted:

Hi Everyone!

Thank you all for responding. This is a very tricky situation, with a lot of parties involved....something an attorney will need to sort out, but maybe a timeline would be more helpful.

-2008 - Original developer goes bankrupt...there may be another developer that acquired it at some point, but that has not been determined yet.
-Late 2014 - The first owner purchases one of the nine homes from the bank I believe
-2015 - The bank owns the remaining 8 properties at this point. It appears that a management company is also in the picture because the bank is renting out some of the finished properties and the management company is also a party in the suit.
-Feb 2015 - One of the renters/ tenants gets hurt in the driveway (common area) when a gutter from one of the properties hits her. She claims that the homes were not being maintained and that the gutter was not secured properly. There is no association at the time of the accident. The developer never turned over the association over to the owners because there were no owners at the time he went bankrupt. The only owner was the bank. No association = no general liability insurance held by a nonexistent HOA. I'm hoping the bank had their own liability insurance.
-Late 2015 2 more homes were sold.
-2016 the remaining homes were purchased by another developer and they have since sold all but 2 of them. I purchased my home from the developer in Oct. The new developer incorporated the association on March 22, 2016. However, I am concerned that the name existed prior to incorporating the HOA. I'm not really certain of the process of creating an HOA, so not sure if it is possible that the name could have existed prior to incorporating it and what that would mean. Also there was not a board until recently and again we just started collecting dues. Additionally, as a condition of my purchasing my home, I required the developer to purchase general liability insurance, which surprisingly they did not already have. I was also shocked that the other owners would not have insisted on it and that the banks financing their purchase did not require it either. In any event, we have had liability insurance since Oct.11, but our current insurance would not cover something that happened in Feb. 2015.

I'm curious if the renter filed a claim with the management company or the banks insurance? If so, the bank would have or should have disclosed this information to whoever bought properties from them (i.e the developer that sold me the property). If they did, then I have a problem with the developer not disclosing this information to me and I think I can go back to the developer to cover any of the expenses I incur as a result of this suit. If the bank didn't disclose this to the developer then the developer has an issue with the bank. I do think we will be able to get this dismissed and I am going to request from our attorney that we attempt to get our expenses covered by the plaintiff. I don't like to get into whether the person was really hurt or not. If she was hurt and can prove it then she deserves the money from whoever is responsible, but I truly don't think the association is responsible. The question is, what is the process in creating an HOA and when was our HOA actually formed? When it was incorporated? Does the original developer going bankrupt impact anything he may have done in trying to start the HOA, like name creation? I also would personally like to know if any of this was disclosed to the above mentioned parties prior to me buying.

Well, sadly this will cost us money and I suppose my lesson learned from this is in the future it is not only important that make sure an HOA has general liability insurance, but that it also had it 2 years prior in an event that the HOA gets sued. This is tricky with new construction or new construction that has changed so many hands. Ugh...

Thanks again everyone!

Christine

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ChristineW5 on 12/05/2016 10:32 PM

-2015 - The bank owns the remaining 8 properties at this point.

There is no association at the time of the accident. The developer never turned over the association over to the owners because there were no owners at the time he went bankrupt.

There was an Association and, as the bank had possession of the developers properties, the Association was under the control of the Bank (who took possession of the declarant rights in the bankruptcy).

You are correct, the attorney's will make money on this one.

My suggestion is that the members get together and hire an attorney separate from everyone else to protect your interests.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

If this was the renter then isn't this an owner/renter situation? The driveway being common area seems to not be a real factor to me. It was the house maintenance. Plus if it were me, I would have them send a copy of the bill of damages they are claiming. That way could weigh the consequence of paying out the damages or hiring an attorney to fight it.

Former HOA President

BobD4 (up north)
Posts: 1,002

Posted:

Quote:

Posted By BobD4 . . I would check into the diligence & transfer documents you obtained as a new purchaser including whether there were disclosures in any estoppelling-type certificates you would have been well to purchase. If you separately bought Title Insurance look closely at the wording to see if any such construes coverage for some sort of title marketability impairment which might have been a decision-changer or a 'back to negotiations' trigger.

Christine W5 Illinois: Respectfully with your lawyer you should look at suggestions like the above. Buying into 'a work in progress' suggests running additional risks - like the alleged injury - & need to try to 'parcel out' into deeper pockets.

As a purchaser did you get any Title Insurance ? ( I ask that because some title insurers have been forced to suck up far more marketability/ title encumbering 'legacy' issues than they thought they were insuring. Eg negligently overlooked utility charges. Chicago Title actually fought & so far has lost on appeal - a claim by its insured resale buyer in my jurisdiction, for title marketability damages arising from the former owner's secret buckshee / No Permit unsafe renovation deficiency that were only discovered 6 yeas later & triggered a municipal evacuation order. Chicago Title has now been forced to suck up $77 K in rectification & $50 K in legal costs over a $400 policy sold 6 years before the unsafe deficiency was discovered ).

In your case someone must have "owned" the common element. The hot potato of a premises liability claim may have ended up legally somewhere in your title-marketability legacy, that is IF - IF - the injury claim ever was filed in a timely fashion.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Yes.

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