Assessing Legal Expenses To Less Than All HOA Owners

A number of HOA declarations state the following:

"The Board shall have the power to assess expenses of the homeowners association against Units that are incurred as a consequence of the conduct of less than all Owners, the licensees, invitees, or guests."

An owner and a HOA are fighting over the interpretation of the above in small claims court as we speak. The HOA is trying to collect $1800 from the owner for legal expenses incurred 'as a consequence of the owner's conduct.' The HOA contends that the legal expenses billed by the HOA attorney for addressing the owner's complaint (long before the dispute is in court and with no threat of litigation) may be assessed to the owner. The owner contends that the legal expenses are incurred far less as a consequence of his actions but instead, as a consequence of a frivolous board decision, based in the board's alleged desire to harass, to send the owner's complaint to the HOA attorney for review of the relevant law. The owner also contends that the Board is not required to take the advice of counsel. According to the owner, the Board's decision not to do so and to pursue another avenue, using the HOA attorney, is again, a consequence not of the owner's conduct but of the board's subjective, and allegedly frivolous and harassing, decision-making.

The owner's complaint was that a requirement to notarize proxies violates the covenants. The HOA attorney eventually agreed with the owner and advised the board to stop requiring notarizing. But this was only after the HOA attorney prepared and sent a six page, single-spaced letter of legal citations and intimidating language essentially telling the owner that, if this went to court, then this would be a case of first impression in the HOA's state.

The board is now assessing other individual owners for the HOA attorney's bills for addressing other complaints of covenant violations; municipal law violations; and federal law (fair housing) violations.

In the opinion of people here, does the owner's argument that the legal expenses are incurred more because of a board decision than because of his actions carry weight?

Any other thoughts on the practice of billing an owner for the cost of the HOA attorney addressing the owner's complaint (with the dispute never going to court and with no threats of going to court even happening)?

If both sides have attorneys, they need to stay out the way and let the attorneys duke this out because that's what attorneys do. Most of us on this website aren't attorneys and even if we were, most don't live in your state, so it really doesn't matter what we think because a judge may end up deciding the thing. By the way, which side are you on - are YOU the owner or a Board member?

All of that said....if the owner contends the legal expenses are less than $1800 or whatever because of a board decision vs. what he or she actually (or allegedly did), that's an argument he or she needs to make before a judge and provide relevant evidence to that effect. I don't know how a judge would look at this because there are no rules saying a specific legal proceeding should cost X dollars. There may be set expenses like filing documents or sending letters. If the association had to take legal action to fight an owner's complaint and won, it's well within its right to request the owner reimburse the Association for its legal expenses. It's not always the big bad board making crazy decisions or being stubborn - sometimes the legal wresting occurs because the homeowner cannot or refuses to read the bloody documents, or comply with them because "it's my house dammit and I'll do what I want!" This, despite buying into a community when he/she automatically became an association member and therefore legally obligated to comply with its rules (even the ones that don't make sense.)

Want to change them? Rally together your neighbors and talk to the board about drafting an amendment, then check your documents to see how amendments are made and follow instructions. Get an attorney to review the proposals to ensure they don't contradict local, state, and federal law, record them and then you're done. Of course, there's a lot more to the process, but you get the idea.

This is why Boards - and homeowners for that matter - need to consider legal action carefully before proceeding. Lawsuits should always be the last resort because they're time-consuming and expensive and in the end, the attorney gets paid regardless. If you're going to throw down in court, you need to go in knowing you have at least an 80% or better chance you'll win. Someone can also countersue you and if you lose that, you're not only out of the money you spent filing the lawsuit but may be ordered to pay the other side's legal expenses. Put another way, don't start none, won't be none. Or, as my dad used to say "don't let your mouth write a check that your ass can't pay."

Regarding the attorney's advice, it's true a HOA board isn't required to take it. There are various reasons for that, but the Board, not the homeowner, makes that decision - another reason legal action should be the last resort, whenever possible. Paying for those expenses come out of the Association's general funds, which all homeowners pay into, and it's not good for homeowners to end up paying for something that could have been settled if both sides sat down and behaved like adults instead of children. I'd rather spend money on improving the community as opposed to a lawsuit "just to teach this jackass homeowner we are the board and therefore we are." Better to have a case so strong that defense counsel takes one look and tells his/her client "you have a better chance of walking through Hell with a gasoline suit on - let's talk about settling this thing now."

Just one observation: something that can be resolved in small claims court is small potatoes. Pursuing it further will push it well beyond that, to the likely detriment of every poor soul living in that community. (Ever try selling your home when the HOA is engaged in litigation? Or see what happens if the HOA's insurer dumps them?)

People seem to get into these snits and throw more and more money at whatever it is, without stopping to consider whether the benefit they hope to achieve in any way justifies the expense needed to achieve it. The fight becomes the end goal, rather than the means to achieve the original end.

