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Subject: Can Board Members be Sued Personally?
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NpB
(Arizona)

Posts:288


05/08/2020 10:29 PM  
If a Board of Directors makes a decision either via a regular meeting or executive session, and an owner sues the Board over a decision, can Board members be sued personally for that decision or are they shielded from personal liability because their decision was made in the course of their duties as a Board member?
TimB4
(Virginia)

Posts:16778


05/08/2020 11:54 PM  
Yes and Yes.

You can hold a board member accountable but you must pierce the corporate veil.


Board members are protected by many avenues of protection.

Governing documents often stipulate that board members are indemnified

As a volunteer, they are protected by Volunteer Protection Act of 1997, a federal law.

As a Director, the individual is protected by the corporate veil (see earlier link).


So Yes, you can name directors individually (should name all, not just one)but it's difficult, if not impossible, to hold them accountable individually.

Hope this helps.

Tim

PaulJ6
(New York)

Posts:860


05/09/2020 5:37 AM  
TimB4 is correct. You can name a director as a defendant in a complaint for a lawsuit. The best ways to potentially find a director personally liable is for breach of fiduciary duty.

Often the only result of naming a director as a defendant is that the complaint will show up if you search for the person online.
NpB
(Arizona)

Posts:288


05/10/2020 10:52 PM  
On average, what does it cost a homeowner contesting a CC&R violation to sue an HOA Board and what does it cost an insured HOA to defend themselves?
PaulJ6
(New York)

Posts:860


05/11/2020 2:41 AM  
My lawsuit against my HOA cost about $35k in legal fees and that’s likely on the low end compared to other litigation. Litigation easily can cost $100k. The HOA’s costs can be similar but since insurance pays them above a deductible, the HOA won’t care. Then the next board will have to deal with an increase in insurance premiums.
MelissaP1
(Alabama)

Posts:9306


05/11/2020 4:49 AM  
Uhm it's NOT just the board that has to deal with the increase in insurance expense. It is ALL the HOA members that have to deal with it. Plus insurance may just drop the HOA altogether. So a lawsuit effects EVERY HOA member. It's not just a "Board thing".

Former HOA President
PaulJ6
(New York)

Posts:860


05/11/2020 5:09 AM  
Posted By MelissaP1 on 05/11/2020 4:49 AM
Uhm it's NOT just the board that has to deal with the increase in insurance expense. It is ALL the HOA members that have to deal with it. Plus insurance may just drop the HOA altogether. So a lawsuit effects EVERY HOA member. It's not just a "Board thing".




Then that should incentivize homeowners to get rid of a board that violates CC&Rs. If a board violates CC&Rs and harms an owner, it’s certainly unjust to make that owner bear the losses.
MelissaP1
(Alabama)

Posts:9306


05/11/2020 5:35 AM  
So how does that exactly happen? They already have to be paying for the damages anyways. If you are in a lawsuit it doesn't stop once you swap a board out. So the people are still going to have to face paying higher dues, special assessment, or losing insurance.

Former HOA President
PaulJ6
(New York)

Posts:860


05/11/2020 5:47 AM  
Posted By MelissaP1 on 05/11/2020 5:35 AM
So how does that exactly happen? They already have to be paying for the damages anyways. If you are in a lawsuit it doesn't stop once you swap a board out. So the people are still going to have to face paying higher dues, special assessment, or losing insurance.




The new board can certainly (1) stop the prior board's bad behavior and (2) settle the lawsuit.

Owners generally may have to bear the costs of the old board's bad behavior but once a new board comes in, the new board can behave better, which will reduce costs of misconduct going forward.

In any event, if one owner is damaged by a board's bad behavior, the owner shouldn't have to bear those costs. Ideally the misbehaving directors would pay out of pocket, but that won't happen except on rare occasions.
PaulJ6
(New York)

Posts:860


05/11/2020 7:48 AM  
Also, to add, in my lawsuit against my HOA, I figure that the total costs to the HOA were at least $50k. My costs were around $35k. The costs to the HOA could have been ZERO if the HOA had just followed its written document.

The owners voted out most of the members of the bad board midway through the process but a lot of the costs had already been incurred.

If owners don't want to have to bear costs of a lawsuit, then they should change their HOA's documents so that owner approval is required before a HOA engages in litigation--but clearly that won't happen.
AugustinD


Posts:3364


05/11/2020 8:36 AM  
On the subject of HOA/condo lawsuits, I skimmed the following site quickly and think it good:

https://independentamericancommunities.com/hoa-lawsuits-a-reality-check/

At the bottom of the site, the site references actual lawsuits from the last several years.
CathyA3
(Ohio)

Posts:953


05/11/2020 9:32 AM  
Posted By AugustinD on 05/11/2020 8:36 AM
On the subject of HOA/condo lawsuits, I skimmed the following site quickly and think it good:

https://independentamericancommunities.com/hoa-lawsuits-a-reality-check/

At the bottom of the site, the site references actual lawsuits from the last several years.




