HOA Suspended by VA and FHA over litigation

VickiW4 (Colorado)
Posts: 2

Posted:

I have recently discovered our HOA was suspended 10/2017 due to litigation with an insurance company over unfinished roof repair, after hail damage in 2014. The roofs were not replaced until July 2016. We (homeowners) were not notified of the suspension and was notified by lender upon refinance as I am a veteran and going through VA. Upon contacting the HOA I was advised they are in litigation with the insurance company because not all townhomes roofs were replaced..they (insurance company) did not approve flat roofed homes to be replaced so the contracted roofing company did not finish the job...leaving those homes without new roofs and the outside of all chimneys unfinished.
The HOA states the BOD is in the process of deciding whether to continue litigation, to settle and possibly assign special assessment to homeowners for completion of repairs...I have requested multiple times a review of the insurance company certificate, requested whether litigation dues have been taken from HOA reserves since no quarterly report of this has been communicated, with no response from the HOA. The VA representative suggests consulting a lawyer due to risk for significant exposure, in the form of a special assessment, and to ensure that the HOA is unable o infringe its costs to me. I am seeking information if anyone has been in similar position and what the HOA's accountability is in this...their responsibility in the insurance contract selected...not providing requested information..what points can be made at next HOA meeting to hold them accountable for a decision to be made in favor of the homeowners as there are several veterans in our HOA community that are directly affected by this litigation.

PaininyourA
Posts: 215

Posted:

ATTORNEY REQUIRED

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By VickiW4 on 11/11/2017 7:11 AM
I have requested multiple times a review of the insurance company certificate, requested whether litigation dues have been taken from HOA reserves since no quarterly report of this has been communicated, with no response from the HOA.

Send a letter of demand for the records you want. Google for how to write such a letter. Their denial of records in this instance is very serious. If the Board is failing to properly record its payments to attorneys in its P&L statements and balance sheets, this is a big no-no. You are probably going to have to run for the board with like-minded folks for real change.

TimB4 (Tennessee)
Posts: 21,059

Posted:

This is an issue that will require an attorney.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Not defending the BOD's actions but as it is a legal issue I assume most of the discussion is being done in Executive Session so owners will never know all that was discussed. They will just see the result.

KerryL1 (California)
Posts: 14,550

Posted:

I'm sorry about your troubles, but welcome to the forum, Vicki.

In CA, once litigation begins, Owners must be informed, JohnC. Don't know about CO, but Janet will & I hope she checks in. Disucssions about the litigation probably can occur in executive session.

This phrase isn't clear to me:"...requested whether litigation dues have been taken from HOA reserves since no quarterly report of this has been communicated, with no response from the HOA." I don't know what "litigation dues" are. but I don't believe reserves can be used to pay them.

Our condo HOA is VA-certified, but I don't recall that it can suspend certification if the HOA is in litigation. FHA cert only last a couple of years nowadays, so I imagine they wouldn't permit recert if the HOA is in litigation.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

My BOD discussed obtaining VA/FHA Certification but decided not to. As our homes sell fairly fast, we decided the effort and cost was not worth it.

KerryL1 (California)
Posts: 14,550

Posted:

Sorry to get off topic, Vickie.

The main reason we got VA cert is so our vets--and we have a lot--can do VA refis.

The only reason we got FHA cert is so that our aging Owners can obtain reverse mortgages to help them "age in place." FHA is about the only way to get reverse mortgages. So, despite the cost, our board decided these were services we wanted to offer existing Owners here.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By VickiW4 on 11/11/2017 7:11 AM
I have recently discovered our HOA was suspended 10/2017 due to litigation with an insurance company over unfinished roof repair, after hail damage in 2014. The roofs were not replaced until July 2016. We (homeowners) were not notified of the suspension and was notified by lender upon refinance as I am a veteran and going through VA. Upon contacting the HOA I was advised they are in litigation with the insurance company because not all townhomes roofs were replaced..they (insurance company) did not approve flat roofed homes to be replaced so the contracted roofing company did not finish the job...leaving those homes without new roofs and the outside of all chimneys unfinished.
The HOA states the BOD is in the process of deciding whether to continue litigation, to settle and possibly assign special assessment to homeowners for completion of repairs...I have requested multiple times a review of the insurance company certificate, requested whether litigation dues have been taken from HOA reserves since no quarterly report of this has been communicated, with no response from the HOA. The VA representative suggests consulting a lawyer due to risk for significant exposure, in the form of a special assessment, and to ensure that the HOA is unable o infringe its costs to me. I am seeking information if anyone has been in similar position and what the HOA's accountability is in this...their responsibility in the insurance contract selected...not providing requested information..what points can be made at next HOA meeting to hold them accountable for a decision to be made in favor of the homeowners as there are several veterans in our HOA community that are directly affected by this litigation.

Hi Vicki ... Welcome to the Forum

First and foremost your HOA would not have been suspended due to any litigation ... it has been suspended because your HOA Board has not completed their Annual Registration with the Colorado Secretary of State: https://www.colorado.gov/pacific/dora/node/92936

If they are suspended they cannot enforce liens for special assessments until they are brought back into compliance as noted in the link I just provided which states: "An HOA who fails to register timely, renew or pay the required fee may be precluded from imposing or enforcing a lien for assessments."

