Recovering Attorneys' Fees from Unit Owners

Posted by David Lindner on September 28, 2010

When a unit owner becomes delinquent or violates the association’s declaration of covenants and restrictions, who is responsible for paying the attorneys’ fees and other costs associated with recovering the delinquent assessments or remedying the violation?  Generally, the “American rule” of law is that each party is responsible for paying its own attorneys’ fees.  In other words, the responsible, rule-abiding owners must pay for an attorney hired by the association to enforce the rules.  Shouldn’t it be the other way around?  Doesn’t it make more sense that the owner who violated the rules or failed to pay his assessments should be the one to pay? 

Fortunately, in Ohio, the law supports an association’s assessment of legal costs against a violating owner in both the condominium and HOA setting.  Ohio Revised Code Section 5312.11 permits a HOA to assess an individual lot for “[c]osts associated with the enforcement of the declaration or the rules and regulations of the owners association, including, but not limited to, attorney’s fees, court costs, and other expenses.”  These fees and costs can be secured by a lien against the owner’s lot pursuant to Revised Code Section 5312.12.

In a condominium, Ohio Revised Code Section 5311.18 authorizes a condominium association to file a lien against an owner’s unit for unpaid expenses, including “[i]nterest, administrative late fees, enforcement assessments, and collection costs, attorney’s fees, and paralegal fees the association incurs if authorized by the declaration, the bylaws, or the rules of the unit owners association and if chargeable against the unit.”  Note that in a condominium the attorneys’ fees and other legal costs must be “authorized” by the association’s governing documents.  If a condominium association’s documents do not expressly authorize the collection of attorneys’ fees and legal costs, the board should consider an amendment to the declaration or rules to allow the recovery of these costs. 

Pet Rules and Restrictions for Condominiums and HOAs

Posted by David Lindner on September 02, 2010

Dog.jpgPets are wonderful.  They’ll provide a lifetime of loyalty and companionship and never ask for anything in return--except food, love, walks, vet check-ups, training, grooming, and . . . . Well, okay, pets can be a lot of work.  And when pet owners are unwilling to properly care for and clean up after their pets, they can become a real nuisance to a condominium or homeowners’ association.  Does the board have the authority to ban animals from the association altogether?  Even if it does have the power to do so, is it a smart move? 

There are a wide range of variables to consider when dealing with pet issues in your association.  Before the board even considers new rules, be sure to look closely at your current declaration and rules.  Do they prohibit pets altogether, impose restrictions on the number, size or type of pets permitted, or do they fail to address pets at all?  If the board would like to change the pet restrictions or rules, what process must be followed?  Can the board adopt a new rule without a vote of the owners, or must the owners approve an amendment to the declaration?

Once these questions have been answered, the board should be sure that it has fully thought through the impact of a rules change.  Too often, associations adopt an arbitrary rule only to find that it has unintended consequences.  For instance, a common approach is to ban dogs over a certain weight limit.  But is a 35 pound dog really more troublesome than a 30 pound dog?  And how does one enforce this restriction?  Does the board really want to go around requiring dogs to be weighed?  Will the board be willing to have a perfectly well-behaved dog removed because, (like many of us), it has gained weight as it aged? 

Another trap boards fall into is banning dogs and/or cats altogether.  I won’t say that this is always a bad move, because if the owners want their community to be pet-free, then they have the right to enact rules or restrictions as specified in their governing documents to accomplish that goal.  The unintended consequence of this action, however, is that the owners may severely limit the pool of potential buyers for their homes.  According to a Gallup poll, 44% of Americans own a dog, and 29% own a cat.  Only 40% of Americans do not own any type of pet.  By banning pets, the Association eliminates a large group of potential home buyers in an already difficult market.  The Association must also understand that under state and federal law, service animals cannot be prohibited for disabled owners. 

While no set of rules will fit every association, a board considering new or additional pet restrictions should consider these points:

  • Unless there is a designated, enclosed area for pets to run free, the rules should require all pets to be on a leash and attended by their owner when outside a unit.
  • Think carefully before imposing a size limit on dogs.  A large dog can be quiet and well-behaved just as a small dog can be loud and disruptive.
  • Be specific about what types of pets are permitted and/or prohibited.  Most of us think of dogs and cats as typical household pets but, for some people, pot-bellied pigs, snakes, rats and other creatures are “pets.”
  • The rules should make it clear that every owner is responsible for his or her pet, including the prompt clean-up of its mess.  Owners should be required to pay the cost of any clean-up the association is required to undertake because of an ill-behaved pet, including attorneys’ fees and enforcement assessments (to the extent permitted by local law and the governing documents).
  • Consider “grandfathering” current pet-owners if the rule change would cause them to be in violation.

With these guidelines, and input from the owners, the board should be able to craft appropriate rules and restrictions tailored to the needs of their community. 

 

Photo credit: Flickr user digital_image_fan

Condominium and HOA Records Inspection Requirements

Posted by David Lindner on August 19, 2010

If you are a member of your association’s board of directors and one of your association’s members asks you to see the minutes from the most recent board meeting, do you need to provide those minutes to him?  Does your answer change if the topic of the most recent board meeting was whether or not to file a lawsuit against this particular owner, who is delinquent in his assessment payments?  These situations arise frequently, and a board should prepare itself to deal with them by not only being familiar with the laws governing association records, but also by adopting rules regulating the inspection of such records.

The Ohio Condominium Act, Chapter 5311 of the Ohio Revised Code, governs condominiums and condominium owners’ associations and, in particular, Section 5311.091 governs the inspection of condominium association records by members of the association.  The newly enacted Ohio Planned Community Law (effective September 10, 2010) governs non-condominium homeowners’ associations.  Section 5312.07 governs the inspection of records.  Since the relevant sections of the Condominium Act and Planned Community Law are substantially similar, I’m just going to quote the Condo Act for this discussion.  Keep in mind, though, that the same rules will apply to a homeowners’ association as of September 10, 2010. 

