Lawsuit over invalid amendment-please comment

Hi all. I would love to hear from board members who have been through a lawsuit.... what are the total fees that have been encountered for a case that has gone through the court system to trial? I would really like a figure as a group of us are prepared to file the complaint but some are hesitant not knowing what our liability could be. This is a year in the making and the only way to resolve this issue now... I don’t need comments on why the group of us shouldn’t sue.... I just want an estimation of costs. Thanks!!

And if you lose, you might be on the hook for their attorney costs.

A homeowner did a remodeling project which was approved and monitored by the City. The HOA took issue with this, but had little ground to stand on. They got their attorney involved and decided to sue. The Judge awarded in favor of the HOA base on the premiss that they homeowner "did not asked for permission" -- no damager, no safety issue. The homeowner was on the hook for $100K in legal fees but the HOA gave him permission for his original remodeling project. Well needless to say, the homeowner use methods to prevent the HOA from collecting the money or taking his condo. This went on for more than a year. The owner also move to another City. The condo has stood empty for more than three years. With attorney games trying to collect the judgement, it is estimate that the HOA has run up about $160K in legal expenses or more for this issue. The HOA finally settle after they put the attorney on contingency. The HOA got $30K from the homeowner with no requirement that the homeowner could not sue in a future case and a $50K lean on the property when it is sold.

Meanwhile our HOA started running a monthly operating funds deficit prior to the settlement and even before which maximized to $130K/month. To solve this deficit, our HOA will start next year by raising our due by 19.7% (convent number). And the clowns who did this are still on the Board.

See http://harbourvistanews.com/Archives/News_Archive2017.html#WhoGotwWhat

So while we are bragging that the homeowner can be always walk over by a Board, meanwhile each member of my HOA is being asked to shell out and extra $90/month unnecessary dues for a Board ignorance and stupidity because they think the "Board must always win".

They need to be a method in California so something like this cannot happen. Such as a real arbitration system without attorneys.

There are "hidden costs" outside the courts/lawyers to consider. If you do prevail, the HOA may need put this on the HOA insurance as a "claim". So the HOA will have to pay the insurance deductible. In our case the deductible was as high as $20k on $1 Million insurance policy. The max it paid out was only like $80K to the prevailing party. The rest would have to be made up by the homeowners/members.

Cost is going to be very subjective to many factors. Each lawyer is different in their charges and/or your needs of them. Some will charge for phone calls, texts, emails, or other communications. A retainer may or may not be needed. I've seen some retainers around $1500 or more. The hourly rate also varies of $100 - $500.

There is also the costs of court filings in addition to the lawyer. Think they charge $400 for a lien and like $300 for a lawsuit. Which is supposed to get back as part of the award.

You can expect to pay upwards to $5k - $7K for the lawsuit. The good news is that it is best to do it as a class lawsuit. Your group can all pitch in money equally. In some cases, if the property involves your rental property it can be tax deductible for the legal expenses. Although that is specific and probably not apply to class suits but individual.

Just always keep in mind that the court can ONLY make one "Whole". It's not for a profit. The court decides who will pay the legal expenses for the other party if at all. You may have to pay the HOA's or vice versa. Either way, your HOA is going to have to pay for their own lawyer to represent themselves in court. So your dues will paying for that. Just like paying a special assessment if that is required. The HOA lawyer is NOT your lawyer.

My recommendation: If it's a large enough group with an issue, then follow your CC&R's process on how to correct. It's best to work internally than externally. It's really ALL in your documentation on how to go about changes.

is there a discrepancy in your documents or does Colorado have a state law about the percentage of votes needed?

Jennifer,

Unfortunately, that is incorrect.

Per CO 38-33.3-217 [emphasis added]:

(1) (a) (I) Except as otherwise provided in subparagraphs (II) and (III) of this paragraph (a), the declaration, including the plats and maps, may be amended only by the affirmative vote or agreement of unit owners of units to which more than fifty percent of the votes in the association are allocated or any larger percentage, not to exceed sixty-seven percent, that the declaration specifies. Any provision in the declaration that purports to specify a percentage larger than sixty-seven percent is hereby declared void as contrary to public policy, and until amended, such provision shall be deemed to specify a percentage of sixty-seven percent. The declaration may specify a smaller percentage than a simple majority only if all of the units are restricted exclusively to nonresidential use. Nothing in this paragraph (a) shall be construed to prohibit the association from seeking a court order, in accordance with subsection (7) of this section, to reduce the required percentage to less than sixty-seven percent.