Was your roof one which was or was not replaced? Do you have actual damage? If you have actual damage I would also file with your own insurance company and potentially let them battle with the HOA insurance. You after all pay them money and they are supposed to protect your property. If you have damage it will also be their attorneys doing the fighting on your behalf.

I would recommend you reading your HOA documents many, many times so you know them well. Also here is a link for the Colorado Information and Resource Center which has links for the Colorado State Statutes and other areas.

https://www.colorado.gov/pacific/dora/hoa-information-and-resource-center

KerryL1 (California)
Posts: 14,550

Posted:

I was hoping you could help, Janet. the OP just didn't sound right right to me.

The VA cert we got not long ago, however, last forever and doesn't need to be renewed (like FHA). But we're a condo HOA so maybe that's why.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By JanetB2 on 11/11/2017 6:29 PM

Posted By VickiW4 on 11/11/2017 7:11 AM
I have recently discovered our HOA was suspended 10/2017 due to litigation with an insurance company over unfinished roof repair, after hail damage in 2014. The roofs were not replaced until July 2016. We (homeowners) were not notified of the suspension and was notified by lender upon refinance as I am a veteran and going through VA. Upon contacting the HOA I was advised they are in litigation with the insurance company because not all townhomes roofs were replaced..they (insurance company) did not approve flat roofed homes to be replaced so the contracted roofing company did not finish the job...leaving those homes without new roofs and the outside of all chimneys unfinished.
The HOA states the BOD is in the process of deciding whether to continue litigation, to settle and possibly assign special assessment to homeowners for completion of repairs...I have requested multiple times a review of the insurance company certificate, requested whether litigation dues have been taken from HOA reserves since no quarterly report of this has been communicated, with no response from the HOA. The VA representative suggests consulting a lawyer due to risk for significant exposure, in the form of a special assessment, and to ensure that the HOA is unable o infringe its costs to me. I am seeking information if anyone has been in similar position and what the HOA's accountability is in this...their responsibility in the insurance contract selected...not providing requested information..what points can be made at next HOA meeting to hold them accountable for a decision to be made in favor of the homeowners as there are several veterans in our HOA community that are directly affected by this litigation.

Hi Vicki ... Welcome to the Forum

First and foremost your HOA would not have been suspended due to any litigation ... it has been suspended because your HOA Board has not completed their Annual Registration with the Colorado Secretary of State: https://www.colorado.gov/pacific/dora/node/92936

If they are suspended they cannot enforce liens for special assessments until they are brought back into compliance as noted in the link I just provided which states: "An HOA who fails to register timely, renew or pay the required fee may be precluded from imposing or enforcing a lien for assessments."

Was your roof one which was or was not replaced? Do you have actual damage? If you have actual damage I would also file with your own insurance company and potentially let them battle with the HOA insurance. You after all pay them money and they are supposed to protect your property. If you have damage it will also be their attorneys doing the fighting on your behalf.

I would recommend you reading your HOA documents many, many times so you know them well. Also here is a link for the Colorado Information and Resource Center which has links for the Colorado State Statutes and other areas.

https://www.colorado.gov/pacific/dora/hoa-information-and-resource-center

It can be hard to tell for sure, but the title suggests the association was suspended from participating in the VA and FHA mortgage programs, not that the corporation was suspended by the state.

Escaped former treasurer and director of a self managed association.

KerryL1 (California)
Posts: 14,550

Posted:

I hope Vicki will return and clarify some of the matters she brought up based on Janet's info.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Litigation does have to be disclosed to certain loan programs. FHA it is on the HUD form. That form is used by other loan program as well. The HOA fills that out at closings. It also has rental percentages. The mortgage companies then may suspend certain programs or raise refinance/loan rates based on that information. It's basically a high risk loan when a HOA has a high rental or is involved in litigation.

Now certain details may not be disclosed to the owner. Most would never know about the HUD form. I know I didn't until had to fill one out for the HOA. It may be known the HOA is involved in litigation and with whom. The details may be kept a bit close to the vest though due to legal advice from a lawyer. It's okay to say there is litigation going on. However, details may not be up for public till after the case is resolved. Client privilege being a condition.

You may need to wait to refinance or not go through the VA. Other options may be available. Plus not sure who is suing who? It's hard to tell. Usually situations with contractors not being paid or being paid and not doing the work can fall either way. Contractor can lien/sue the HOA for not filling the contract. The HOA may view it as the contractor did not finish the work paid for and refuses to pay. They may then sue. It's basically an impasse till a judge steps in to decide.