Under Section 5311.09(A), a condominium association is required to keep all of the following:

(a) Correct and complete books and records of account that specify the receipts and expenditures relating to the common elements and other common receipts and expenses ;

(b) Records showing the allocation, distribution, and collection of the common profits, losses, and expenses among and from the unit owners;

(c) Minutes of the meetings of the association and the board of directors;

(d) Records of the names and addresses of the unit owners and their respective undivided interests in the common elements.

Section 5311.091(A) goes on to say that any member of the unit owners association may examine and copy the books, records and minutes described above, subject to reasonable standards imposed by the association through the declaration, bylaws or rules adopted by the board.  These standards can include the type of documents that are subject to exam and copying, and the time, place and reasonable fee for copying. 

The following documents, however, are not subject to copying pursuant to Section 5311.091(B):

(1) Information that pertains to condominium property-related personnel matters;

(2) Communications with legal counsel or attorney work product pertaining to pending litigation or other condominium property-related matters;

(3) Information that pertains to contracts or transactions currently under negotiation, or information that is contained in a contract or other agreement containing confidentiality requirements and that is subject to those requirements;

(4) Information that relates to the enforcement of the declaration, bylaws, or rules of the unit owners association against unit owners;

(5) Information the disclosure of which is prohibited by state or federal law.

Going back to the hypothetical at the beginning of this post, you can now see that the board did not need to allow the examination of that portion of its minutes dealing with a potential lawsuit against the delinquent owner, since that would be “information that relates to the enforcement of the declaration.”  Any communications with the association’s attorney about the issue would also be exempt from disclosure.  The information referred to in items 1 through 5 above should generally be discussed by the board in executive session, and the minutes related to these discussions should be kept separately from the association’s other books and records to prevent inadvertent disclosures. 

Enforcement of HOA Restrictions Can Be Costly

Posted by David Lindner on August 13, 2010

The enforcement of HOA restrictions can be a costly matter for an association, particularly when the association goes to court over the issue and loses.  Take the case of the Eagles Master Association in Hillsborough County, Florida, where the Master Association sued an owner who it claimed violated the Master Association’s restrictions by parking his pickup truck in his driveway.  In the Master Association’s interpretation of the restrictions, owners were required to park their trucks out of view in their garages.  The owners, Mr. and Mrs. Vizzi, contended that the restriction applied only to commercial vehicles, not personal vehicles like their truck. 

At the root of the conflict was a provision in the master declaration prohibiting the parking of any trucks or vans upon an owners’ property except out of view in a garage.  The declaration for the sub-association in which the Vizzis lived, however, only prohibited commercial vehicles from being parked in driveways.  In its Order (pdf), the court found that the conflict had to be resolved in favor of the free use of the owners private property and the apparent intent of the developer. 

Clearly the intent of both documents was to permit personal trucks, SUV's, minivans, and vans to be regularly parked in the driveway and to require commercial vehicles, which were deemed unsightly in a residential environment, to be garaged and out of the public's view. This is a more rational interpretation of these Declarations, reconciles provisions which have been argued by the parties as being in conflict, and gives a reasonable, lawful, and effective meaning to all of the terms of both Declarations.

The court reasoned that the intent of the master declaration was actually to prohibit only commercial vehicles, not all trucks, SUVs and minivans used for personal purposes.  As such, summary judgment was granted in favor of the owners.  But, the story doesn’t end there.  Not only did the Master Association lose the case, it was also required to pay the Vizzis’ attorneys’ fees in the amount of $187,443.37!  Imagine being a member of the board of directors of Eagles Master Association and having to explain this at your next annual meeting.

All too often, disputes between owners and their association become personal and therefore more difficult to resolve in a reasonable way.  The parties become entrenched in their positions and unwilling to compromise.  In many cases, the association fears setting a bad precedent by settling and the owner becomes unwilling to back down because they see it as a battle of David vs. Goliath.  Of course, settlement is not always the answer.  The restrictions are put in place for a purpose and it’s the association’s job to enforce them.  However, where restrictions are vague or conflicting, the association may want to think twice about rushing to court.  Not only does it risk an adverse judgment, but the process is costly and often upsetting to the community.  A better approach for Eagles Master Association may have been to meet with owners to better understand the issues, then seek to amend their documents to clarify the restriction before proceeding with enforcement action.   

Ohio's Planned Community Law Goes into Effect September 10, 2010

Posted by David Lindner on August 04, 2010

Ohio’s new homeowners association act, known as the Planned Community Law (pdf), will go into effect on September 10, 2010.  The Planned Community Law provides homeowners associations with new tools to enforce rules and restrictions, collect assessments, and amend their governing documents.  Additionally, the Planned Community Law sets out new obligations for associations to comply with.  Over the next few weeks, I will be explaining the provisions of the new Planned Community Law in detail. 

The first thing you need to know about the new law is whether it applies to your association.  In the Planned Community Law, the term “planned community” is defined as a community comprised of individual lots for which a deed, common plan, or declaration requires any of the following: 

  • That owners become members of an owners association that governs the community
  • That owners or the owners association holds or leases property or facilities for the benefit of the owners
  • That owners support by membership or fees, property or facilities for all owners to use.  Although condominiums meet this definition, they are expressly excluded since condominiums are already covered by the Ohio Condominium Act. 

So, if you live in an association where membership is required, or that provides recreational or other common facilities for members to use, (and it’s not a condominium), it probably falls under the new law and you will therefore want to be familiar with its requirements.  Next time, we’ll discuss what this new law requires to be included in an association’s declaration and by-laws.