Some of the real-life lawsuits were "interesting", although I don't think they make the case that the author of the article thinks that they do.

* The owner with the drywall dispute had a beef with the developer/builder, not with the HOA. How is it the fault of her neighbors, and why should they bear the cost of making this right? It's likely that some of them have the same issue.

* Regarding the nuisance barking dogs, how is the HOA supposed to stop this without taking a high-handed approach with the owner of the dogs? My CC&Rs give the board the right to remove nuisance animals at the board's sole discretion. If the CC&Rs of the community involved in the lawsuit did not give that board such power, just what could the board do if the dog's owner did not cooperate? Fine him and then foreclose, assuming that state allowed foreclosure for unpaid fines? And then we'd hear howls about "Nazi HOAs abusing their power". The judge very likely ruled the only way he could.

* "We all wanted a vote –to vote on our business and to vote on a manager–the board refused, so we organized for the next member meeting." This one reflects the typical ignorance about how corporations operate.

* The one with the Fair Housing complaint is likely justified, but the plaintiff laments the loss of friends and isolation. Well, yeah, the neighbors are going to literally pay the price of this litigation, through increased insurance premiums and damage to property values as potential buyers steer clear of the community because of the prolonged litigation.

What buyers in HOAs and COAs generally don't understand is that they're not just buying a home and sharing the costs of the amenities. They are becoming legal and financial partners with a bunch of other people that they didn't choose - they'll have the obligations of home ownership, along with the obligations of joint ownership in a corporation. The average Joe probably has a good idea about what owning a home involves. However, it's unlikely that he has the first clue about being a business owner and the potential pitfalls involved.

Personally, I think it's unconscionable that people can buy in these communities in complete ignorance about what the legal, financial and other implications are. And then they get their panties in a wad about something, and suddenly everybody in the community literally pays the price.
AugustinD


Posts:3364


05/11/2020 10:08 AM  
Posted By CathyA3 on 05/11/2020 9:32 AM
Some of the real-life lawsuits were "interesting", although I don't think they make the case that the author of the article thinks that they do.
I was looking for signs that the author feels all HOAs and HOA boards are fascists yada, but I did not quite see this. The author seemed either a bit anti-HOA or a lot "anti-HOA lawsuit involvement." Otherwise to me, the author seemed pretty much 'just the facts.'
Posted By CathyA3 on 05/11/2020 9:32 AM
* The owner with the drywall dispute had a beef with the developer/builder, not with the HOA. How is it the fault of her neighbors, and why should they bear the cost of making this right? It's likely that some of them have the same issue.
Googling shows that Michelle Germano was involved in a number of lawsuits on the issue of the defective, toxic drywall. This got a lot of press. Class action litigation is ongoing as far as the drywall manufacturer is concerned? Not sure. One of the lawsuits was the HOA suing her for failing to pay her assessment. The latter lawsuit appears to have forced her into bankruptcy. A settlement occurred. I do see the HOA's side of this, as far as collecting the assessment. As for the harassment Germano claimed happen, of course I do not support this.
Posted By CathyA3 on 05/11/2020 9:32 AM
* Regarding the nuisance barking dogs, how is the HOA supposed to stop this without taking a high-handed approach with the owner of the dogs? [snip] Fine him and then foreclose, assuming that state allowed foreclosure for unpaid fines?
I think this is absolutely an option that needs to be considered. I took note of the fact that the neighbors with the barking dogs did move after a year or so, and that the plaintiff won a large settlement from these neighbors. The judge threw out the plaintif's case against the condo association and ordered the plaintiff to pay the HOA's huge attorney's fees. The plaintiff wrote that the suit against the HOA was for "Failure to Enforce Covenants, Breach of Duty of Care, Breach of Duty of Good Faith, and Breach of Contract." The usual stuff for a plaintiff that wants the HOA/condo to enforce covenants. From the plaintiff: "The Judge dismissed the lawsuit [upon hearing the HOA's motion for summary judgement] against the Homeowners’ Association, ruling that — no matter how the HOA acted, what they did, what they did not do, or what laws may have been broken — since it was up to the Homeowners’ Association whether or not they would enforce the dog barking Covenant — the case was totally without merit." More at http://fromthehoatrenches.com/2015/10/neil-brooks/. The only judgment I have to offer is that on appeal, the plaintiff might have won.

[snip; not interested in commenting at length. Folks can google on these lawsuits and see if there is more info.]