As per CO law:



seems the attorney is (gasp, choke, gurgle) correct

In shoving the state statue section 217(1) in my face what you neglected to do was read further into sections 217 (4) and 217 (4.5) where for Use Restrictions, and allocated interests exceptions are carved out: the MINIMUM to pass an amendment (words AT LEAST) 67%, or any higher percentage the declaration specifies. Most of the declarations are 90% or unanimous consent... in 2016 and 2017 case law upheld both these sections of statute and unanimous consent was upheld. It is this type of assumption by members that mimicked the actions of Our HOA attorney by jumping to conclusions before understanding the statute or other governing documents in its entirety. Out board went attorney shopping and found an attorney that was willing to challenge the unanimous consent by claiming the use restriction as defined in our declaration really isn’t a use restriction. It’s ludicrous that the board followed this but they are protected in the wake of attorney advice,

So no... this has nothing to do with something I have requested. This is an amendment that legally requires unanimous consent (and supported by our previous HOA attorney) and the board passed it at 67%, recorded it and are calling it good. The only way is to take this to court.

What exactly are you talking about Melissa? The vote is invalid. You can record any document at any time... it isn't the courts that record the document it is the County recorder. I can go down with $45 and record any document I like as long as I pay the fee... the courts have absolutely nothing to do with this.

The vote is invalid because to be legal it requires unanimous consent which is 100% not 90%. They only achieved nearly 75% but are challenging the requirement of the unanimous consent. I don't understand why you can't see this... the board is the problem... the vote is not legally valid unless we achieve unanimous consent. However due to the fact that they have accepted it as law in the community the ONLY way to challenge it is through court where a judge will decide the required percentage for a valid amendment. If they decide that yes, per statute and supporting case law, and our Declaration that unanimous consent is indeed required the amendment will be pulled from the registrar and the declaration will revert back to its original state. If the judge somehow decides that only a 67% vote was required (which as I said is NOT supported by the Declaration or the statute) then the amendment will stay in force and we will lose our butts on legal fees.

So no, there is no other way as the board is dead set on moving forward with enforcement of the new amendment.. thus the only way is to challenge it.

Jennifer,

I was not throwing anything in your face.
Often, those who post here have not checked the statute.

You never mentioned, hence I had zero knowledge, what the amendment was for.
What is common knowledge to you is not common knowledge to others.

Once the brief is prepared, your attorney can request that the judge issue a summary judgement based on the facts in the brief.

Should be simple enough. Cite the statute, cite the declaration, cite the amendment, cite past precedence.

TimB4, it wasn't so much you as PaininyourA with the
"seems the attorney is (gasp, choke, gurgle) correct" comment. These issues take every so much research, and just when you think you have an answer there is yet another statute, or a different law in the Co Nonprofit Act etc. It takes a lot of dedication examination and determination to get to the bottom of what is really enforceable.

You do make it sound simple to ask for Summary judgement, but yes that is the plan. We have a couple of solid previous CO court cases, but then there is the CO law that the declaration will be interpreted as it is plain in its face. I think we have a very solid and great chance of winning, but we just shouldn't be here in the first place. I hate the fact that it affects everyone in our community, however at least we are overfunded in our reserves and can pay for legal fees up front before requiring special assessments.

I would be open to other ways, but the board has been trying to obtain this amendment for years.. they aren't going to walk away without a fight.

Summary judgment is usually called for when the facts of a case are not in dispute. You've got multiple statutes and interpretations from various attorneys already that disagree on whether or not it's a change to the land use restrictions. That doesn't sound to me like a good scenario for a summary judgment. (But I'm not a lawyer so what do I know?)

If you've really done your homework and believe it's a slam-dunk no-brainer, then you should be prepared for your opponent to appeal the decision anyway. More $$$ will be required. If you win at the lower level and are awarded your legal costs and attorney fees, you won't get a final order for those until the appeal has run its course, so you'll have to go for more out-of-pocket costs for the appeal.

Without knowing what attorneys in your state usually charge, and as a wild-arse guess, I wouldn't proceed without a $50,000 legal bankroll at the start and go on from there. Be aware that going to trial and possibly through an appeal could increase your legal costs substantially, and you just might lose in the end. Of course, the same is true for the other side. It sounds like one of those cases where the side with the deepest pockets wins. Carefully gauge how deep your opponents' pockets are. The last thing you want is to win the case plus an award of $200,000 to cover your attorney fees, and watch as the losers file for bankruptcy.

said question was answered IMMEDIATELY

Everyone is pretty much wrong on the amount it will cost and process involved. How do I do a private message on this message board?

