The Fair Debt Collection Practice Act (FDCPA) was enacted to protect consumers from unscrupulous debt collectors; as a shield against prohibited acts. However, it is now often used as a sword, by attorneys who are part of a “cottage industry” that simply look for even the smallest of violations and then claim thousands of dollars of attorney fees and damages in their first letter to the alleged violator. Continue Reading Foreclosing on a Unit When Owner Discharged in Bankruptcy
The answer to the question of when are fees unreasonable is simple: when a court says they are. Fairfield Ridge Homeowners Association (association) is an HOA in Ohio. The association entered into a management agreement with Elite Management Services, Inc. (EMS) to manage the association, including providing closing certification letters to sellers just before the closing on a sale. EMS charged a unit owner $395 for these letters along with a $100 fee if they needed expedited service. The association declaration provided that a “reasonable charge” could be assessed to a unit owner for these letters. Ms. Barger viewed the $495 in charges as unreasonable and filed a class action suit against EMS. Continue Reading When Are Fees Unreasonable?
IMPRESSION: The ruling in Great Am. Ins. Co. v. State Parkway Condo. Ass’n, No. 17-cv-3083 (N.D. Ill. Sept. 11, 2018), should serve as a cautionary tale to Condo and HOA boards.
DETAILS: In Chicago, a unit owner of a condominium located at 1445 North State Street filed an Illinois state discrimination claim in 2007 against the State Parkway Condominium Association (“SPCA”) for failure to accommodate his hearing disability during SPCA Board meetings. The SPCA defended the claim under its 2006-2007 Non-Profit Management and Organization Liability Insurance Policy (“policy) issued by Travelers Casualty and Surety Company of America (“Travelers”).
A settlement between parties was reached in September 2007; but six months later, the SPCA sued the same unit owner in an entirely unrelated matter. Continue Reading “Related Wrongful Acts” Can Exhaust an Association’s Liability Insurance Policy Limit
Holding: The Supreme Court of Vermont held that a homeowners association, as assignee from the developer, could charge lot owners for its reasonable costs to maintain the subdivision private roads and water system, including litigation and other overhead costs.
The Facts: A 92 lot subdivision in Vermont was developed in the 1960s. The subdivision contained private roads and a private water system that was to be maintained by the developer. Owners/Purchasers of the lots were granted the right to use the private roads and water system, and a service fee for said use was imposed.
In 1998, maintenance of the private roads, streetlights, water system, and recreational facilities was turned over from the developer to a homeowners association (the “Association”). The Association continued to charge the homeowners a service fee to maintain these parts of the subdivision per the relevant subdivision deed, which included litigation and overhead costs.
In 2009, a Homeowner Plaintiff alleged that the service fee was unreasonable and refused to continue paying. Continue Reading Owner Responsible for Share of Costs to Maintain Subdivision Facilities
Issue: If your association was destroyed by fire or some other hazard, and it did not make sense to rebuild, how would the funds be divided?
Problem. Odds are that you don’t know the answer. The fact that you don’t know should scare you. Is every unit in your association worth the same amount? I doubt it. Do you each pay the same amount in assessments? Does that control? What does your declaration say about the distribution of insurance proceeds if the unit owners elect not to rebuild? Do you understand what it says? Does it even make sense? Continue Reading Why You NEED to Amend Your Association Declaration Insurance Provision Before You Have a Loss
IMPRESSION: A recent Minnesota Court of Appeals ruling served as a stiff reminder to investor-purchasers of condominium units: request of association resale disclosure certificates should be undertaken as a matter of course (in Wisconsin this is essentially the Section 703.165(4) Wis. Stat. statement of the amount of unpaid assessments).