As the cliche goes, I think lawsuits by HOAs or against HOAs are bad news for all. But I also think sometimes they are necessary.
Posted By CathyA3 on 05/11/2020 9:32 AM
Personally, I think it's unconscionable that people can buy in these communities in complete ignorance about what the legal, financial and other implications are. And then they get their panties in a wad about something, and suddenly everybody in the community literally pays the price.
I "just" want all HOA/Condo members and HOA/Condo Boards following the covenants and other law. I continue to feel it might be best if directors were paid. This would cost the condo/HOA members more, but they would get more, too. Paid directors lose their federal volunteer statute protection but still have D&O insurance.
SheliaH
(Indiana)

Posts:3224


05/11/2020 10:09 AM  
Although board members can bee suex, it doesn't necessarily mean this is a good idea. the UP dishes say what the decision was, so my question would start with that and why the homeowner feels compelled to sue the board member personally. This is keyboards should have D & O insurance and do things in a transparent manner. It doesn't mean the board will be perfect in everything, and I would also think other board members would also risk being sued because they should be making decisions as a group.

The threat of being sued is a double edged sword - yes, it should drive home the importance of following the documents, but it can also keep very good peop!e from serving because no one wants to be sued. That can leave you with no one stepping and the risk of the association going into receivership, or the board being completely ineffective because they've afraid of ticking off the wrong person.
AugustinD


Posts:3364


05/11/2020 10:42 AM  
Posted By AugustinD on 05/11/2020 10:08 AM
Attorney's fees being awarded is kind of unusual. I wondered what the reasoning was. The site https://independentamericancommunities.com/2019/02/19/dont-count-on-your-hoa-to-enforce-nuisance-rules/ reports on the Neil Brooks v. HOA further. This site excerpts part of the judge's statement (at the hearing) regarding attorney's fees:
"... as I’ve stated before many, many times, granting summary judgment is a rare thing for the Court to do, but it’s supported here and I’m not convinced that there’s any other issue for the Court to consider or any reason for the Court to reconsider its position. I also normally am asked whether a party should leave the courtroom before they just [exit], but he’s been upset so the Plaintiff — I’m not going to say anything further about it and he can go ahead and leave. The problem is he should have stayed for the end result as to what happens when these cases are brought and you lose in court, and that’s the issue of attorney fees and costs. We’re talking about a lot of money and now the burden shifts to [the HOA] to tell me why it’s that much money."

At Brook's own site, he does not mention that he (and I presume his attorney) left before discussion of attorney's fees. From the real-time transcript, perhaps Brooks may have become emotional and ordered his attorney to leave with him? Which was simply stupid. The judge was left with no choice but to award attorney's fees to the HOA on default.

To me, Brooks's failure to report this in his own account (linked above) says a great deal. If Brooks appeared here at hoatalk to argue his case, I suspect he would respond negatively to my criticism. Mr. Brooks, the law is what it is. Your attorney and you failed to argue against awarding the HOA its attorney's fees. The burden was on the HOA to make this case, but your departure removed that burden altogether. At this writing, I am not persuaded the judge had another choice.
NpB
(Arizona)

Posts:288


05/11/2020 1:09 PM  
So if an owner receives a $100 fine for leaving her/his trash container out too long and they want to sue the Board "out of principle" because they think the fine is excessive, how much on average will that "exercise in principle" cost them with an attorney and what would it cost the HOA to defend? Other than convincing a judge that the fine is excessive, could they claim any punitive damages for "emotional stress?"

SheilaJ1
(South Carolina)

Posts:164


05/11/2020 1:32 PM  
Posted By NpB on 05/11/2020 1:09 PM
So if an owner receives a $100 fine for leaving her/his trash container out too long and they want to sue the Board "out of principle" because they think the fine is excessive, how much on average will that "exercise in principle" cost them with an attorney and what would it cost the HOA to defend? Other than convincing a judge that the fine is excessive, could they claim any punitive damages for "emotional stress?"



yes the board members can be sued individually and not just for breach of duty but also declaratory judgments.

you must go through the proper process, attend a fine's hearing, have a valid vote for the fine, and if you are firm on your position, let them continue to fine so you will have a large amount...if all avenues of a resolution are exhausted, have an attorney send a letter, after that is exhausted, then you go to court.