To quote the great Philosopher King Kenny Rogers: "You gotta know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run."

I agree, CathyA3 and JohnC46. From what I can tell, what keeps the Board determined to win this lawsuit are (1) a HOA attorney who previously, was a generalist and never practiced HOA law; (2) this attorney's reading (misreading?) of the aforementioned covenant; and (3) a long-entrenched board who like to give the impression of being powerful and smack owners around when the owners challenge them.

The interpretation of this covenant is new, courtesy of this new HOA attorney. The way this is going, with an appeal now underway, and thanks to this inexperienced attorney, I think the board naively thinks it is going to recover all the HOA's court costs from the defendant-owner. This is not the first time this HOA's board has been so reckless.

Another friend started a web site with 'just the facts' and some opining. Hopefully this will put some pressure on the board.

Where this HOA is the court one level up from small claims court does not set precedent. There will be a new trial and a new judge in this higher court (one level up from small claims court). The original pleadings filed in small claims court, along with the new trial, will determine the new judge's decision.

As an academic matter, I kind of hope this does rise to an appeals court that will set precedent. Because for one, I do not want to see this Board targeting owners with the (unlawful IMO) imposition of HOA legal fees. But this is a lot to ask of a pro se defendant.

Apathy prevails at this HOA, as is so common. I do not think the owner has the energy for a campaign to replace the board and fight the lawsuit.

I will try to update the thread with developments.

Chris

Did it occur to you lawyer or not, the court decided against the lawyer. A lawyer in small claims court does not guarantee a win. Especially in small claims court where a judge will listen to both sides.

I do admit it is fun seeing a lawyer get his a$$ kicked in small claims court.

ElleN, I would do whatever is needed to get the HOA board to get a better lawyer who will get the board to knock this off.

Lawyers are not slaves of their clients; lawyers have professional ethics requirements to follow and should advise their client about how to best handle a situation, and lawyers must (under ethics rules) withdraw from representing a client if the client wants to take an illegal or harassing action.

By continuing with this nonsense, the lawyer is putting himself/herself and the HOA at risk.

I would go after the lawyer and get the board voted out.

ElleN said that she offered help, and the owner accepted. I stand by my recommendation and agree with you fully about the second paragraph of your response.

ElleN, HOAs are prone to try to burn out a plaintiff by dragging on the litigation and trying to run up the plaintiff’s legal fees. They do it all the time. They’re perhaps worse than regular companies in this respect because the board doesn’t have investors behind it, wanting their money spent wisely. I’ve been through litigation against a HOA and your friend needs to be a lot more aggressive than just litigating; your friend needs to go after the lawyer and go after the board members personally. Only when they will individually near the consequences of their wrongdoing will they stop. So what if the HOA spends a fortune in litigation and even loses; it’s the HOA’s money and the HOA’s problem, so the board members couldn’t care less unless they feel the results themselves.

The cheaper and faster solution to rogue boards is a recall election and voting in replacements.

Easier said than done, I know. You need enough homeowners who've had their necks full of the nonsense and who are willing to volunteer their own time to creating a better situation. People need to understand that they, too, are being personally harmed (eg., rising assessments to cover the cost of litigation) - otherwise they're going to maintain their apathetic ways.

If I were in the position of the friend of the friend, I would take a hard look at my situation, the odds that it would improve, how long the improvement would last, and what it would take to achieve this. For instance, do I have deeper pockets than the association does, or can they force me to give up at some point? Also do a thought experiment - assume that nothing changes and the current board remains in power, is my community so wonderful that it's worth putting up with the status quo?

Moving is always an option, and often involves the least amount of wear and tear on your finances and mental health.

CathyA3, in the last two years at one point, the defendant owner undertook a campaign, with flyers and going door-to-door. The owner is well-liked. He found enormous sympathy and heard many stories of similar harassment. Some of these folks readily agreed to serve as witnesses in small claims court. But the defendant owner also heard many express fear if they fought or spoke out.

As John, Chris and you suggested, I advised the defendant owner to consider, as one of his options, moving. To me the problem is the legal expenses the HOA has assessed the owner are, it turns out, in the tens of thousands of dollars at this time. This was mentioned at the small claims court trial. The judge and HOA attorney noted that "attorney's fees" would be covered in a different proceeding. I am aware of this in general but am not sure how small claims/district court handles this from a practical standpoint.

As I am sure all here know, the defendant owner cannot sell as long as there is this unpaid HOA debt (based in a bogus assessment of HOA attorney fees, as far as I am concerned). So it would seem to me the owner has a noose around his neck and can't really 'fold 'em,' in the words of the esteemed philosopher Mr. Rogers and perhaps, in different words, the other Mr. Rogers.

I have advised the defendant owner to focus on the lawsuit and extricating himself from it, such that he owes nothing (no attorney fees et cetera) other than his regular assessment.

