The rest of the excerpts from the last few chapters of this 2014 book with some discussion of the dangers of lawsuits, like when you sue the builder and then miss a second filing deadline in your suit.
Except for states with bank-friendly legislation limiting the lender’s obligations to pay assessments, say for six months, banks are required by law to pay monthly condo assessments or HOA dues from the moment they foreclose on a property in a community association. (page 321)
Often all it takes to become an association board member is a winning smile and a charming personality – which doesn’t always explain the number of curmudgeons serving on boards. But it does explain the number of board members that steal or misappropriate association funds. (page 357)
Association management instructions shouldn’t be a secret. Perhaps it is because professional management companies and attorneys continue to profit ss long as homeowners cannot or will not effectively manage their own associations. (page 358)
In Florida, 71 percent of connunity associations in 2011 were managed by either an independent state-licensed community association manager (CAM) or a licensed CAM employed by a property management company. Only 29 percent of associations had no professional manager and relied on non-salaried board members for management of the community, according to the Florida Association Management Survey. However, in contrast to the Sunshine State, the vast majority of community associations nationwide are not managed by a professional management company because of their small size. (page 376)
An association can also hire and place on its payroll its own property management staff reporting dir54ectly to the board – and not to a management company. (page 377)
Veteran Chicago condominium attorney David M Lewin noted: “I’ve seen way too many people calling themselves condo attorneys who have rarely seen the inside of a courtroom. When attorneys lack litigation experience, they may not realize how troubling their opinions can be. I’ve also seen attorneys who simply have no idea what it would cost to pursue some of their opinions in court.” (page 382)
Many D&O package policies do not provide a defense for claims seeking nonmonetary relief. (page 393)
Generally, directors must remain informed about the community association’s business at all times, be knowledgeable about the legal documents governing the affairs of the association, and attend and participate in the association meetings. Directors may be held responsible for obtaining and reading the minutes of those association meetings the director was unable to attend. Directors should also vote against actions taken or adopted by the board of directors that they are in disagreement with and record their disagreement in the meeting minutes. Failure to perform any of these duties in a reasonably diligent and prudent manner could expose a director to liability for breach of fiduciary duty. (page 394)
Some experts estimate that in California, 75 percent of the homeowners associations are embroiled in a legal tangle of some kind. HOA lawsuits can range from the absurdly petty to major precendent-settin gcases that fundamentally change state statutes. Board directors can be sued. Associations can be sued. Of course, homeowners can be sued. As one well-known attorney quipped, “You can be sued for being ugly if you can get a judge to hear the case.”…One major problem with lawsuits is that nationwide, manyu lenders will stop dead in their tracks from making a loan in any association with pending litigation. (page 298)
Lawsuits can drain the financial resources of associations and will likely required special assessments to pay for legal expenses. IN this way, homeowners can be held responsible for the actions of their neighbors. (page 399)
It isn’t uncommon for unit owners to be blissfully unaware of an upcoming special assessment. After all, most owners don’t go to board meetings or take time to read the minutes. It also isn’t uncommon that once owners find out about an upcoming special assessment, they decide to sell. (page 416)
With the exception of cooperatives, nearly all condo and homeowner associations have the right to foreclose on an owner who doesn’t pay his or her fair share of the expenses. Further, in nearly every state, homestead law does not protect owners against foreclosure for failure to pay assessments. Cooperatives are different because owners do not actually own real estate, but shares of stock in a corporation that then issues them a lease. Because a cooperative is considered personal property, nto real estate, foreclosures can usually be accomplished without going to court.(page 429)
Homeowner associations are generally considered cr4editors and not debt collectors. Does this matter to an owner? Absolutely! Lawyers who work for associations are not subject to federal debt-collection laws. What this means is that attorneys will go after the homeowner – not the board – for whatever fees the attorney decides to charge in connection with collecting overdue assessments, fines, and penalties. As an example, if you owe the telephone company $350, it may tack on a few dollars in late fees, but it cannot charge you thousands of dollars in attorney’s fees to collect the debt. In direct contrast, an association attorney can turn an owner’s $50 ticket into a $20,000 bill – and the owner is responsible for paying the entire amount. (page 430)
According to attorney and author Evan McKenzie, the windfall of doing association fine and assessment collection legal work can be too tempting for collection lawyers to resist. “The process is being abused so badly that there’s no way to fix it,” he said. “The collection lawyers don’t care about the bad press, or about throwing elderly people out the window, or about scaring off potential buyers because the association is known to be so tyrannical.”…About the runaway power of homeowner associations, Williams observed, “They are judge, jury , and executioner.” (pages 431-2)
But when you buy in a community develo[pment, who inspects the condominium or homeowner’s association? Typically, neither your Realtor nor your attorney nor your accountant does this investigative work. (page 442)
Lawsuits can truly7 devastate and paralyze a community. Mark Luxemburt, a New York attorney and president of the Council of New York cooperatives and Condominiums, advises: “Litigation is bad. It usually costs a lot of money and you never know what’s going to happen.” (age 453)
Not only can a lawsuit bankrupt an association, it will have as chilling effect on resale potential. Banks do not like to make loans in buildings with lawsuits. (page 454)
Across the nation, most regulation and governance for HOAs is ridiculously ineffective, and enforcement is cost prohibitive. Why> Police will not get involved in “civil” matters. Government departments respOnsible for condo and homeowner association enforcement are severely underbudgeted and under staffed. Further, condo and homeowner association litigation is expensive and equivalent to “suing yourself.” (page 491)
Let’s suppose that as a result of the lack of supervision, rampant racial and religious discrimination, financial fraud, book cooking, and voting abuse in the business occurs – and that all of the stock holders subsequently have3 poor returns on their investments or lose their investment altogether. Imagine that! (page 492)
Across the country, there is no coherent or effective system to oversee these powerful mini-government entities. As a result, mismanagement, abuse, theft, coercion, and apathy are rampant. Simply state, the lack of comprehensive registration and monitoring of HOA and condo associations not only enables, but also creates and environment that actually promotes the rampant abuses and mismanagement. (pages 494-5)
The vast majority of homeowner associations – up to 90 percent – are self-managed and ill equipped to provide complete answers to most of the required questions, and an overwhelming percentage of the lender’s questionnaires are completed by untrained volunteer board members. These are the reports the bank relies on to make its lending decisions, ( page 516)