Suing ex property manger

Started by CliftonR • 7 replies • 140 views

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CliftonR (Arizona)
Posts: 15

Posted:

Our HOA (Phoenix Az) was managed by an owner named R*** for many years and our board was controlled and the community run as it was their own kingdom. A new board was elected in 2023 and we hired a professionally company. Within a month, an owner came to the board stating, R*** had a landscaper go into her back yard (climb the wall) and cut down her tree. Victim requested reimbursement for replacement. R*** was asked about the indecent and they said "I did them a favor, it was dead". Pics from the same year show otherwise. This was not authorized by a board but done under R***'s authority. The new board paid $2,700 on 1/24 to reimburse for stump removal (dig up) and replant of similar size tree.

Side note, R*** owns 5 of 76 properties and knows many of the multi owner investors there. I have seen the disparaging emails sent by them to their investor friends and old timers regarding the current BoD's. R*** has done everything to keep our assessments low for them as far as getting bylaws changed so the BoD need owner approval for more than 5% increase. Condo insurance goes up quicker than we can account for. We are also severely under funded per our first ever reserve study in 2024.

Question: To get reimbursement from previous PM/R***, does one board member have a legal right to sue on behalf of the community/board or would this need a board decision and be filed by the current management? If so who would file and be the plaintiff? I know how to file in small claims while being the plaintiff but I know nothing about this.

Any help or guidance would be appreciated.

DeanJ
Posts: 1,786

Posted:

Quote:

Posted By CliftonR on 06/15/2025 6:42 AM
Our HOA (Phoenix Az) was managed by an owner named R*** for many years and our board was controlled and the community run as it was their own kingdom. A new board was elected in 2023 and we hired a professionally company. Within a month, an owner came to the board stating, R*** had a landscaper go into her back yard (climb the wall) and cut down her tree. Victim requested reimbursement for replacement. R*** was asked about the indecent and they said "I did them a favor, it was dead". Pics from the same year show otherwise. This was not authorized by a board but done under R***'s authority. The new board paid $2,700 on 1/24 to reimburse for stump removal (dig up) and replant of similar size tree.

Side note, R*** owns 5 of 76 properties and knows many of the multi owner investors there. I have seen the disparaging emails sent by them to their investor friends and old timers regarding the current BoD's. R*** has done everything to keep our assessments low for them as far as getting bylaws changed so the BoD need owner approval for more than 5% increase. Condo insurance goes up quicker than we can account for. We are also severely under funded per our first ever reserve study in 2024.

Question: To get reimbursement from previous PM/R***, does one board member have a legal right to sue on behalf of the community/board or would this need a board decision and be filed by the current management? If so who would file and be the plaintiff? I know how to file in small claims while being the plaintiff but I know nothing about this.

Any help or guidance would be appreciated.

I think your board has already screwed this up by not speaking to an attorney before the board reimbursed the owner of the tree.

If R*** acted without HOA authority, R*** was responsible and the owner needed to sue R*** for damages. The HOA should have not got involved.

The only recourse for the 5% cap approved by the owners is an emergency assessments on a recurring basis each date the insurance premium is due.

CliftonR (Arizona)
Posts: 15

Posted:

Thanks Dean,

We were one month in with the then new PM when the decision was made. Our PM just started with that company and it was her first year. We are no longer with that company. Current company is on point. Lessons learned.

ElleN (Idaho)
Posts: 1,334

Posted:

Some practical realities:

The cost of paying an attorney here could quickly exceed the cost ($2700) of what the HOA paid to remedy the situation with the owner. I think competent attorneys would advise the HOA and anyone wanting to sue over this to let this go and chalk it up to the board failing to properly oversee the manager.

The suit would be complicated. Why? For one thing I bet R*** says it is the board's fault for delegating authority to him. Some might think that is far-fetched. But hopefully all know the United States's adversarial legal system is about grasping at every last straw. And it sure pays attorneys well (meaning for one thing, attorneys do not exactly have incentive to keep things cheap for clients).

Quote:

Posted By CliftonR on 06/15/2025 6:42 AM

Question: To get reimbursement from previous PM/R***, does one board member have a legal right to sue on behalf of the community/board

Some legal realities:

One board member can put on his/her owner's hat; hire an attorney; ask the attorney to make demands on R*** over several months; then, if the attorney is willing and after meeting certain criteria, file suit on behalf of the HOA (not the board; and not on behalf of himself/herself per se) in what is known as a "derivative action." A "derivative action" refers to a lawsuit where shareholders (or HOA/condo owners) believe that the corporation has been harmed by someone else's action. The shareholders' right to sue the someone "derives" from the rights of the corporation not to be harmed. If you want to know the main criteria to have standing to file a derivative claim (lawsuit; action; yada), ask.

Quote:

Posted By CliftonR on 06/15/2025 6:42 AM
or would this need a board decision and be filed by the current management?

The current management cannot lawfully be a party (plaintiff) in a lawsuit against R***.

The board can vote to hire an attorney and have the corporation sue R*** (again, after a series of demands). Whether a derivative suit would be allowed in small claims court is a question whose answer should be sought. I would bet the answer is "no; derivative suits cannot lawfully be brought in small claims court."

I am not an attorney. I have personally observed numerous HOA lawsuits where I am over a dozen years. I read HOA case law.

CliftonR (Arizona)
Posts: 15

Posted:

Thanks Ellen.

Another idea would be to have a legal letter sent on behalf of the board requesting reimbursement. I feel this would be wasted money too though.

The right to sue if one the shareholder is harmed. If a shareholder has the right to sue, would an individual owner have this right too? In Az small claims is very easy. I have filled and been successful. I can get this on the agenda but I don't want to waste time if it's fruitless.

ElleN (Idaho)
Posts: 1,334

Posted:

Quote:

Posted By CliftonR on 06/15/2025 5:05 PM
If a shareholder has the right to sue, would an individual owner have this right too?

Individual HOA owners are viewed as "shareholders" when it comes to derivative suits involving HOAs. So yes.

Quote:

Posted By CliftonR on 06/15/2025 5:05 PM
In Az small claims is very easy. I have filled and been successful. I can get this on the agenda but I don't want to waste time if it's fruitless.

Google has some interesting things to say about corporations suing in small claims courts. I trust you can do your own search.

If I were on your HOA board, I would vote either to consult the HOA attorney or to not pursue reimbursement.

CliftonR (Arizona)
Posts: 15

Posted:

Ellen,

I am on the board. We have a free legal Monday that our PM can use for questions. I'll ask our PM if this something pursuable and then talk to at least one other member prior to adding to the agenda. Some tip toe with her as she has friends there and don't want problems, I don't live there. Currently we have 4 other on going legal issues that require legal and much deferred maintenance from her lack of enforcement and care. I was told I need to find if she was named as "other" under on our D&O insurance too. I know she wasn't licensed.

Thanks again for the input.

ElleN (Idaho)
Posts: 1,334

Posted:

Quote:

Posted By CliftonR on 06/16/2025 1:34 AM
I was told I need to find if she was named as "other" under on our D&O insurance too.

I agree the above is a good question.

Quote:

Posted By CliftonR on 06/16/2025 1:34 AM
I know she wasn't licensed.

I do not think this is required in Arizona. Nationwide it is rarely required.

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