Hi Paul... my email is [email protected]. Any info is appreciated

So far the votes that matter are 2 to 1.

Jennifer and former lawyer are the two.

The new lawyer is the one.

If we assume Jennifer is not a lawyer, we have a 1 to 1, tie vote.

Geno, so lets all get on same page. So they require 100% membership vote to make a restricted land use into use for whatever else, animals other than horses. They, meaning the membership vote collected by the board members, have not achieved this 100% but still have time to get 100%? In addition, the board has not started to use the restricted land for lets say letting cows graze?

Is that how everyone see's the current situation?

Okay great, lets assume it is 100% membership vote and lets also assume that Jen will always vote no, so they can never achieve 100%.

To get around her voting no, they are challenging the 100% vote, so we really need to know have the directors adopted the 67% rule and have they acted on it or are they waiting for county to accept the change? Someone kindly reply.

We need to see action, do we have it? Then we can go to cause for action.

That's my understanding as well. Whether the vote needs to be 100% or 67% hinges on what definition of "land use" is employed. I think past court decisions probably run the gamut of how to define such. Maybe it's cut and dried with plenty of precedent-setting decisions. For instance, are there any restrictions or covenants that apply to animals, quite outside of the question of land use? My HOA's CC&Rs say no animals may be kept for the purpose of breeding. If we wanted to change that to allow breeding, would that be a change in land use restrictions? We also have a section in the CC&R's regarding "land use" and it restricts use of the lots to "single family residences". The laws have been changing over the last few decades to loosen the old and strict definition of "family". If we amend that language to be more flexible it would ostensibly go against the "Land Use" provision of the CC&Rs. Would that change need a 100% vote of approval by the homeowners, or could it be enacted by the lesser amendatory threshold of votes to amend the CC&Rs?

All I'm saying is, if there's any question at all about whether or not the OP's proposed change in their documents constitutes a change in "land use", which would necessitate a 100% vote of approval, then a court is unlikely to issue a summary judgment. If both sides stipulate (agree) that it is a question of land use then a summary judgment would be appropriate. I think both sides are unlikely to agree on that. I have no clue how Colorado courts have ruled on such things in the past.

The OP wrote in another thread last month: "We are in the process of voting on an amendment to remove the right for us on rural land (5-35 acres)to have any animal other than horses."

Jennifer, are you saying that the Board wants to change the covenants to permit only horses?

If so, I think another argument in your favor is that, when disputes arise, the courts favor free enjoyment of property.

Sorry all... I have not been available to add to this discussion the majority of the day. The discussion is evolving into a very appropriate and informative thread.... and many of you are right on track with what we expect will be the argument in court. So, as concise as I can, here is the detail.

Here is what the declaration states:

9.2 Use Restrictions. Subject to the Special Declarant rights reserved under article VI, the following use restrictions apply to all units and to the common elements.

A listing of use restrictions follow a-r after this subheading
Section J: Pets; Animals Farm livestock (not raised for resale or a commercial purpose), horses, dogs, cats and other household pets shall be controlled by their owner at all times... etc. etc. Note the clear implication is farm animals, though that is not defined in any of our documents.

11.1 In general: Except in cases of amendments that may be executed by declarant....and except as limited by section 11.4.....this declaration may be amended only by vote or agreement of unit owners to which at least 67% of the votes in the association are allocated.

11.4 Unanimous Consent: an amendment may not create or increase declarant rights, increase number of units, change the boundaries of a unit.....or the uses to which a unit is restricted, except by unanimous consent of the unit owners.

So clearly by the declaration animals is listed directly under the subtitle Use Restrictions, and the section thus defines the use restrictions of the association. The planned development filed with the county by the developer also lists the land uses to include single family dwellings, barns and guesthouses, home businesses etc. and of course animals (and this developer document defers to the county ordinance which lists an abundance of animals we may have in our rural area). The county has agreed to also provide me with a legal interpretation of the planned development as the county may enforce which lists animals specifically as a land use.