And no, you cannot sue for punitive damages unless the issue has been going on for years, google it and you'll find a case where a couple got punitive damages after years of abuse, death threats, neighbor leaving bullet shells on their lawn, etc. Plus states have a max for breach of contract w/ puntive damages its usually $100,000 to $500,000.
AugustinD


Posts:3364


05/11/2020 1:43 PM  
Posted By NpB on 05/11/2020 1:09 PM
So if an owner receives a $100 fine for leaving her/his trash container out too long and they want to sue the Board "out of principle"
There is no "principle" here. There's only the law. The law typically asks: Is a fine in the amount of $100 reasonable? The dollar figure appears reasonable to me. But then there are questions about whether the HOA was too hasty in imposing the fine; whether proper notice of the schedule of fines was performed; whether a schedule of fines even exists; was a hearing offered; and so on. All going to "due process."
Posted By NpB on 05/11/2020 1:09 PM
because they think the fine is excessive, how much on average will that "exercise in principle" cost them with an attorney
Where you are, I would estimate that the review of the governing documents alone will run $1000 to $3000. I estimate the attorney's writing several letters of demand (as a judge will expect) will cost another $2000 or so. Filing in court would run another $2000 or more. This assumes the attorney is willing to do this. Many attorneys, who think the case is not winnable, will not take it.
Posted By NpB on 05/11/2020 1:09 PM
and what would it cost the HOA to defend?
The HOA attorney's answering letters of demand, explaining why the HOA member should not go to court: Around $2000 or more. IF a lawsuit is actually filed with the local court, then tesponding in court might be done by an attorney that the HOA's insurance company hires. Then the HOA faces "only" the cost of possibly increased premiums.
Posted By NpB on 05/11/2020 1:09 PM
Other than convincing a judge that the fine is excessive, could they claim any punitive damages for "emotional stress?"
Short answer: It is extremely unlikely. Long answer: I think you are referring to the tort of "intentional infliction of emotional distress." The bar for winning an IIED claim is quite high. The plaintiff has to show truly outrageous conduct, preferably in a long pattern, and has to show medical bills that will quantify a dollar value of "harm" done by the IIED.

My dollar figures above are ballpark.
NpB
(Arizona)

Posts:288


05/11/2020 1:45 PM  
Posted By SheilaJ1 on 05/11/2020 1:32 PM
Posted By NpB on 05/11/2020 1:09 PM
So if an owner receives a $100 fine for leaving her/his trash container out too long and they want to sue the Board "out of principle" because they think the fine is excessive, how much on average will that "exercise in principle" cost them with an attorney and what would it cost the HOA to defend? Other than convincing a judge that the fine is excessive, could they claim any punitive damages for "emotional stress?"



yes the board members can be sued individually and not just for breach of duty but also declaratory judgments.

you must go through the proper process, attend a fine's hearing, have a valid vote for the fine, and if you are firm on your position, let them continue to fine so you will have a large amount...if all avenues of a resolution are exhausted, have an attorney send a letter, after that is exhausted, then you go to court.

And no, you cannot sue for punitive damages unless the issue has been going on for years, google it and you'll find a case where a couple got punitive damages after years of abuse, death threats, neighbor leaving bullet shells on their lawn, etc. Plus states have a max for breach of contract w/ puntive damages its usually $100,000 to $500,000.





So if a Board unanimously votes in Executive Session to fine an owner $200 to leaving their trash can out too long, how can each individual Board member be sued personally for that action?

A lot of people use the legal system to foster social change based on principles. It would be unfortunate if the HOA were to have to spend thousands on dollars defending a fine over a trash container out too long, because someone wants to overturn the fine "based on principle."
PaulJ6
(New York)

Posts:860


05/11/2020 1:49 PM  
Posted By NpB on 05/11/2020 1:09 PM
So if an owner receives a $100 fine for leaving her/his trash container out too long and they want to sue the Board "out of principle" because they think the fine is excessive, how much on average will that "exercise in principle" cost them with an attorney and what would it cost the HOA to defend? Other than convincing a judge that the fine is excessive, could they claim any punitive damages for "emotional stress?"





Don't count on punitive damages. Don't even count on a court making the loser pay both sides' attorneys' fees.

If the fine was imposed in violation of the governing documents, then one could sue for a breach of contract case and recover damages. If the fine is below the small claims court threshold (usually $5k or $10k), the fastest and cheapest option is to sue in it. That wouldn't cost more than a few thousand dollars in lawyers' fees. If you can get a lawyer to take the case (a reputable lawyer won't want to bother with small claims.) (You can sue in small claims court only to recover a monetary judgment--not to force the board to do something other than pay you.)

If you're suing to force the board to do something other than pay you, or if you want to damages above the small claims court threshold (usually $5k or $10k), then you would likely go to state court. That gets really expensive. A board that isn't clearly in the wrong, and someone who sues "out of principle", is likely to involve two very stubborn sides that won't settle. So it would need to go to trial. I'd expect at least $50k per side.

Sue only if you're clearly in the right, legally. Don't sue "out of principle". Suing "out of principle" is a good way to burn through a LOT of your own money with little to show for it.

