“HOA Executive Council” and “Contingency”?

I have two questions:

1. When an HOA legal council pursue a case on contingency does that mean that the HOA is not responsible for any costs whether the HOA wins or loses?.
2. Is it legal to set up a subset of a Board (“Executive Council” which is also a quorum which holds secret meetings (no announcements) and excludes the other Board members?

Our HOA has been pursing legal Action against a member for over two years for not asking for permission. The owner was granted permission from the City with Building permits and inspection to do an internal remodeling project very similar to one that was done several years ago in our Association. But the HOA would not grant them permission after they started the project and went to court. The HOA received a judgement for $100k against this homeowner for legal fees only because the Homeowner did not ask for permission. Our HOA has approximately $100K operating funds deficit this month and which has been on the books for several months. The member in question filed bankruptcy which cleared the debt with courts. But the HOA General Legal council has run up another $40K in expenses trying to provide the bankruptcy was illegal. The HOA council lost that trial. He is now pursuing trying to through out the member’s homestead of the property. The unit has an appraisal in its unfinished condition of $140K (no appliances, unfinished floors down to the sub flooring, no tubes, sinks or toilets). On a good day similar units that are is in very good condition go for $300K. The attorney submitted his appraisal of $470K. There is a first on this unit for $300K-its entire purchased price. The member has no equity in the unit. I asked our board at the last meeting why this additional $40k of legal expenses does appear on our financial statements even though it was published in courts. They stated that their legal council is doing this legal action on contingency and that the HOA will not have to pay anything if he wins or loses. As one final note, we have a five man board with two recent elected members. Two previous members resigned and in one case , one resignations was because of the money that was being spent. We were informed at this last HOA meeting that the Board had created an internal “Execute Council” consisting to the previous three members and none of the new members. These three member get together in private, receive correspondence exclusively form the attorney and make the recommendation to the entire Board as to how the legal matter against this homeowner will be handled. Of course the three members are a quorum.

I am in the State of California

You can correspond with me directly if you want at [email protected]

Depends on how the contingency is written.
Typically, the Association owes no money unless the case is won or settled.

see:

5 Do's And Don'ts Of Contingency Fee Work

Contingency Fees: Read this Before You Hire a Lawyer

How does a contingent fee agreement work?


A Board may establish any committee that they see as required.

Per the davis-stirling website: Discussion of association issues by less than a quorum of directors in an executive committee is not a violation of the Open Meeting Act (Civ. Code §§4900-4955) and does not require a meeting notice. If the committee is composed of a majority of directors then notice must be given.

See: Executive Committee

You can have an Executive Committee which consists of less than a majority of the Board members, but not a majority. If this "council" is meeting with their attorneys, not only is the Board in violation, but so is the attorneys. They should know better.

That, although if a lawsuit is on contingency then the lawyer picks up all costs.

But another issue occurs when such a lawsuit is on contingency. If a new board decides that litigation is not in the best interests of the HOA, you can bet that the lawyer working on contingency is going to want to recover his costs (and then some) from the HOA. This isn't a Gennie easily put back into the bottle, unlike an attorney working on retainer who you can turn on or off by a simple phone call.

This ONE issue-case could be taking up a lot of Board time, so it's not unusual to set up a special committee to deal with all the issues/paperwork, BUT not make any decisions.

Those need to be brought to the Board for motion/approval (like hiring the lawyer and approving the billing agreement)

I agree with Richard. All BOD members should be included in meetings with the attorney ... they should not exclude new BOD members elected by the majority of the membership.

In some states Sue ... A "majority" of the BOD cannot have a meeting and exclude other BOD members. A BOD member can be on a sub-committee, but if the "majority" are on that committee it then potentially is considered also a BOD meeting and as such cannot exclude other members, if they choose to participate.