Legal Advice

Started by RogerB • 5 replies • 1656 views

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RogerB (Colorado)
Posts: 5,067

Posted:

A recent incident caused me to ponder.
What legal advice? When is it needed? And how does one protect themselves in this 'suit happy' society in which we live?

At the bottom of this page are three separate legal disclaimers "for informational purposes only and is not legal advice". We provide the same disclaimer to our clients and advise them to seek legal councel whenever they deem it to be necessary. We take that course of action whenever we are asked to answer questions which may be construed as providing legal advice.
To protect ourselves this must be done, otherwise Board members may take the information provided as legal advice.

What are your thoughts on these questions?
* Does your managing agent provide guidance when asked by the Board or usally say "We can get you a legal opinion"?
* To what degree does your management company's agent provide guidance to Board members?
* To what degree does your management company's agent provide comments concerning interpretation of governing documents?
* Are Board members required to seek a legal opinion?
* As a Board member what is your risk when a legal opinion is not obtained and there is a challenge to the board's decision?

SusanW1 (Michigan)
Posts: 5,202

Posted:

CCR's and Bylaws should not be written so as not to be understood. Hopefully, 5 - 10 people on the Board can figure out what they mean.

I would say it's the state statutes and other government documents that cause 90% of the problems. In that case, there should be government agencies available to put their laws into English so the Board can understand.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Roger,

How many times has it been posted, the wording in documents and laws and Statutes is not understandable. The "notwithstanding, unles the governing documents shall, will, must, can and so forth. These are not written with the common persons ability to decipher in mind.

WE OTTA PASS A NEW LAW FOR LAWYERS. WRITE IN SIMPLE ENGLISH!

Okay, now for my opinion. Yes, my P.M said often, that we need to call the Lawyer for clarification. Not always but often enough. She gave guideance but she was very experienced at this and had a very even temper so she took our abuse with a smile. We did not "require" the Board to seek legal opinion but we had a great lawyer on retainer so better safe than sorry to give a bad judgement call. There is always a risk when judgements are called but that safety net of D. and O. insurance helps some.

JosephW (Michigan)
Posts: 882

Posted:

There's a difference between "good" managers and "bad" managers:

"Good" managers know where the line is between guidance and legal advice and resist board's efforts to push them over the line in order to save a few dollars.

"Good" managers will often use the phrase "I think we need to talk to the attorney about that" when the board is about to do something really stupid (and possibly illegal) and finds they are not paying attention to the manager.

"Good" managers probably know as much about community association law as the attorney representing the association, but probably a lot less about corporate law, and how all of the laws impact the association.

A "Good" manager should be able to refer board members to specific sections of the state laws and their own documents when dealing with an issue. If it's a gray area, the manager should not try and interpret it.

Any (every) management contract (or employment agreement for on-site managers) should have a stipulation that any statements made by the manager are not to be construed as legal advice, even if referring to the documents or state laws. That it is the responsibility of the association to seek legal counsel when confronted with an issue regarding the interpretation of the documents and any or all state and federal laws.

Now the only question is how do you know if you have a "good" manager?

The reality is that boards ask managers for their opinion regarding legal issues all of the time, and often, take it negatively if the manager refuses to give it. So the manager often finds him/her self in a well-known quandary. See the first point above.

Are board members required to seek legal opinion? As a board member, what is your risk when a legal opinion is not obtained and there is a challenge to the board's decision? I've used this example before, but I use it often in these types of circumstances. Picture yourself on a witness stand being questioned by the opposing counsel in a lawsuit against the association. If you can defend the decision and the process by which you made it, without counsel making mincemeat out of you, then you're probably OK. If your reasoning is that lawyers are expensive, or you relied on your manager for legal advice, then you can pretty much count on your D&O getting cancelled aafter you lose the suit.

Joe

Joseph West
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Community Associations Network, LLC
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*See legal notice below (end of page) or go to www.hoatalk.com/legal

DonN (Michigan)
Posts: 357

Posted:

Obtaining and using legal advice or legal opinions is one of the most difficult challenges for board members.

While the client is the association, the reality is that the client tends to be viewed as the board — both by the board and by the association's attorney. There is no bright line that defines whether the legal advice is based on the association being the client, or the board.