AugustinD


Posts:3364


05/11/2020 1:53 PM  
Posted By NpB on 05/11/2020 1:45 PM
So if a Board unanimously votes in Executive Session to fine an owner $200 to leaving their trash can out too long, how can each individual Board member be sued personally for that action?
First, anyone can name anyone else they want in a lawsuit. An individual director can be named. Subsequently it is possible the HOA attorney will motion to dismiss the individual director on various grounds. If it's the insurance company paying for the HOA's defense in court, the attorney likely will not bother to find out how to get the individual directors removed as defendants and instead will focus on the claim in the lawsuit.
Posted By NpB on 05/11/2020 1:45 PM
A lot of people use the legal system to foster social change based on principles.
The ones who are successful do so on account of having a good legal argument.
Posted By NpB on 05/11/2020 1:45 PM
It would be unfortunate if the HOA were to have to spend thousands on dollars defending a fine over a trash container out too long, because someone wants to overturn the fine "based on principle."
There are too many other criteria that have to be met before a HOA board even has to consider whether it fights a lawsuit.
SheilaJ1
(South Carolina)

Posts:164


05/11/2020 1:59 PM  
I believe in order to sue personally, you have to show the individuals acted with malice towards you specifically and personally. Perhaps you have emails showing they targeted you or perhaps you talked to other neighbors who had their trash out but never got fined.

Plus an attorney will only put on co-defendants if they believe they can be sued individually, its not your call. If you go Pro se, just sue the HOA and put the individuals as co-defendants. This happens all the time.
NpB
(Arizona)

Posts:288


05/11/2020 1:59 PM  
I would hope for Board's sake, plaintiff attorney's fees would be high in order to discourage people from suing "based on principle" because they have a vendetta against the Board.
AugustinD


Posts:3364


05/11/2020 2:11 PM  
Free legal clinics are abundant enough, and enough people are ignorant, to sue frivolously on pro se grounds and have to pay typically (1) only a couple of hundred dollars to file the suit and (2) lots of hours of labor. The hoped-for deterrent then is a crystal clear statute or covenant that says loser pays the winner's attorney's fees. The HOA Board and sometimes, the HOA insurer, are then in a conundrum: Either cave to the frivolous member and risk others bringing suit, until the HOA's whole fine system becomes worthless; or fight the lawsuit at considerable expense to either the HOA, the insurer or both.
PaulJ6
(New York)

Posts:860


05/11/2020 2:16 PM  
I used my HOA board president (among other defendants). I just didn't like him.

It was awesome to Google his name and see the complaint come up.

Neighbors found the complaint by Googling him and voted him out of office.
NpB
(Arizona)

Posts:288


05/12/2020 1:41 PM  
Posted By AugustinD on 05/11/2020 2:11 PM
Free legal clinics are abundant enough, and enough people are ignorant, to sue frivolously on pro se grounds and have to pay typically (1) only a couple of hundred dollars to file the suit and (2) lots of hours of labor. The hoped-for deterrent then is a crystal clear statute or covenant that says loser pays the winner's attorney's fees. The HOA Board and sometimes, the HOA insurer, are then in a conundrum: Either cave to the frivolous member and risk others bringing suit, until the HOA's whole fine system becomes worthless; or fight the lawsuit at considerable expense to either the HOA, the insurer or both.





Do you think a legal clinic can write a 10 page complaint for an owner who has no legal background?
AugustinD


Posts:3364


05/12/2020 1:48 PM  
Posted By NpB on 05/12/2020 1:41 PM
Do you think a legal clinic can write a 10 page complaint for an owner who has no legal background?
An attorney at the typical free legal clinic will steer the pro se person to actuual court complaints (meaning the first filing of a lawsuit) to get the format correct, with nice short statements that are numbered and so on. The free legal clinic's attorneys will not write the complaint. But they will get the person started, and they will be happy to review the complaint.

The point is to try to minimize pro se folks backing up the court dockets.
PaulJ6
(New York)

Posts:860


05/12/2020 2:10 PM  
I don't know of any lawyer- and I know hundreds- who would file a lawsuit if the plaintiff wants to sue "out of principle". To the contrary, one of my law school classmates was telling me that she always discourages plaintiffs from suing "out of principle", in part due to the unexpected and high costs of litigation. I also believe that there are ethics rules that prevent a lawyer from filing a lawsuit that is not warranted by the law (i.e., you can't just file a lawsuit unless there's something valid that you're suing about--otherwise you can get in hot water).
GenoS
(Florida)

Posts:3805


05/12/2020 2:15 PM  
Posted By AugustinD on 05/11/2020 8:36 AM
On the subject of HOA/condo lawsuits, I skimmed the following site quickly and think it good:

https://independentamericancommunities.com/hoa-lawsuits-a-reality-check/

At the bottom of the site, the site references actual lawsuits from the last several years.

That is a very interesting site. I take issue with the author where she says,

"The HOA’s goal is to wear down the “malcontent” financially and emotionally, so that they will give up the fight and move on. The goal is to set an example for other owners and residents, so that they do not dare to question status quo, for fear that they will be the next target of the Association.

