The rumor around the office is that, “I am not an attorney, but I did stay at a Holiday inn Express last night.” All joking aside, please note that I am certainly not an attorney and therefore am not in any position to give any formal legal advice. I can however offer some common sense rules of thumb, which could potentially spare your community a legal nightmare.
In our ever increasing litigious society, people are often quick to throw out phrases like: “Talk to my lawyer”, “I will have my lawyer handle this”, or even, “I’ll just sue you”. It’s important to understand what exactly is being disagreed upon before exchanging these types of words with anyone. Even if you are on the receiving end of these legal threats, you should also evaluate what risks you may have placed yourself in. All too often when two parties disagree on something substantial (or not), they immediately go to their lawyers to formally fight out the situation.
While I certainly understand the value of having my own attorney nearby, I also find it necessary to understand that he is inevitably billing me for a conversation; and although he has my best interest in mind, it’s difficult to ignore the fact that his initial catalyst is money. I have seen too many associations spend thousands of dollars fighting something in court that could have been easily settled in a number of other ways. Even if you win, there is no guarantee the courts will allow the prevailing party to recover attorney’s fees spent in litigation.
For HOA Boards, it’s crucial to keep this in mind. Before getting embattled in a legal disagreement, ask yourself this one question: “would I be willing and able to stand up in front of a judge and tell him/her I made this decision without being embarrassed?” It sounds simple and maybe a bit childish, but it will help you make sound decisions.
Also, it should go without saying that your governing documents must be reviewed, as well as being sure to keep an accurate summary of the BOD meetings. We call these summaries “minutes” for a reason, they should be able to be read in about a minute or so, and should keep a record of motions made, brief summary of discussions on the motion, and the tally of the vote. Minutes may seem like an informal administrative waste of time, but if you are ever involved in a lawsuit, they will be a valuable reference to what decisions were made, as well as the basis of making those decisions, and an indication of whether the majority of the BOD voted for or against a particular item. This is important, as it speaks to the “Business judgment rule”.
In summary, this is where the courts tell us that they do not want to second guess the business decisions of Boards of Directors, especially when those decisions were made by members who have acted on an informed, honest basis, while doing so in good faith. It’s also based on the honest belief that their decisions are in the best interest of the community association as a whole. Generally speaking, the courts will inquire only on whether or not the Board acted in good faith and with due care.
Review your governing documents, use common sense and don’t hesitate to consult your HOA’s attorney. A simple question to him/her and the resulting written legal opinion can be obtained for as low as $500.00, while a lawsuit on the other hand could cost your association thousands of dollars or more.