Former HOA President

VickiW4 (Colorado)
Posts: 2

Posted:

Thank you for all the very informative responses..the reason for the VA suspension came directly from the VA representative I was given by the lender...the response states, 'We received information from the lender related to this matter (litigation letter) that was forwarded to our attorneys..On October 25, 2017, they responded with the following suspension determination: After reviewing the same, it appears that there was substantial damage done to this project during the hail storm of 2014..The litigation pending was asserted by the HOA against the insurance company who had previously refused to cooperate and/or appropriately and timely adjust the claim. At this point, it appears that there would be a risk for significant exposure, in the form of a special assessment, for the cost of the repairs to the residents/buyers (i.e. damages that would not be awarded by this suit, or otherwise covered by the insurance policy). As such, I would recommend suspending approval of this project until the issue of the litigation and repair of the damage from the hail storm has been resolved. As such, we took the appropriate action to suspend the approval though it does not affect your current VA standing/loan. We are not able to directly address what the lender stated regarding your property liability however, I would encourage you to consult with a an attorney related to this matter to ensure that the HOA is unable to infringe its costs over to you.'

This is why it is my understanding the suspension is due to current litigation...I have read, and reread my HOA docs and have spent the past week researching as much as possible the state HOA rules and regulations and was reaching out to others in attempts to clarify possible recourse.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sounds like what I said. The HOA disclosed to the VA program their current status with being involved in a lawsuit. (Either party could be suing). This makes the loan too high of a risk to the VA to loan the money. So it won't effect your ability to apply later once the issue is resolved. You still qualify for VA loans. It's just not NOW.

It also sounds like the HOA may have filed their lawsuit with the HOA insurance company. There was not a payout to cover the damages or it was not covered by HOA insurance. That sounds like the HOA is in the midst of making a Special Assessment to cover these damages/expenses. It happens. Something I warn people about when you file a lawsuit in a HOA. The HOA may need to pass the difference of award/coverage and cost of damage onto the owners. (Someone sues the HOA for a million dollars. The HOA insurance only pays out 80K after legal expense/coverage limits. Judge still has HOA on the hook for the award if they win 100K. So the HOA has to raise 20K for that difference in award/coverage).

Your situation is that you need to wait it out if you want the VA to refinance. It may be at a higher rate due to this situation. You can always choose another loan package instead of VA if you can't wait. They may refinance but it may not be lower rate. You do have the option of not voting for that special assessment to pass. However, that is not in your or neighbors best interest. Will cause more damage than good. If you don't pay it, then the HOA may be forced to take a loan, have their insurance dropped, or rates increased effecting your HOA dues.

Count your blessing as it's not hurting your credit. It's basically a hit against the HOA. It effects loan rates, available packages, and increased legal/insurance expenses.

Former HOA President

GenoS (Florida)
Posts: 4,276

Posted:

Quote:

Posted By VickiW4 on 11/12/2017 6:55 AM
"The litigation pending was asserted by the HOA against the insurance company who had previously refused to cooperate and/or appropriately and timely adjust the claim. At this point, it appears that there would be a risk for significant exposure, in the form of a special assessment, for the cost of the repairs to the residents/buyers (i.e. damages that would not be awarded by this suit, or otherwise covered by the insurance policy)."

This raises more questions than it answers. Was the property covered for hail damage or not? If so, why would a lawsuit not result in enough of a settlement to cover the repairs? Is the ins. company disputing the claim for some reason? Prior damage? Routine maintenance not done? Maybe the premiums weren't paid up, or the ins. company itself is going bankrupt?

Next thing you know, and this is all speculation, if the board didn't purchase enough insurance of the right kind, or failed to keep the policy current, or was perhaps negligent in some way regarding the insurance coverage, the board will lawyer up and the homeowners will have an even harder time getting any answers.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By VickiW4 on 11/12/2017 6:55 AM
Thank you for all the very informative responses..the reason for the VA suspension came directly from the VA representative I was given by the lender...the response states, 'We received information from the lender related to this matter (litigation letter) that was forwarded to our attorneys..On October 25, 2017, they responded with the following suspension determination: After reviewing the same, it appears that there was substantial damage done to this project during the hail storm of 2014..The litigation pending was asserted by the HOA against the insurance company who had previously refused to cooperate and/or appropriately and timely adjust the claim. At this point, it appears that there would be a risk for significant exposure, in the form of a special assessment, for the cost of the repairs to the residents/buyers (i.e. damages that would not be awarded by this suit, or otherwise covered by the insurance policy). As such, I would recommend suspending approval of this project until the issue of the litigation and repair of the damage from the hail storm has been resolved. As such, we took the appropriate action to suspend the approval though it does not affect your current VA standing/loan. We are not able to directly address what the lender stated regarding your property liability however, I would encourage you to consult with a an attorney related to this matter to ensure that the HOA is unable to infringe its costs over to you.'

This is why it is my understanding the suspension is due to current litigation...I have read, and reread my HOA docs and have spent the past week researching as much as possible the state HOA rules and regulations and was reaching out to others in attempts to clarify possible recourse.

I would recommend consulting with 2-3 attorneys. Some attorneys will offer a short consultation for minimal fee and some will offer FREE consultation for like the first 30 minutes. If you go in with your ducks in a row such as the letter you mentioned above the consultation could be short with minimal or no cost. At least you will know where you stand for moving forward. Also, as I stated above ... If your roof is one at issue you need to also contact your homeowner insurance. It could be that their lawyers will fight on your behalf regarding this issue against your HOA.