There is no such thing as a unique legal opinion. A unique and singular legal opinion is a myth. When a matter goes to court, one attorney argues one legal opinion or theory and the opposing attorney another theory. One of the two opinions or both turns out to be wrong in the opinion of the court which may advance another theory in deciding the case. One way to look at this is that over 50% of the time, the legal opinion is wrong.

I would advise MC's not to provide any advice on legal matters to the board. The MC is not the attorney for the association. The MC can provide excepts (facts) from case law that define how documents should be interpreted. That can probably be provided in one page. The board can decide whether or not to seek legal advice on interpretations, but most are really obvious from the language as written. The case law provides instructions for interpreting vague and ambiguous language.

If the legal matter involves a third party, then the advocacy representations by the two attorneys provides the checks and balances and the resolution may evolve to the central legal theory.

If the legal matter involves interpretation of governing documents that may affect the rights and obligations of individual owners/members, then the checks and balances are typically lost. If one assumes that any singular legal opinion is wrong, then one can understand how the board — or more specifically a board president — might use legal advice to be advocacy for the president's wishes and compromise the individual rights of owners/members. The board president makes it clear what legal advice is wanted and provides limited facts and background to support the advice wanted. The board president then uses the legal advice to justify the action, and represents to the members that the board is only following legal advice. The costs to members to challenge the legal opinion and actions taken are large, and therefore generally not taken. Consequently, the president can effectively become a dictator on such issues because the only legal opinion available is the one from the association's attorney.

While most associations likely do not operate at the extreme described above, the discussion above shows that it can happen.

The discussion in the above two paragraphs is almost unique to owners associations with its mandatory membership and the purpose of the association to administer the affairs of the association. Typically, protecting the rights of individual members is not a stated obligation of the board.

Statutory relief can only be limited. I believe both Virginia and Florida have requirements for the legal advice to be available to all members. That should also include the instructions to the attorney, which should be approved by motion of the board so that all board members understand what is being asked for. Diligence by owners/members is essential.

My conclusion concerning additional statutory relief is that the office of attorney general should have an ombudsman in its consumer protection division that will provide legal opinions regarding interpretation of governing documents and specifically, any compromise of the individual rights of owners/members. These are issues that typically exist between boards and the members.

My recommendation for the standard for the legal advice is that which would likely be affirmed by a Court of Appeals.

Typically, board members are protected from personal liability if they acted upon advice of counsel, if they resolve any doubts about the correctness of the advice and do not blindly follow the advice.

Please be advised that I am not an attorney and that the above is not legal advice.

Don Nordeen
Governance of Property Owners Associations

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Roger,
I have tried to digest all the creditable advice here and just can't get in wrapped up where I can understand it.
Can I suggest you have taken too large a bite out of the apple and if this all can be broken down maybe individual elements would make sense.

Hovering over all this is the realization that we just can't say what a good management compnay is and apply it to all associations. Especially in defining the specifics of a PM. There have been posting here that indicate a P/M does a bang up job for one place and is a failure in another.

I would look on all Management personnel as advisors, and conductors of the association business to arrange that business that the association stays out of trouble. I can't imagine a M/C that did not give opinions, nor a Manager did not have input. I suppose the Board is charged with weighting the opinions of the management and melding it into the Boards actions. If the actions are wrong it falls to the Board, then to the people to decide what changes they want to make.

Certainly in smaller associations a Manager could be hired with his sole responsibility to do specific jobs as outlined by the Board and the Board makes all maqnagement decisions. I sort of suspect that may be the way for some to go, but the reality is the sole Manager is usually given way to much power to control covenants. What is reality at my association is not close in others. We have a large POA that runs well with professional Management (CEO and staff), they answer to the board, there are numerous small condos and little POA that have been in existance for 30 years and more. They are still here, so by that measure they did a good job, but I doubt their history could stand up to scrutiny, and does it matter? There are a few plankowners about but thousands of individuals have passed through and made their marks, good and bad. And the same old arguments are presented as new material each year. I guess that is how it is going to be. Maybe we should make do with trying to hit a moving target.

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