That’s the kind of environment that breeds apathy. Ignoring problems and pretending not to care about HOA dysfunction is matter of self-preservation for most homeowners."

My HOA suffers with rampant apathy and it has nothing to do with a tyrranical HOA that wields a big hammer and doesn't like to lose. Since the beginning here, 30+ years ago, the HOA has never had any "targets". The HOA has never been involved in any litigation. It has never fined anyone for anything. So whatever the reason for apathy is here, ignoring problems and not caring about the HOA's dysfunction, it's not a matter of self-preservation, that's for sure. In fact, the board over the years has carefully avoided any enforcement actions against anyone, even when blatant violations of the covenants take place.
PaulJ6
(New York)

Posts:860


05/12/2020 5:57 PM  
Posted By GenoS on 05/12/2020 2:15 PM
Posted By AugustinD on 05/11/2020 8:36 AM
On the subject of HOA/condo lawsuits, I skimmed the following site quickly and think it good:

https://independentamericancommunities.com/hoa-lawsuits-a-reality-check/

At the bottom of the site, the site references actual lawsuits from the last several years.

That is a very interesting site. I take issue with the author where she says,

"The HOA’s goal is to wear down the “malcontent” financially and emotionally, so that they will give up the fight and move on. The goal is to set an example for other owners and residents, so that they do not dare to question status quo, for fear that they will be the next target of the Association.




Fair point--although that's exactly what the HOA tried to do in my case: bully me and make me waste money on legal fees, in hopes that I would give up. They learned otherwise.
JaredC
(Texas)

Posts:259


05/12/2020 7:17 PM  
Yup. Our board members have been personally sued and lost thousands. Their personality disorders are such that they continue their bad behavior. As of May 18, 2020 they will be in violation of yet another court order wherein a state agency will begin assessing daily fines due to board members gross and willful negligence. These items are actionable because homeowners are forced to bear the costs of bad directors. It's a process but God help you if your a director doing bad things for bad reasons.

Words of wisdom for board members: Act in good faith and follow the law. D&O insurance will only go so far. Trust me.

12 year former board president and now informed and current angry homeowner. Just sayin.

NpB
(Arizona)

Posts:288


05/12/2020 8:12 PM  
Posted By JaredC on 05/12/2020 7:17 PM
Yup. Our board members have been personally sued and lost thousands. Their personality disorders are such that they continue their bad behavior. As of May 18, 2020 they will be in violation of yet another court order wherein a state agency will begin assessing daily fines due to board members gross and willful negligence. These items are actionable because homeowners are forced to bear the costs of bad directors. It's a process but God help you if your a director doing bad things for bad reasons.

Words of wisdom for board members: Act in good faith and follow the law. D&O insurance will only go so far. Trust me.

12 year former board president and now informed and current angry homeowner. Just sayin.






So if a Board follows their CC&Rs and fine policy and issues a homeowner a $200 fine for leaving out their trash can too long, would a Superior Court even hear a case if the plaintiff sued the Board collectively for $50,000 and individually for $10,00 each over "emotional distress" resulting from this fine? Could a homeowner in essence profit from being levied a fine because of "emotional damages."

MelissaP1
(Alabama)

Posts:9306


05/12/2020 8:15 PM  
That isn't how cases like this work. Court is set up to make one "whole" not a profit. You can sue all you want for "emotional distress" but doesn't mean you get it or deserve it. Most cases never get this. It's a punitive step. If it was gross and negligent behavior/damage caused then the court may consider it. However, being upset over a $200 fine and calling it "harrassment" doesn't not quite meet that standard.

Former HOA President
JaredC
(Texas)

Posts:259


05/12/2020 8:28 PM  
What she said. :-)

Follow the law, act in good faith and you're fine. Jump in front of a truck to prevent a vendor access to the property to fix the 4th guys home when the previous 3 were already fixed.... because you just don't like the 4th guy. Welp, in those cases you lose. You lose personally and the HOA loses as a whole.

If you fight against the idea that homeowners should be billed fairly and equally for electrical services then choose to ignore a court order that mandates the same then things change. You're not protected you're just screwed.
JaredC
(Texas)

Posts:259


05/12/2020 8:33 PM  
Two completely different cases BTW.
PaulJ6
(New York)

Posts:860


05/13/2020 3:11 AM  
Posted By NpB on 05/12/2020 8:12 PM
Posted By JaredC on 05/12/2020 7:17 PM
Yup. Our board members have been personally sued and lost thousands. Their personality disorders are such that they continue their bad behavior. As of May 18, 2020 they will be in violation of yet another court order wherein a state agency will begin assessing daily fines due to board members gross and willful negligence. These items are actionable because homeowners are forced to bear the costs of bad directors. It's a process but God help you if your a director doing bad things for bad reasons.

