The perversity of HOA’s
The Law Office of J. Patrick Sutton PLLC
Austin Texas
17 August 2014
My clients have recovered a great deal in attorney's fees from HOA's
over the years, but time and time again, I see HOA's digging in their
heels in litigation, even in cases where they've already lost the main
issue in contention at the pre-trial phase (that is, at summary
judgment). Why won't HOA's ever admit defeat, even when they've been
defeated?
the nature of HOA governance
The answer, I believe, lies in the nature of HOA governance. When
people with axes to grind seize control of HOA's, they wreak all kinds
of havoc by imposing draconian new rules without getting broad
community approval. Most people in the subdivision or condo don't have
time to fool around with local-local government (HOA's), so they don't
get involved or know what's going on until busybodies and fascists have
taken over the board. By then, it's too late to do anything but fight
the HOA in court since the new officers and directors won't respond to
reason or criticism and can draw on the HOA's bank account to hire
expensive lawyers to enforce the board's will. There are always lawyers
willing to take HOA money to stick it to homeowners, and HOA lawyers
are sometimes the same kinds of people as those who take over HOA
boards!
where it gets really ugly and perverse
But here's where it gets really ugly and perverse. When an HOA fights a
homeowner, the homeowner (in Texas) faces the threat of paying the
HOA's entire legal bill if the homeowner loses, which can be a terrible
burden for one homeowner. The HOA, however, draws on all its members to
pay an adverse attorney fee award, often amounting to less than a few
hundred dollars per member under the worst-case scenario. Bad HOA
boards have every incentive to keep litigation going, and their lawyers
have every incentive to egg them on, so long as the downside risk is
low for every homeowner in the HOA. An HOA can crush a homeowner, but
all a homeowner can do is collect a small sum from each owner for
horrendous HOA board misconduct.
You can't generally sue an HOA officer or director
You can't generally sue an HOA officer or director. Those lawsuits
belong to the HOA itself. In cases where homeowners finally do oust bad
directors, having the new board sue the old board only compounds the
problems. The HOA usually bought insurance for its directors, so suing
the former directors just triggers the HOA's own insurance. The HOA
pays a deductible, and the insurance pays out, but then the insurance
carrier jacks up the premium or refuses to insure the HOA in the
future. All the HOA has done is get money to pay for more insurance!
even a good lawyer can't tame that beast
The only brake I've ever seen on bad HOA boards is the lawyers the
HOA's insurance company hires when my clients file suit. Typically, the
HOA's general counsel (who may have egged the HOA on) steps aside so
that the lawyer provided by the insurance company handles the case my
client has brought against the HOA. I have found, almost without
exception, that generalist attorneys who come in to do HOA defense work
are seasoned, reasonable, fair-minded attorneys who are aghast at what
their HOA client has done. At that point, it is often -- but not always
-- possible to resolve a case that the HOA seems destined to lose.
Nevertheless, when an HOA board is deeply entrenched, power-crazed, and
fascistic, even a good lawyer can't tame that beast, and the people who
pay the price, ultimately, are all the other homeowners, not the bad
board members.
What a system!
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