Whenever a homeowner decides to file a civil action against their HOA they not only become the plaintiff, they also become the defendant. In other words, all homeowners are collectively the HOA by virtue of their membership. This technically means that whenever a homeowner sues the HOA they are in all actuality suing themselves as well.
Higher HOA dues anyone?
First the HOA must contact their insurance carrier and place them on notice of a claim. That single event ends up costing every homeowner in the HOA. As a manager, I've seen one insurance claim actually double the cost of the HOA's Insurance premiums. You must keep in mind that some HOAs pay well over 50K a year so this could end up costing every homeowner double that amount. Higher HOA dues anyone?
Nobody wins in a lawsuit except for the attorneys. Almost 75% of all HOA lawsuits filed by homeowners end up being what I call 'walkways.' It all boils down to who has enough money to continue the fight. And trust me when I tell you, the HOA has insurance carriers providing unlimited legal resources and attorneys to their clients. Eventually, the HOA will break the homeowners' piggybank and the homeowner will simply 'walk away.' This is how owners in HOAs lose their entire savings, retirement, and homes.
There are no real pros when homeowners or their HOAs decide to file lawsuits against each other. Again, the only one who finds the pot of gold at the end of the rainbow is the lawyers. While there recently have been a few successful 'wins' for the homeowner in court, these represent only a fraction of the losses. Win, lose or draw, every homeowner ends up paying the grim reaper. (The attorneys)
HOA arbitration is beneficial -and in many cases a mandatory program could save everyone money.*
I have seen a pinhole leak in an associations roof rise to the level of 100K in legal defense fees. I've also seen the wrong paint color of a house cost homeowners 50K in legal fees battling it out with their HOA.
It shouldn't and doesn't have to cost every homeowner tens of thousands of dollars in legal fees or increased insurance premiums because Mr. or Mrs. Homeowner and their HOA can't see eye to eye on something. This is why I'm a firm believer in mandatory and binding arbitration like Homeowner Legal Services program.
Of course some HOA attorneys are not very happy with arbitration programs like Homeowner Legal Services. Programs like this could have a significant impact on those HOA attorneys' earnings. When HOA industry attorneys oppose a cost saving legal program such as this, it probably is the right thing to do.
In conclusion, what happens when a homeowner files a lawsuit against their HOA is simply mind-blowing. Don't be caught unaware.
By Dave Russell
* Dave is referring to a structured arbitration program (not regular arbitration that can be as much as a lawsuit) that is limited to under $2000 for owner and HOA combined. It is run by retired judges picked for their impartiality and knowlege of HOA law--very fair, very sensible--but all parties have to agree. Read about it here: Homeowner Legal Services