Homeowner lawsuit against HOA

My wife and I are currently bringing a lawsuit against our HOA Board members for multiple breeches of the CC&Rs as well as breech of fiduciary duty. The most obvious problem has been a chronic failure to maintain the common areas such as tennis court, walking trail, and private road that runs through the neighborhood. The HOA, established in 1992, is comprised of 15 single family homes and the annual dues of $200 per home was in effect from 1993 to 2020. In 2020, the dues were increased to $300/annually along with a Board refusal to establish a budget to help guide the extent of any dues increase. Presently, the Board consists of 3 people, two of which have been on the Board for the past 20+ years as President and Treasurer. The VP is currently held by the same individual for the past 2 years and the Secretary position was not filled during the last election. There have never been any special assessments. The President has always insisted on performing needed maintenance as DIY in the form of work parties so that the HOA doesn't have to raise the dues. In 2017, I requested in writing an opportunity to review HOA records, finances, insurance policies, etc and was told, in writing, from the President that there were no records to review.

The HOA is required by law to register with the Secretary of State and reviewing the history of these transactions, indicates there have been multiple years (6) where the HOA did not comply, and the Secretary of State's office administratively dissolved the HOA. Currently the HOA has complied with this requirement. During these years of dissolution, I seriously doubt the HOA was insurable. For that matter, I have serious doubts as to whether the HOA was ever insured because policies were never discussed at annual meetings. I understand that not having insurance exposes all of the homeowners to liability.
The end result is this HOA has willfully accepted underfunding as the status quo while allowing the common areas to further deteriorate. The tennis court is unusable due to presence of large cracks and the walking trails have narrowed due to overgrown vegetation and poor footing. There is evidence to suggest that Board elections are not conducted properly as people who want to step up for positive change somehow never make it onto the Board.

All three Board members were named in the suit, however two of them have chosen not to respond to being served with the lawsuit. The President made a cursory, half-hearted brief response to our attorney without providing any supporting documentation. A default judgement is currently being sought.
To date, we have asked that the CC&Rs and State statutes governing HOAs be adhered to, repair and upkeep to the common areas and reconstituting the Board along with legal fees. We recognize a special assessment will likely be required to address much needed repairs but we're not looking to incur unreasonable costs onto our neighbors. We have lived in this HOA for the past 14 years and nothing has changed. Prior attempts to resolve concerns by us and others have largely been ignored. When the lawsuit was initiated a few months ago, a letter went out from my attorney to all of the other homeowners to inform them of our actions and will continue to do so as warranted. We have not received any negative blowback thus far except it has been chilly with the Board members.

Would be interested in your thoughts. I think I have distilled a complicated situation to the most pertinent points.

Rick

Thank you for your quick response. From my short time perusing this discussion site, I see that you have made many similar responses, sort of like cut and paste.
I'm looking for thoughtful, reasoned suggestions for homeowners who have exhausted all other internal remedies and choose to go the litigation route to effect change.

Rick

Do not ignore my advice just because you don't want to hear it. Facts are facts...

Besides these issues your HOA is having is because people would rather complain or threaten lawsuits than get involved in their HOA. Difference are made from the INSIDE not the outside in.

If your HOA doesn't have the money to improve or make changes where do you think it will come from when/if you sue?

Most people here have made changes in their HOA's because they decided to take action from WITHIN it. I know my HOA that is what I did and turned it around to be a successful well run HOA. No lawsuit involved.

Both the CCRs and State law requires HOAs have relevant insurance.

Yes there is an annual meeting and usually there are about 10 homes represented. Minutes have never been recorded, at least for the past 14 years,
and budgets have not been developed or shared with the homeowners as required by the CC&Rs. People do have an opportunity to serve on the Board, and I have expressed interest.
However, if you are a homeowner who wants the Board and HOA to adhere to the CC&Rs and maintain the common areas at the very least, it is unlikely
that you will be voted in. I agree with an earlier post in that several other homeowners are perfectly satisfied to keep the dues the same even though that
means inadequate funding for the required HOA responsibilities. We absolutely do have an apathy problem as far as people willing to step up to lead
changes.

If I thought for one minute, this could be resolved without a lawsuit, I'd gladly pursue other options. But having tried multiple times over the past 14 years
and seeing a nice neighborhood go to hell along with an HOA that egregiously ignores the CCRs and State laws, is just to much to stand by idly.

