Legal Fee obligation

Started by RobertM39 • 11 replies • 1071 views

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RobertM39 (North Carolina)
Posts: 9

Posted:

Our HOA Board Members have chosen to not allowing us to vote on removing our age restrictions, after having a Special Meeting about the issue. We now seem to only have two reasonable options left in hopes of getting all of our members to vote. The first option would be to take our issue to our Superior Court, for a judge to determine whether, or not, to force a vote of our members to remove our age restrictions in this Planned Community. Our hired legal council advises us that a judge would would most likely make a decision to force a vote, requiring a 67% majority to pass under North Carolina state law. Not knowing until after the vote, whether or not, we would capture 67% is very much up in the air. We had the same vote over 3 years ago, and captured 59.5% of all the members,
so with time passing & some of our seniors having declining health, we feel we have the opportunity to capture even more than 59.5%. My big question from attempting to set the table for understanding is, if we lose if allowed to vote, who pays for our court fees? It seems to me if the judge declares a judgment to force a vote, that if we capture more than 50% of the vote, the HOA should absorb all court & legal councils fees? If the HOA is not responsible for these fees, if we do not capture 67%, why would we bother to go to court if there is only a 50% chance let's say, that we capture the required 67%? The second, & more drastic option is to remove any, or all board members by law with a simple majority vote, without requiring just cause by law. I do not prefer that choice, only that it would just add more tension & stress, & hatred among our community.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The HOA is ONLY funded by it's members. So when you say who is going to "pay" for the legal cost... It is you and your neighbors. That may be in the way of your regular dues, raised dues, or special assessment. As far as the age issue. Being a 55 and above does NOT mean you can not allow or restrict those of a lower age. It's not a 100% deal with that. Legally there is still an allowance for younger members.

So read up to make sure your fight or vote is for something that can be enforced. Otherwise your back at square one and out money.

Former HOA President

SheliaH (Indiana)
Posts: 6,964

Posted:

You don't say who "our hired legal counsel is" - are you talking about the HOA attorney or someone you (or you and some of your neighbors) hired to take this thing to court? If it's the latter, you will have to pay the legal costs because the HOA attorney represents the association as a whole and would defend any legal action brought against it. The HOA attorney doesn't represent you individually and certainly not in a private legal action against the association. By the way, you do realize that you and your neighbors are the HOA, as MelissaP1 likes to say, don't you? That means all legal fees incurred by the association to defend itself would be paid by - guess who? You and your neighbors.

Now, you said you had a special meeting about the age restrictions issue and then the board decided it "wouldn't allow you to vote." Well, they really can't do that - the homeowners themselves could call for another special meeting and assuming you did everything your documents required to call said meeting, your board has no other choice but to hold it. If they still refuse, then you'll have to consider if these guys and gals should continue to serve as your board members because they appear to ignore the will of the people, such as it is, and institute a recall (go back to your documents to see how that's supposed to go down.)

But ever if there is another vote, whether run by this board or whoever replaces them, your real problem is getting the 67% needed to remove the age restriction. No judge or board (or you, for that matter) can force anyone to vote. If you really think you can win, you'll have to go out and campaign to encourage people to cast a vote in favor of removing the age restrictions. For this, I would think you'd want as close to 100% participation as possible because getting 67% of people to agree to anything may be difficult.

And if you still get a 59% participation rate? That may mean people don't want the age restrictions lifted, in which case you'll just have to accept the will of the majority.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

RobertM39 (North Carolina)
Posts: 9

Posted:

Responding to both posts, which I am grateful for your input, time, & experience in such matters. Without reading my first post, I probably didn't make things as clear as they could be. First of all, the 59.5% that voted to remove the age restrictions is a vast majority & the will of the people. so all we need to increase is another 8.2% to accomplish a 2/3rd's majority. The reason I am asking about the question of whether the judge will declare for all reasonable costs to be directed to the HOA is that is what our own lawyer has told us would most likely happen if it went to vote & we won. My concern was if we lost, what would those chances be if we still captured a simple majority as in the past vote that occurred. To clarify all legal councils represented, we have one attorney, the HOA board has one attorney, & the initial opponents of the first vote had an attorney as well. I am sure that attorney does not come to play since 3 years ago, so the only current legal council is ours & the HOA's (one of each side). We cannot demand another Special Meeting, because the HOA Board says our request to amend our DC & R's is against the Federal law stated by either FHA, or, HUD? Our attorney says this is not the law, & that we can have a legal vote on age restrictions. So that is why either the court, or, removal of board members is our only direction.

