Why Community Associations Get Sued and What To Do If It Happens To You
Common Claims Against Community Associations
Homeowners may have a variety of reasons for deciding to file a lawsuit against their association. However, their complaints will tend to revolve around some common issues, dependent on the type of community in which they reside.
“Single-family-home claims are often about governance issues,” says Carolyn Goldschmidt, partner at Arizona-based Goldschmidt and Shupe, a law firm specializing in common-interest associations. “Procedure has become very important. For example, I’m seeing more claims and threatened claims about how board member elections are handled.”
In contrast, lawsuits in condominium associations and other properties where residents share common walls focus more on repair and replacement issues. According to Ben Solomon, managing partner at ALG, a Florida law firm specializing in real estate, “Most of these are insurable issues, unless there’s gross negligence or willful misconduct. The most common claim is typically a property damage claim alleging that the association is responsible for repairs to an owner’s unit.”
Goldschmidt points out that in these situations, the association often gets brought in because “the adjacent unit owner who caused the damage doesn’t have insurance.” She explains that repair and replacement responsibility in a condo is not always aligned with what insurance companies will cover, making the issue complex. For example, “association insurance policies often cover damage that starts with leaks from interior plumbing fixtures that the unit owner is responsible to repair and maintain,” she says.
You’ve Been Served: Community Association Do’s and Don’ts
Even a board that tries to do everything right still may not be able to prevent a determined or overzealous resident from suing. If your association is served with a lawsuit, both Solomon and Goldschmidt recommend the following do’s and don’ts:
- DO consult with your association attorney.
Your attorney is the first person you should turn to if your association gets sued. Following the attorney’s advice will help you avoid further issues.
- DO inform your insurance agent or broker.
More than likely, your attorney will recommend that you report the lawsuit to your insurance carrier. Solomon explains that “if the lawsuit is covered by your insurance, it could be a problem if you don’t report it.” Goldschmidt agrees. “The insurance company can take the position that it’s too late if you wait to report it,” she says.
- DON’T share information about the case.
Avoid discussing the lawsuit with individuals, at open board meetings or on social media. Board discussions about the case should occur exclusively in closed sessions. “The biggest conundrum is what to say to the other association members,” says Goldschmidt. “You need to get a crafted statement from your attorney.”
- DON’T engage directly with the homeowner who filed the suit (the plaintiff).
Once your association is served, any discussions between your board and the plaintiff must occur through your attorneys.
The Case for Settling Out of Court
If your board is sure it is in the right, should you plan to fight it to the end? Probably not, says Solomon. “Principles don’t always make economic sense,” he explains. “The association needs to analyze the cost of defending the matter versus the costs of settlement so it does not spend more in legal fees than it could to just settle the matter.”
If your attorney thinks you should go to court, seek a second opinion. “I think there’s a lot of value in a second opinion, especially if you’re going to dive into major litigation,” Solomon says. “At the very least, the board gets more information. The cost of a second opinion could save you what could be hundreds of thousands of dollars.”
Even if a plaintiff doesn’t accept a settlement right away, Solomon says to keep trying. “Ninety percent or more are going to settle anyway. So you should be looking for settlement opportunities throughout the case.” He also recommends keeping your attorney accountable. “Make sure the attorneys are moving the case. Monitor it, stay informed and bring it up in monthly meetings.”
Litigation is never a pleasant experience. But by trying to understand why a homeowner is unhappy and following your attorney’s advice to the letter, you and the other board members can help to keep the situation from having a devastating impact on your community association.