Rick

Since you are bringing legal action, I would advice you to listen to your attorney.

Personally, I think it is quicker and less expensive to gather support and elect different people to the board. It takes volunteers to do this, perhaps you will be willing to serve.

If it's a board of three, you would need to replace two of them to control the votes.

I wish you luck.

$300 a year sounds like very little to maintain what you describe. However, it would depend on the number of lots paying that amount along with the delinquencies to determine if that is actually enough or not.

Has a reserve study been done to show how much should be set aside for expected maintenance, repairs and replacements?

A lawsuit in a 15-member HOA? Ouch. There goes any potential friendship with a big chunk of your neighbors.

The administrative dissolution is sloppy by the HOA but that is minor and fixable.

The failures to maintain are perhaps protected by the business judgment rule (unless the failures to maintain are due to specific, documented breaches of governing documents).

I would have either moved or tried to round up support to change the board. A lawsuit will poison relationships in the neighborhood.

However, bad HOAs can be shaped up due to lawsuits so I tend to support you, and if you have a decent lawyer then he or she would not have filed the suit if it lacked some merit.

Suing your HOA in this case is NOT suing yourself. Breaches of fiduciary duty are often not covered by insurance so those directors may have to pay out of pocket if they lose.

Sorry Rick, That's a cold hard fact. Let me be the first to say, Your attorney is likely to coma back to you and tell you that the HOA is currently uninsured, and YOU will be the one if you want to proceed with litigation will have to fund it all by yourself. Research Harbor Light HOA Lawsui in Las Vegas. Board members neglected to get a swing set fixed and it drastically injured a child.
This verdict could very well cost every homeowner their home if the Plaintiff decides to go that route. https://blog.cvn.com/homeowners-association-hit-with-20m-verdict-over-faulty-swing-set
If this is your primary residence and you haven't done so, go to the county recorders office and Homestead your property IMMEDIATELY!!!

Like Augustine said, get the facts, organize your neighbors and lay out the facts about the community and the legal consequences if they continue to allow these two board members to continue. You could like face your HOA being placed in State Receivership, then expect your dues to go up drastically.

Honestly, get the Secretary of State's investigation division to do the dirty work for you to get these BOD. You and your fellow homeowners can mount a recall petition, elect three new members and get your HOA back on track. This is the the only way other than selling your home.

-- This is one reason why I think suing to say, get the tennis court maintained (read: replaced) will likely fail. Furthermore, if the tennis court has been un-usable for years, and its unusable condition is obvious to all who have bought into the HOA in the last ten years or so, then the covenant on maintaining it may very well be deemed to be abandoned.

-- If the road is in poor condition but still usable and not really a safety hazard, the OP will have the same problem in court: The HOA's board exercised its judgment to not replace the road.

-- It sounds like the HOA has neither insurance nor an attorney on retainer. For injunctive relief, chances are high that this is in Washington state district court. Chances are high that the HOA corporation is required to use an attorney. The Court may order the two directors to hire an attorney. This will cause the assessment to go up very quickly. Current income from the assessments is $4500. The HOA will have to double or triple the assessment to pay for the HOA attorney. This is money that could be better used to, say, maintain the road better.

-- The Court may simply grant a default judgment, which amounts to an order for the HOA to comply with the governing documents. At some point, if the Court has not already ordered the HOA to retain an attorney, then I expect the two directors will hire an attorney. The attorney will decide which of the covenants are, in his or her opinion, still active; which are abandoned; and the extent to which the HOA must comply with "maintenance" at this point.

-- Will the judge award attorney fees to the OP? For some of the reasons above, and because of the American Rule (for attorney fees), I doubt it.

--Has the OP's attorney laid out all permutations of what could happen? I continue to have concerns about the competence of the OP's attorney.

-- Thinking like the above is what I think the OP's attorney should be doing.

-- I tend to agree with ChrisE8 on this point.

-- Of course, the downside of not having insurance is that the members have to pay out of pocket for the HOA attorney.

-- On the third hand, the cost of a HOA attorney may be incentive for the members to do what the OP wants.

-- On the fourth hand [wink], what the OP wants may also cost the members a lot of money.