Words of wisdom for board members: Act in good faith and follow the law. D&O insurance will only go so far. Trust me.

12 year former board president and now informed and current angry homeowner. Just sayin.






So if a Board follows their CC&Rs and fine policy and issues a homeowner a $200 fine for leaving out their trash can too long, would a Superior Court even hear a case if the plaintiff sued the Board collectively for $50,000 and individually for $10,00 each over "emotional distress" resulting from this fine? Could a homeowner in essence profit from being levied a fine because of "emotional damages."





No.

The owner could pay the fine and then sue for $200 plus a request for punitive damages and legal fees. The court would likely award $200 at most.

Don’t even hope for a profit in litigation. Litigation is a financial black hole even for the victor.
MelissaP1
(Alabama)

Posts:9306


05/13/2020 5:00 AM  
It should be noted that a HOA lawsuit just being filed hurts refinance rates and loan packages. This has to be reported on the HUD form that some mortgage companies use. The lawsuit doesn't have to be won/loss just exist. That means that refinance rates can go up if anyone is refinancing. It also means that less loans are available or at a higher rate. You may lose FHA loans. New owners would have to seek other loan packages.

So it does effect more than just risk of losing insurance or raise in rates. Behind the scenes it can cause potential buyers to move on from buying in the HOA.

Former HOA President
PaulJ6
(New York)

Posts:860


05/13/2020 5:24 AM  
Posted By MelissaP1 on 05/13/2020 5:00 AM
It should be noted that a HOA lawsuit just being filed hurts refinance rates and loan packages. This has to be reported on the HUD form that some mortgage companies use. The lawsuit doesn't have to be won/loss just exist. That means that refinance rates can go up if anyone is refinancing. It also means that less loans are available or at a higher rate. You may lose FHA loans. New owners would have to seek other loan packages.

So it does effect more than just risk of losing insurance or raise in rates. Behind the scenes it can cause potential buyers to move on from buying in the HOA.




True...IF the board follows requirements and reports the lawsuit.

In my case, the board concealed my lawsuit from everyone. Neighbors then saw the complaint on Google and didn't like it. Some neighbors were upset because the lawsuit had been out there but they hadn't reported it to buyers, because they hadn't known about it. So they were ticked.
SheilaJ1
(South Carolina)

Posts:164


05/13/2020 5:53 AM  
Mirror what Paul said, boards rarely disclose lawsuits or they put it in a one liner in the hardest place to find. And who ever really reads 300-400 page disclosure documents.
AugustinD


Posts:3364


05/13/2020 8:54 AM  
Posted By SheilaJ1 on 05/13/2020 5:53 AM
Mirror what Paul said, boards rarely disclose lawsuits or they put it in a one liner in the hardest place to find.
HOA/condo disputes are common. But HOA/condo lawsuits are not. I do not buy the above generalization.
Posted By SheilaJ1 on 05/13/2020 5:53 AM
And who ever really reads 300-400 page disclosure documents.
I trust you know that the legal burden is on the buyer to read the disclosure documents, regardless of such length.
GeorgeS21
(Florida)

Posts:2681


05/13/2020 11:02 AM  
More of NpB stuff?
PaulJ6
(New York)

Posts:860


05/13/2020 12:39 PM  
NpB, you can certainly sue in small claims court and have a lawyer add a statement of facts (like a "real" court complaint" to the small claims court filing. Then you can send that to your neighbors once you've filed it. That's a cost-effective way to get your side of the story in a legitimate court filing and to publicize it to your neighbors.
KerryL1
(California)

Posts:7217


05/13/2020 12:45 PM  
I think so, George. On one hand, he seems to want to entertain himself --being in lockdown & all. He seems to enjoy adding bits & pieces to replies to "show" why the advice "won't work."

Some of his hypotheticals have useful answers from thoughtful posters, so his queries aren't useless.

Others during lockdown entertain themselves in other ways... like calling tech support when they're lonely or bored.
NpB
(Arizona)

Posts:288


05/13/2020 3:01 PM  
Posted By KerryL1 on 05/13/2020 12:45 PM
I think so, George. On one hand, he seems to want to entertain himself --being in lockdown & all. He seems to enjoy adding bits & pieces to replies to "show" why the advice "won't work."

Some of his hypotheticals have useful answers from thoughtful posters, so his queries aren't useless.

Others during lockdown entertain themselves in other ways... like calling tech support when they're lonely or bored.





The motto of this website is "Helping community leaders since 2005." It's unfortunate there are posters on here who disparage other members and are sarcastic to them perhaps because they don't like their rhetorical style.