So... the community has been trying to change the amendment since 2008 to equine only. Currently the only other animals on any lots here in the community are chickens, as the donkeys and mules are considered equine. A vote failed at that time to make the community "equine only." However it was just discovered this year, at least publicly that the declaration mandates unanimous consent. Interestingly enough, there were two separate Colorado cases tried in 2016 and 2017 which upheld the unanimous consent clause in the declaration as the state statute has 2 exceptions for allowing a higher than 67% affirmative vote to pass amendments, and one of those is "changes to which any unit is restricted"

Our previous HOA attorney did uphold unanimous consent and educated the entire community regarding the situation and the recent case law to support that we wouldn't be able to fight the unanimous consent since the declaration listed animals as a use restriction. Most other amendments would be fair game to change at 67%

When the HOA found a new attorney 3 months later... the board was begging how they could make the community "equine only"... and we have a huge bully group who hired a group and called themselves Keene Ranch Equine Only.... they put serious pressure on the board and threatened to sue (that's another story but has nothing to do with the issue surrounding the validity of the vote)

The new HOA attorney admitted that the unanimous consent clause is present in our declaration for any changes to the uses to which a unit is restricted. However, she then said "a change to what animals are premitted on the lots does not impact the rights of owners to use their homes for residential and/or leasing purposes. Therefore, a declaration amendment removing owners' rights to keep farm animals on their lots does not change the actual use to which such land is restricted and does not require approval from 100% of the owners."

Therefore the board ended up proposing the amendment for vote, and the community did not see the language of the amendment until it showed up on the ballot in the mail. The amendment package sent out with the ballots from the attorney states:

"an amendment may not .... change... the uses to which a unit is restricted, except by unanimous consent of the unit owners"

C. the purpose of this amendment is to update the restrictions concerning animals that may be kept in the community.

D. This amendment does not seek to change the uses to which units in the community are restricted and therefore may be amended with approval of 67% of the votes in the association.

Well... the amendment received the requisite 67% and the association has now recorded the amendment. Mind you, my attorney had send a letter of demand reinforcing unanimous consent and reinforcing how animals was a use restriction by all accounts of case law in colorado and other states. The board ignored the attorney demand letter and ignored all of the ruckus we put up as a group challenging this. Also the HOA attorney provided no statute or case law to support her opinion/advice to the board despite us asking for it.

So.... I think the attorney's firm (as our HOA attorney isn't a litigator so another attorney will go to court) is planning to fight by saying the land use isn't CHANGING being the operative word. The land use remains as animals are still allowed, therefore they aren't CHANGING the land restrictions.

Well, Good V. Bear Canyon, a Colorado case actually defined the clause "change the uses to which any unit is restricted"in the statute we are referring to. The plaintiff argued that this phrase is indicated only as permitting changes only to existing restrictions and covenants, not the creation and addition of new restrictions and covenants or the removal of specifically permitted uses. The court disagreed with this and defined the clause as to mean changes in any enumerated uses to which a lot is restricted, as well as to create a new use restriction or to remove a specifically permitted land use pursuant to the terms of a declaration. Therefore per this case the removal of the "farm livestock" as a previously permitted land use, as well as the creation of a new restriction to allow "equine only"
falls right into this case as a CHANGE to the uses to which any unit is restricted."

Soooooooo.... that is a lot but that is the issue. The change in this amendment has farther reaching issues... the board also spent $30,000 of unapproved and unbudgeted funds for a capital improvement project, have enacted policies in executive sessions or email votes (prohibited in CO statute and our declaration) and have generally just been avoiding following policies. Going to court on this hopefully also means the board will start following policy, rules and procedure and will stop acting outside of their authority. For instance back in 2008 the board filed a fake amendment they called an addendum, filed it with the county, and said the community is equine only. This document was completely unenforceable and invalid as there wasn't a vote as is required to legally amend the declaration. What do you all think???

I don't understand why that would pose any risk at all, let alone a huge one. If the judge declines to issue one, the case continues on. Asking for a summary judgment happens all the time and in many cases the judge declines because he or she doesn't feel the facts of the case are as clear cut as the attorneys claim.

Jennifer, thank you for the elaboration.

-- From my reading of HOA case law in general, it's a doggone big deal to suddenly change the covenants in the fashion your HOA board wants. Why? Because all owners relied on the Declaration when they bought their (rather large) lots. Wouldn't the inconvenience and expense to some Members with non-equine animals be enormous?

-- Does your Declaration have words in it like "runs with the land"? If so, this too supports a contention that amending the Declaration is a serious undertaking and where it says "unanimous consent required," it means unanimous consent required.

-- Maybe check out the recent New Mexico Eldorado chicken case, where the court of appeals ruled that HOA members also on rather large lots could keep chickens as pets, despite some ambiguity in the Declaration, for "free enjoyment" reasons. To me, the overlap with the Eldorado case and your HOA is that Members should be able to keep your non-equine animals until a 100% vote is achieved.