The HOA will not settle. I think this is partly because the Board is operating under what I think is bad advice from the HOA attorney regarding interpreting the covenant on assessing individual owner's for attorney fees. I have done more research. I like the defendant-owner's chances on this point (the attorney's fees being assessed to him on his HOA statements as we speak) and am having success getting him to focus on battling just this.

Oh my, I think the board's actions are unconscionable.

Some maybe not-so-off-the-wall suggestions:

Could he talk to his state congressperson(s) or ombudsman, especially if he can find one who has a history of speaking out against HOA excesses.

Or call a local newspaper, if you still have one, or a local TV/radio station. Sometimes they have "action lines" that help their constituents with problems. Perhaps some negative publicity will get the board's attention.

I can understand why other homeowners may be reluctant to become victims themselves, but outsiders don't have those concerns. This kind of nonsense thrives if people just roll over and get silently steamrolled. Time for some noise.

I agree.

If you have a valid legal claim against the directors individually, why would the judge get angry if you assert the claim?

Whether or not I used a lawyer, my approach was successful.

Update:
The few attorneys helping my friend via pro bono work here and there, and who looked closely at the HOA's covenants, have all said the same as CathyA3 posted above, and without any equivocation. The reports I have is that the attorneys' jaws hit the ground, incredulous that the HOA would pull this. Furthermore in the last several months, I understand a second member of this HOA was billed several thousand dollars for the HOA attorney fees for review of a Fair Housing complaint submitted to HUD. HUD now has one of its attorneys talking to both sides (the HOA and the second member).

I expect this dispute, over the HOA billing owners for the HOA's attorney fees when the governing documents do not authorize billing for this type of attorney fees, will last at least a year longer.

JohnC46, I think a covenant (or covenant interpretation) that says a HOA may assess an HOA member several thousand dollars for the cost of the HOA attorney's review of the HOA member's Fair Housing complaint violates the anti-retaliation clause of the Fair Housing Act. I think a HOA billing an HOA member like this would interfere with the HOA member's exercise of his lawful fair housing rights.

When I first heard that the HOA was now billing at least one member thousands of dollars of the HOA's attorney fees because the member filed a fair housing complaint, I thought about what you said above. For the purposes of discussion here, I will set aside other problems with billing owners for attorney fees when there is not express permission in the covenants to do so. Then the fair housing question becomes something like: When the HOA is billing individual members (and not the membership as a whole) for any attorney fees the Board claims the individual members "caused," and then one day the HOA bills Joe Garcia for filing an FHA complaint, is a violation of the FHA anti-retaliation clause occurring?

First, the Board has claimed its assessment of individual members for certain attorney fees is discretionary. Has the Board even created guidelines on when it will bill an individual member for the HOA's attorney fees (of which the member was ostensibly the cause, at least in the Board's opinion)? It has not. If a member files a complaint against the HOA alleging violations of the covenants, or does anything else, no member can be sure whether he or she will be billed for any of the HOA's attorney fees that might arise.

Second, the covenants have a clause that states that the HOA board has the right not to enforce a covenant when doing so would conflict with relevant law.

Third, I think it's pretty clear that HOA members would be greatly deterred from ever filing an FHA complaint if they knew that they would automatically be billed several thousand dollars by the HOA every time they do so. What I am seeing in FHA federal court cases is a lot of talk about the intent of the Fair Housing Act. By my reading the courts do not like seeing the intent of the FHA undermined.

Fourth, in early 2013, a New York landlord (an apartment complex) billed a disabled tenant with service dog some $30,000 for the landlord's attorney fees in battling the disabled tenant over his alleged right to keep the service dog. The landlord claimed the terms of the lease allowed passing along the landlord's attorney fees to the disabled tenant. In May 2013, the disabled tenant filed a complaint of discrimination, including retaliation, with HUD. In December 19, 2013, HUD filed a formal charge against the apartment complex for discrimination and retaliation (specifically, the attorney fees). On December 30, 2013, a New York "Housing Court" ruled for the landlord on the attorney fees, I believe saying the lease allowed the landlord to bill the tenant for the landlord's attorney fees. In January 2014 and on behalf of the tenant, HUD filed suit against the apartment complex in federal district court. By May, 2015, the parties agreed to a settlement. Per the settlement: The landlord agreed not to collect the attorney fees from the disabled tenant; the landlord agreed to pay the disabled tenant some $30,000 for all he'd been through; and the landlord agreed the disabled tenant could have a service dog.
https://www.justice.gov/sites/default/files/crt/legacy/2015/03/02/eastriver_opinion_3-2-15.pdf
https://www.justice.gov/usao-sdny/file/450741/download

I expect months or years will pass before this is resolved where I am.

Elle,

Thank you for the update.

It's always nice to hear how things turned out.

It's also nice to see that you will be (or have gotten) a new board that won't repeat the mistakes or run to an attorney every time there is an issue (which sounds like your last board did).