Many legal courses use hypothetical examples and since upholding CC&Rs and following state statutes are a huge component of being an HOA Board member. Therefore, discussing hypothetical issues and situations are a great asset for members of this forum.
PaulJ6
(New York)

Posts:860


05/13/2020 3:07 PM  
There is absolutely nothing wrong with NpB or his questions.

If someone doesn't like a person's questions--ignore them and move on to something else.
MelissaP1
(Alabama)

Posts:9306


05/13/2020 3:18 PM  
It should be noted that NOT all loans require the HUD form. That form is mostly for use for loans involving Federal funds. That includes FHA, Fanny Mae, and Freddie Mac. It is a requirement for corporations to reveal if they are involved in a lawsuit. Regular corporations reveal it in their "Prospectus" they give out to their shareholders. A HOA will report it on the HUD form and/or in board meetings. They do NOT need to reveal details of the case just there is a Lawsuit. Everything else can be discussed in executive session in regards to details.

I don't know of any HOA that would not be wagging their tongues about a lawsuit socially or in meetings. It's good "church gossip" when it is a real filed lawsuit. It isn't when there is just a threat of one. That isn't a lawsuit.

Former HOA President
NpB
(Arizona)

Posts:288


05/13/2020 3:19 PM  
Posted By PaulJ6 on 05/13/2020 3:07 PM
There is absolutely nothing wrong with NpB or his questions.

If someone doesn't like a person's questions--ignore them and move on to something else.





I completely agree. Some members on here criticize my hypotheticals unnecessarily.
NpB
(Arizona)

Posts:288


05/13/2020 3:38 PM  
Posted By MelissaP1 on 05/13/2020 3:18 PM
It should be noted that NOT all loans require the HUD form. That form is mostly for use for loans involving Federal funds. That includes FHA, Fanny Mae, and Freddie Mac. It is a requirement for corporations to reveal if they are involved in a lawsuit. Regular corporations reveal it in their "Prospectus" they give out to their shareholders. A HOA will report it on the HUD form and/or in board meetings. They do NOT need to reveal details of the case just there is a Lawsuit. Everything else can be discussed in executive session in regards to details.

I don't know of any HOA that would not be wagging their tongues about a lawsuit socially or in meetings. It's good "church gossip" when it is a real filed lawsuit. It isn't when there is just a threat of one. That isn't a lawsuit.




MelissaP1: As a former HOA President, here is a hypothetical. Suppose the person in my example of the $200 trash can violation communicates to the Board that she/he feels the $200 fine is outrageous and wants to haggle the amount down to $50, or else he/she will sue the Board. If I ever encountered this hypothetical, I would reject the offer because if the Board were to accept, the violator would tell others with trash can violations that the Board is receptive to haggling and then wouldn't everyone have to be fined $50 or else, it would constitute unequal treatment, correct? The "gossip" would then be that the Board is weak.

I expect to be lampooned by certain posters for this hypothetical, but hopefully intelligent readers will see the benefit of my post as a learning discussion.
MelissaP1
(Alabama)

Posts:9306


05/13/2020 3:51 PM  
Honestly don't take this the wrong way but I don't do "hypotheticals". That is because dealing with reality has it's own facets. It's either an existing issue your dealing with or a fantastical fear in your head.

Our HOA never issued fines. Fines are just punitive measures. A HOA isn't entitled to fines. They can't be used for basis of Liens or foreclosures. (Yes there is some bookkeeping tricks but keeping this simple). A Fine works like a "speeding" ticket does. It is NOT a source of income for the HOA. It's just a method of which helps a HOA enforce it's rules. Which many believe involves people's pockets.

Our HOA could do fines but we chose another option of enforcement of violation. Which if you were in violation and did not fix it, we could. If you refused to pay that amount it cost us to fix it, THEN we could lien you for that amount. Which is different than fines as it's counted as "damages" which are recoverable.

Former HOA President
NpB
(Arizona)

Posts:288


05/13/2020 3:58 PM  
Posted By MelissaP1 on 05/13/2020 3:51 PM
Honestly don't take this the wrong way but I don't do "hypotheticals". That is because dealing with reality has it's own facets. It's either an existing issue your dealing with or a fantastical fear in your head.

It's neither. Some of the previous posts on this thread with examples of high $$ amounts involved prompted further discussion and questions. In my state, you cannot lien based on an outstanding fine.
NpB
(Arizona)

Posts:288


05/13/2020 4:14 PM  
Based on the view count, this topic has garnered a lot of interest. Thumbs up for hypotheticals.
PaulJ6
(New York)

Posts:860


05/13/2020 4:17 PM  
Note: GAAP requires that the board disclose prospective liability from lawsuits, as part of the HOA's annual financial statements, if the risk meets a threshold (which I believe is "reasonably probable" or something. That is totally separate from HUD, Fannie Mae, etc. The board will often try to just include a small footnote about the lawsuit there, instead of being really clear about it.
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