-- Is this lawsuit a cash cow for the OP's attorney? I think so. Is this going to cost the OP a lot of money? I think so. Is this going to cost all six months to a few years of heartache and stress? I think so.

-- One wonders if the OP's money would be better put towards moving.

-- I think this suit (like nearly all lawsuits) begs for mediation.

Rick

Have you ever served on or run for the BOD?

Augustin,

I get your points - doesn't mean I would not do as I suggest.

Interesting things turn up in discovery sometimes :-)

Thank you for your responses and suggestions. Another dynamic at play here is that about a third of the homeowners are new (within the last year or so) and so they have limited knowledge
of the history of the manner the HOA has operated over the years. Secondly, via our discussions, our attorney is very aware of many of the pitfalls and potential minefields, upsides and downsides
of pursuing this legal action as you all have put forward. His advice has been spot on so far and we've elected to take a measured, targeted and incremental approach to dealing with the current
Board. It's sometimes difficult to convey in a forum such as this, all of the complexities and nuances of HOA situations and relationships that have taken to years to develop. Of course, there are well-meaning posters
who want to be helpful and constructive with suggestions or questions but, understandably have limited knowledge or experience in this particular problem scenario.

I am hopeful there will be opportunities, perhaps during discovery, whereby the HOA Board is forced to disclose its mismanagement and non-compliance with the CC&Rs and state law to
all of the homeowners. My sense is this will force changes in the HOA that will be demanded by the homeowners and they will see the value in maintaining the neighborhood according to
the CC&R (contract) they signed when they bought their property. And, yes, I suspect a special assessment and an increase in annual dues will be necessary to meet the requirements of
our CC&Rs.

Rick

$300 per YEAR or per MONTH?

What is your annual budget?

No wonder things have been neglected!

That isn't a lot of money to do much with. Have you even priced out the things you are wanting? Take a moment to price out what you want the changes to be. Your HOA should only be hiring contractors licensed and insured. Insurance isn't that cheap. Plus got to consider a HOA is ONLY funded by it's members for it's members. Is everyone willing to take a hit to raise dues to cover all these things including legal expenses?

My view is that you're likely to prevail, at least with respect to something, as long as your lawyer is halfway competent and you're willing to incur the legal fees. The basis for my view is that the HOA probably is run in a shoddy way and has violated at least some governing document and it probably doesn't have the best lawyer, or the funds to spend on one. Thus you will likely have the stronger "army", and to win, it's necessary to simply find a flaw somewhere with respect to something that the HOA has done, and I expect you can do that.

But what's the point? Unless you can show that your property value was harmed due to an illegal action by the HOA (and that's tough to do, as HOA boards, and any boards, are given broad deference by courts), all I see that you could get would be "equitable relief"- forcing the HOA to do something (i.e., no monetary damages). So you'd get the HOA to raise dues and maintain the property, maybe.

I would spend money moving instead of money paying legal fees. You'll incur the permanent hatred of at least some of your neighbors, as a defendant in these kinds of situations will consider you to be the Devil incarnate and will consider himself to be saintly, even as he's reading the court's judgment against him.

AugustinD, I’m not interested in debating this point with you, as you have your view and surely there’s a basis for it from your own experience.

You repeatedly say that lawyers make out “like a bandit” and use litigation as a “cash cow”.

I’ve been through litigation (as a plaintiff) several times, and each time, my counsel repeatedly advised me not to do various things because the legal fees would be large, and my counsel repeatedly steered me to do things that wouldn’t run up a large bill. The lawyers who I’ve used have certainly made it clear that they want reasonable results at the lowest cost in legal fees: they wouldn’t go for various things that would have run up a larger bill, even though I repeatedly stated that money was no object.

So in my view, lawyers don’t want to milk situations; they want results but try to keep legal fees down.

At least the lawyers who I’ve used have been that way. I know that your views differ, and there are slimy lawyers out there, but there are plenty of good ones who don’t want to bill too much.

Yeah I think your wasting the money of the HOA by doing all of this. Instead should be concentrating how to help the HOA not put it in more debt. Debt your complaining about they are already low in funds to do what you want them to do.

A lawyer that ever tells you "I will do whatever you tell me to do" is one that you should NOT have.