DETAILS: In Bridge Investments, LLC v. Lowry Ridge Townhomes Assoc., LLP, A17-1221 (Minn. Ct. App. 2018) the owner of a condo unit in the Lowry Ridge Townhomes community defaulted on association payments owing over $3,500.00 in assessments. After foreclosure proceedings, the condo was purchased by the owner’s bank at a sheriff’s sale. Later, the defaulting owner reacquired the condo via redemption and on the same day sold the unit to Bridge Investments (“Bridge”)—a venture capital and private equity firm. Bridge recorded its purchase with no knowledge of Lowry Ridge’s assessment lien; which was junior to the bank’s mortgage, but not eliminated by the redemption, and remained attached to the condo when sold. By this time, the outstanding balance reached over $9,000.00 prompting Lowry Ridge to record a lien for the unpaid balance, late fees, attorney’s fees, and costs. Lowry Ridge attempted to amicably collect its debt rather than foreclose on the unit; however, Bridge felt it was not responsible for payment since it had no notice of the preexisting lien prior to purchasing the condo. Continue Reading Request Resale Certificates Rather than Roll the Dice
Harrison v. Casa de Emdeko, Incorporated, No. SCWC-15-0000744 (Haw. Apr. 26, 2018)
The Supreme Court of Hawaii held that, under the Hawaii Condominium Property Act, expenses for building components that served only particular units (residential units in this case) in a mixed-use project had to be allocated as limited common expenses to the units served, even though the declaration of the association did not assign the components as limited common elements.
Harrison purchased two commercial condominium units out of a mixed use condominium project consisting of both residential and commercial units. The residential units were completely separate from the commercial units. Even though she only owned commercial units, Harrison was assessed expenses for elevators, lanai railings, and drains for the residential buildings. After Harrison brought suit for being improperly charged, alleging that the items were limited common elements, the association responded that Harrison never objected to the costs during her 30 years of ownership or her tenure on the association’s board of directors. Continue Reading Commercial Units in Mixed-Use Condominium Not Responsible for Residential Unit Costs
The Condominium Statutes are written such that associations can collect their actual attorneys’ fees if they proceed in a lien enforcement action for unpaid assessments. But, as in many things law-related, there are traps for the unwary, and if your attorney is not savvy, you may miss out on collecting everything you are owed…
Facts. In a 2017 case, a unit owner was delinquent in paying assessments and the Association hired an attorney to file a lawsuit against the owner seeking collection of the assessments. The attorney filed suit, seeking a “breach of contract” cause of action against the owner, since he violated the portion of the condominium documents that says owners must timely pay assessments. The attorney was successful in getting a judgment in favor of the association for the unpaid assessments, but when he asked the court for an award of his attorneys’ fees, the Court’s answer was no. Continue Reading Think You Will Get Your Attorneys’ Fees Paid in a Successful Collection Action? That May Depend on Your Attorney…
The Business Judgment Rule can be a great protection for condo and HOA boards—but only if the board is following the documents.
Facts. The Declaration for an HOA stated that the Board had the discretion to raise the “maximum annual assessment” without a vote of the homeowners as long as it was “in an amount equal to 150% of the rise, if any, of the [CPI] for the preceding month of July.” Higher increases required the vote of the homeowners. The Association’s Bylaws contained a formula for calculating this “maximum annual assessment” raise, but the formula allowed the Board to accumulate the CPI increases year over year in calculating the maximum assessment. The Board followed the Bylaws formula, and owners sued, contending (1) that the increase to the maximum annual assessment was higher than the Board had authority to do under the Declaration; and (2) that the Bylaws formula conflicted with the Declaration. The HOA Board argued that it exercised good Business Judgment in following the Bylaws formula. Continue Reading How is the Business Judgment Rule Applied to Board Actions?
When a mortgage company faces having its mortgage interest swept away in a quiet title action following an HOA lien foreclosure, the mortgage company comes up with all sorts of arguments as to why its mortgage should remain intact. This time, the arguments did not carry the day.
Facts. In a 2017 Nevada case, a successful purchaser at an HOA lien foreclosure sale bought the condo for $35,000. The fair market value of the condo at the time was $335,000. The unit purchaser filed a quiet title action against Nationstar, who held the first mortgage on the unit, seeking to extinguish Nationstar’s mortgage so the purchaser could have clear title to the unit. Continue Reading Can a Court Set Aside a HOA-Lien Foreclosure Sale Because the Sales Price Was Too Low?