Condominium Irrationality

A very interesting article, although probably obscured from most readers’ field of vision, appeared yesterday (October 3, 2012).  It was interesting not because the events were important or earthshaking but because it was an example of the kinds of horror stories experienced today by people living in condominium housing.

The story involved the court victory, of a couple living in a condo, after 11 years and legal fees of over $200,000.  It seems that 11 years ago the condo association sent them a bill for over $2,000 for mowing their lawn. They just didn’t think that was right and took on the legal fight.

Without knowing the facts it is hard to judge the merits of the case but the court decision in favor of the homeowner suggests that the association was in the wrong. The lesson here, for condo dwellers is that associations are governed by CC & R’s (Covenants, Conditions and Restrictions) as well as State laws in some instances. Often, overzealous HOA’s (Homeowners Associations) act before determining that their actions are permitted under law.

Homeowners who become embroiled in disputes with HOA’s should read the governing documents and law before initiating a legal fight.  Once that is done, if they conclude that the action of the HOA was not permitted under the prevailing governing documents, the first action should be to the HOA Board of Directors citing the reasons for opposing their action(s).  If that doesn’t bring about dialog and resolution then there are steps that should be taken before commencing any legal action.

First, demand, in writing, copies of the Board minutes, surrounding the incident(s) in question as well as minutes for at last two years preceding the incident. Many HOA’s, particularly the smaller ones without professional management, do not operate in compliance with the governing documents or applicable law.  Finding out that there have been deviations from the governing documents provides an almost infallible step to a quick solution. Many larger HOA’s, with professional management, have the management company take care of fiscal management only with all other aspects of management reserved for the Board. In these cases some deviation from governing documents is likely.

Condominium projects (sometimes called Common Interest Developments (CID’s) are, in some States, subject to a body of law specifically addressing requirements for condominiums that are designed to protect the homeowners. In California the governing law is known as the Davis-Sterling Act.  These laws are usually readily available on the internet and, before taking any legal action, should be reviewed to make certain that the action(s) questioned are not permissible under law or are not implemented in accordance with the law. If this is the case, present the information, in writing, to the Board of Directors and request that immediate action be taken to correct the situation.

If letters to the Board do not succeed in bring about any corrective action, before taking legal action, the Board should be notified, in writing, of an intent to take legal steps and suggest that, before doing such, an agreement to quickly mediate is a workable remedy. Some States may require mediation but even if not, litigation can be very expensive and mediation may resolve the problem at far less cost.

If these steps fail, retaining an attorney may be the next step.  But, before doing so, determine if other homeowners are in the same boat and might agree to participate in any legal steps.  The cost of litigation would be more manageable if shared by several people.

In the case described, if the homeowner spent $200,000 in legal fees it must be assumed that the HOA also incurred extensive legal fees in defense.  The expenditure, on both sides, was irrational considering the amount at stake.  In the case of the homeowner, it was their money and they are entitled to be irrational. However, the HOA Board of Directors is not entitled to be irrational since it is money belonging to the homeowners that is ultimately used to pay legal expenses.  Either they or their attorney should have realized the futility of spending money on a $2,000 + case and should have found a way of resolving the problem without litigation.

HOA Boards should make sure they are competently advised as to the requirement of the CC&R’s and governing law in order to avoid needles conflicts with homeowners.  HOA’s are mini-governments and elected officers and directors have all of the same failings as other elected officials in that they may begin to like the power with a risk that they might abuse that power. In the instance of the subject Board, their action in litigating might have exposed them, individually, to liability for a fiduciary breach by spending homeowners money fighting a $2,000+ lawsuit.

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