Geno, I am seeing motions for summary judgment happening as well. One or maybe even both sides will argue that there is no real dispute about the facts, so xyz. I think the case is solely about the law. I think the case will go beyond a mere plain reading of the Declaration but draw on case law and relevant general principles of property rights.

I feel terrible for Jennifer's side. I presume that there is no way she could get a like-minded majority on the Board, given how the majority (but not 100%) of HOA Members want equine-only. The "oppression of a minority by a tyrannical majority" is also treated in HOA case law.

*&^%$# to the current HOA attorney there.

Okay, I'm here now, now that we have details. This is a great case. Jen's original question was about going through a lawsuit and the cost etc. Everyone has gone too far, Jen is so far away from litigation and the real cost. So lets step back a bit. Every homeowner that lives in an HOA thinks they will be fighting against the HOA and its an impossible task, most HOA cases get settled before litigation and here's the reason why.

I'm going to give you an example from my state on how something very similar happened and I will put Jen's name as if she is doing this.

Lets say the directors made this amendment. Jen has Meeting Minutes to back up this vote. Records are so critical because directors will change the meeting minutes when cornered. When Jen gets a lawyer, she'll pay the lawyer say $2000 retainer fee. Next, the lawyer will write a demand letter asking for all documentation backing this amendment and all other records that the HOA has and based on the records she is entitled to as a homeowner with a deadline, the lawyers name will not be on this letter it is done with purpose because you want to show the court they denied you at every step. The HOA will ignore it and the attorney will play games and send a letter back saying she isn't entitled to any records. Jen keeps this very important response.

The next letter is a demand from her attorney on his/her letterhead with a short deadline. Now the HOA knows she has an attorney. HOA attorney responds saying she is not entitled. At this point she can recover her fee's but Jen is not after the fee's, she wants the records. Lets assume they do handover records, it will cost her about $300/hr to down to the office and get them, this high price obstacle is done with purpose to discourage her (this is why records are so important, they have the fee schedule). If she doesn't get the records, her attorney files a court order for the request, now the court knows the directors are trying to discourage Jen from pursuing this. In the end she will get the records or she will get an explanation on which one's she is entitled to. She probably doesn't even need them but these 3 steps must be exhausted. A critical middle step is filing a complaint with the Ombudsman about the records request denial. The Ombudsman will determine such and such. Now she can show the court (she hasn't got to court yet) that she has exhausted all remedies. And if you can get other neighbors to file a records request and have a denial, then they can contact Ombudsman as well and get a determination on the record, the court will see you are not the only one making the complaints.

Next step, the lawyer will file an injunction to stop the enforcement of the new amendment. The directors have 90 days or if they choose to vote on the injunction earlier in an earlier meeting which they will. In that meeting, the meeting minutes will show they voted ignore the injunction or they will realize and undo the new amendment. Most directors will ignore, the vote will be 5 to 0. Now it is on the record.

Now Jen has a case, cause for action, it only cost her around $2500-$3500 to get the injunctions milestone and exhausting all avenues. She has also kept a record of all the complaints neighbors have made about the new amendment or she will obtain them through the above steps.

Now Jen files a civil lawsuit not against the HOA but each individual director. The directors are obviously covered by insurance. Who cares, this is where directors get really scared. Not only do they realize they have to start attending court, if they have a job with a security clearance, say bye bye to that. How do you think an employee is going to get out from work if they are being sued? This is how it went down in our state, the directors were begging to settle and undid the bad amendment.

So the point is Jen, let them keep doing the actions, have it on the record. The use of funds, you can get them on that as well. Once you have those records, you will find tons of things you can get them on. Once the HOA lawyer see's the lawsuit, they will be calling you to settle. If you can make it class action, then your case is even stronger. Lets all hope they undo this amendment but if they decide to fight, then the above responses are true, it will cost up to $200k. This cost happened in our state and the HOA had to sell the land to repay the homeowner, the homeowner did win. You have to know where you want to stop the suit.

Will you able to figure out how far you want to take this?

Jennifer, I'm going to ignore your request and tell you why you shouldn't sue.

Don't own the problem! If there is to be any suing, let the HOA sue you. Ignore the invalid amendment. Keep farm animals as allowed in the original covenants, and make the HOA prove in court that the amendments are valid. If they lose, then your attorney fees will be paid by them. How confident are they?

Gary