KerryL1 (California)
Posts: 14,550

Posted:

Are you certain, Robert, that you likeminded owners have explored every option possible without having to consider legal action? Many states have legislation that a x% of Owners can petition for a special meeting of the members to revise your governing documents. I believe most Bylaws also contain that info too. I don't see how "the board" can turn down your request if your followed the procedure in your documents and/or NC law.

Is the attorney you met with an HOA attorney, or some other kind?

LarryB13 (Arizona)
Posts: 4,099

Posted:

Robert,

The court proceeding would be to establish what percentage of the members are required to approve an amendment to your governing documents. That would be the sole issue before the court. Certain costs, such as filing fees, serving process, and taking depositions are automatically awarded to the prevailing party. The award for attorney's fees is almost always left to the discretion of the trial court and is totally unpredictable. The judge could award you 100% of your costs if you prevail, some of your costs, or none of your costs. Much of this will depend on whether there was a good faith dispute over the percentage of members or whether the board was just being a bunch of jerks.

The one thing that should not factor into the judgment for attorney fees is the outcome of the vote. The issue is the percentage of members required to approve; the question as to whether approving the amendment is good or bad is a political issue for the members and not a judicial decision for the court to decide.

JanetB2 (Colorado)
Posts: 4,219

Posted:

So ... You called a Special Meeting, but it was not a meeting to Vote and Amend the CCR's??? It was only a discussion? My question would be why would you want to go to court for this when you have not had a RECENT VOTE of the members and which could potentially be done via Special Meeting called for that purpose. As you have noted if you go to court most likely that will be what a Judge will order and doing it without court will save $$$ on all sides.

Court costs and who pays can vary depending on circumstances, governing documents, and state laws. If the Membership calls a Special Meeting for the purpose as stated following the documents and state laws and if the BOD does not follow the contract and laws, then most likely the HOA should be responsible for attorney fees. If the members suing did not follow the contract and laws then they in turn could be responsible. Or a Judge could determine each party is responsible for their own attorney fees based on what he heard and his decision.

The best method if at all possible is for everyone to be reasonable and avoid court costs.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Robert,

Let me get this straight.

There was a vote and 59.5% supported the change. This means that 40.5% opposed the change or simply chose not to vote.

There is a reason why there is such a large percentage to amend the CC&Rs. Some may have purchased within the community because of the terms of the CC&Rs and simply do not want it changed.

The Board entertained your proposal and held a vote. You didn't have enough support to have the proposal pass.
Now you want a second bite at the apple and the Board doesn't want to spend the money for another special meeting.

My suggestion would be, instead of going to court, to petition the board for another special meeting of the membership to amend the CC&Rs. However, rather then simply obtaining the minimum amount required to have that meeting, work like crazy and obtain enough signatures to represent 67% or more. This will demonstrate to the Board that there is a greater chance of the issue passing.

Another option would be to use the 59.5% support you did have and vote the current Board out and replace them with those of that 59.5%. This way, the Board could place the issue on the ballot anytime they desired.

To answer your specific question: Court costs are typically awarded to the winning side (providing they asked for them). Reasonable attorney fees are a crap shoot. It is up to the court to decide if they are awarded or not and what would be considered reasonable. If awarded, you would still be responsible for the difference (attorney fees less awarded amount).

Keep in mind, if you lose, the same thing can happen to you.

Additionally, as others have said, being part of the Association, you will also be responsible for your share of the Associations legal costs and any mandated costs by the court. The Association will also need to deal with the likely higher costs of insurance due to legal action being brought against the Association.

As for what the Association and your attorney has said, it's best to trust but verify. Keep in mind that in addition to Federal laws and regulations, there may be State laws. You may want to contact HUD directly and ask them that question. To help you verify, I offer the following:

24CFR Part 100, Implementation of the Housing for Older Persons Act of 1995; Final Rule

Questions and Answers Concerning the Final Rule Implementing the Housing for Older Persons Act of 1995 (HOPA)

The FAIR HOUSING ACT HUD Portal

Practical Issues in Planning for Age-Restricted Housing Under the Housing for Older Persons Act (HOPA) From the American Bar Association

National Fair Housing Advocate Online

Can we become a 55-and-over only community?

TimB4 (Tennessee)
Posts: 21,062

Posted:

Robert,

How large is your Association?

RobertM39 (North Carolina)
Posts: 9

Posted:

In this post, I will attempt to clarify & answer any of the above contributions in their posts which again appreciate all your input from your own experiences. First to answer this last question, we have about 40 lots that were designated for a Planned Community (age restricted) by the developer, of which 19 lots have been developed. The unique thing about out specific environment is we our within the confines of a much larger community that has an association, but, has no age restrictions. That community, without having age restrictions sells historically at a faster rate & for a much higher price. Why? Because, the baby boomers that are now retiring & were slam dunked by the 2008 recession, have not only been delaying their retirement, but, have basically changed their whole game plan on moving to any restricted environment to put them a another financial bind. If you doubt these facts, please research yourself for your own interpretation as why a 55 & over community, especially due to our extremely small amount of lots is not desirable financially. We do not have one amenity to offer, that sets us apart from the surrounding community, other than
the age restrictions. If you a buyer looking in this area, it would be a no brainer to select a home that has everything we have, & not have these age restrictions. Our particular scenario is we are beginning our 7th year of listing the home for sell, & have not had one legitimate offer. Out of only two resales in the last ten years, one sold for about $40.00 per sq ft below the market,
& the other sold for about $15.00 below the local community market price.

Getting back to the issue of our board, & the options to get them to allow a vote on this requested amendment to our association. At the last "Special Meeting" our team requested, the board allowed a meeting, but, did not allow us to vote. They gave no legal explanation, other than we not not want to have a vote, & said we will discuss it further at the Annual Meeting which occurred in January 2017. Again, they said we will not vote on this issue, that it was not legal, & the board proposed to never discuss this topic again, & was seconded by a board member. They have never presented any legal documents that would state that we could not vote on the issue, other then they the "opinion" of two different attorneys that declared that the INTENT by the developer was legally binding forever, only unless the association was disbanded. Of course, we had legal council stating in his "opinion" a 180 degree different take that law does not state anywhere that intent was binding - nothing from NC Planned Community Act: Chapter 47F / NC Non Profit Corporation Act: Chapter 55A / Federal Housing Act (FHA) / US Dept of Housing & Urban Development (HUD).

To answer another question presented, why would we put this up for vote again after 3 years. Well here are a few answers to that question, One, we had a vote 3 years ago, & our DC&R's were written to say only a simple majority (51%) was required to approve any amendment in our association. As was discussed earlier, we had a 59.5% vote to remove age restrictions, but, the opponents of this measure researched to find that our DC&R's were written incorrectly, & by NC state should have read 67%. So after the original vote was to remove the age restrictions, the judgement was reversed by the board to meet our NC state law. So as we support the ultimate NC state law, it left a bad taste in our mouth about the ultimate outcome. So to fast forward 3 years later, our seniors who retired here to our Planned Community are now dying, losing their health, & needing to move to assisted care living. Due to our unusual circumstance they not selling their homes at all, or, they are having to drop their resale prices dramatically below the market price. When most of moved here at age 62 to 65 years old, for the better part were in good health & saw a bright long & healthy future. But, 10 years later reality has set in, & are having many health issues along with this added financial burden of a "White Elephant"!

In conclusion, especially noting the HUD reference to research, you have all been very helpful with thoughts & ideas that I will share at our next team meeting. Due to costs, my first thought would be to remove any board member that does not share & represent the majority, & only their own personal point of view. Going to court will be expensive, & most our costs will be from our pockets, & this being delayed in court would only delay the possible sell of our own home & others that are listed.

TimB4 (Tennessee)
Posts: 21,062

Posted:

Robert,

They were correct that NC statute requires 67%.

However, you don't need a vote. Per NC § 47F-2-117, the amendment may be done by written document.

My suggestion, if the Board won't call for a vote, is to have your attorney draft up the necessary amendment with signature blocks.
Then obtain the services of a notary (to prevent challenges) and start soliciting signatures on the document.

Per your numbers you already had 23 or 24 lots who agreed. You only need 27 signatures of lot owners (make sure that they are the owners of the property who are listed on the deed) to make the change. Once you have the required signatures, have your attorney file the paperwork and mail a copy of the approved amendment to all members.

Basically, you will be bypassing the Board and doing a grass roots movement.

RobertM39 (North Carolina)
Posts: 9

Posted:

That sounds like some good advice to get around the board not allowing a vote & avoiding costly court fees & legal fees. I will do some research on the subject, to see if that will be a possibility from the legality standpoint. Again, even we cannot gain the required 67% to amend our age restrictions, it will be the best option at this particular time. Thank you for a very good suggestion,
& if we can pull it off I will let you know the results.

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