HOA Lawyer Blog

Recovering Pre-Litigation Attorney’s Fees in HOA Disputes

Published on: March 13, 2013 | by Steven J. Tinnelly, Esq.

*New Case Law

In our recent blog post entitled “Are Attorney’s Fees for ADR Recoverable?” we touched briefly on the recently decided case of Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128 (“Grossman”). In response to requests for more information on this issue from our clients and industry partners, we felt it necessary to further address the reasoning behind the court’s ruling in Grossman.

In Grossman, a dispute between a homeowners association (“HOA”) and a homeowner relating to a claimed architectural violation was resolved by the trial court in favor of the homeowners. In awarding the homeowners attorney’s fees and costs arising from both pre and post-litigation activities, the trial court cited Civil Code Section 1354(c), which states that “[i]n an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (Emphasis added.)

The HOA objected to the award based on its argument that the statute did not authorize awarding pre-litigation attorney’s fees (fees incurred in participating in ADR) because such fees were not incurred as part of the action (the lawsuit) to enforce the governing documents. However, the appellate court disagreed with the HOA and ultimately affirmed the ruling, noting several key points…

Consequences for failing to distribute HOA annual budget?

Published on: March 8, 2013 | by Steven J. Tinnelly, Esq.

*Asked & Answered

Asked: Are there any negative consequences or liability that can result from our Board’s failure to distribute the HOA’s annual budget?

Answered: Yes. California Civil Code Section 1365 requires a homeowners association (“HOA”) board of directors to prepare and distribute an annual pro forma operating budget to the HOA’s membership. Failure to comply with this requirement may hinder the board’s ability to take certain actions, such as increasing assessments or levying special assessments.

Under California Civil Code Section 1366, a HOA may increase annual assessments by twenty percent (20%), and impose special assessments of up to five percent (5%) of budgeted gross expenses, without the need to obtain membership approval. However, this power may only be exercised by the board if the annual budget required by Section 1365 has been distributed to the membership thirty (30) to ninety (90) days before the start of the fiscal year. Accordingly, where a HOA fails to comply with its financial disclosure obligations, regular assessment increases and special assessments will need to be submitted to the membership for approval. This will require the HOA to conduct a costly and potentially ineffective election and, should the membership fail to approve the assessment increase, the HOA may be forced to delay desperately needed repairs or forego other necessary services when needed.

The Civil Code’s various disclosure requirements can be difficult for any volunteer board to fully understand and satisfy. It is therefore important for HOAs to utilize the services of competent industry professionals, managers and financial planners to ensure that the interests of the HOA and the membership are not jeopardized as a result of statutory noncompliance.

Content provided by TLG attorney Kai MacDonald.

To submit questions to the HOA attorneys at Tinnelly Law Group, click here.

Are Attorney’s Fees for ADR Recoverable?

Published on: February 25, 2013 | by Steven J. Tinnelly, Esq.

*Asked & Answered ADR california hoa law litigation.jpg

Asked – Are our HOA’s attorney’s fees recoverable when we participate in ADR with a homeowner?

Answered – Maybe. Civil Code §1354(c) states that “in an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” Alternative Dispute Resolution (“ADR”) does not technically constitute an “action” as contemplated by Civil Code §1354(c). When a homeowners association (“HOA”) and a homeowner agree to participate in ADR, Civil Code §1369.540(c) states that “the costs of [ADR] shall be borne by the parties.” Accordingly, each side pays its own attorney’s fees, and the mediation fees/costs are split between the parties unless the parties negotiate a different arrangement.

However, if the ADR results in a settlement of the dispute, then the attorney’s fees are allocated according to the settlement terms. If the ADR does not result in a settlement and a lawsuit ensues, then the “prevailing party” in the resulting lawsuit may recover its pre-litigation attorney’s fees incurred for ADR. In the recent case of Grossman v. Park Fort Washington Association (2012) 212 Cal. App. 4th 1128, the prevailing party (the homeowners) were awarded their attorneys’ fees incurred in pre-litigation ADR:

“…[B]ecause the Legislature has required ADR, a party acts reasonably when it spends money on attorney fees and costs during pre-litigation ADR. The alternate view–that such expenditures are categorically unreasonable–is contrary to the strong public policy of promoting the resolution of disputes through mediation and arbitration…Thus, when attorney fees and costs expended in pre-litigation ADR satisfy the other criteria of reasonableness, those fees and costs may be recovered in an action to enforce the governing documents of a common interest development.” Grossman.

Attorney’s fees incurred in ADR are typically not recoverable absent language to that effect in the terms of the ADR settlement. However, if no settlement is reached and a lawsuit ensues, the public policy factors recognized by the court in Grossman suggest that these attorney’s fees should be recovered by the prevailing party (e.g., the HOA) in the lawsuit.

Content provided by Tinnelly Law Group attorney Bruce Kermott

To submit questions to the HOA attorneys at Tinnelly Law Group, click here.

New Client: Solera Diamond Valley

Published on: February 13, 2013 | by Steven J. Tinnelly, Esq.

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We are proud to announce that Solera Diamond Valley has selected Tinnelly Law Group as their association legal counsel.

Located in Hemet, Solera Diamond Valley will have over 570 units at build out. With mountain views and gently rolling hills, this active adult community gives its residents enough space to feel removed from the city, while still being conveniently close to shopping, entertainment, and restaurants.

Multiple pools, a fitness center, sport courts, and an assortment of clubs and classes ensure that residents are never lacking activities to engage in.

Our HOA Lawyers and staff look forward to working with Solera at Diamond Valley as we continue developing our relationship with this fantastic active adult community.

Responding to Requests for Accommodation

Published on: February 7, 2013 | by Steven J. Tinnelly, Esq.

*New Library Article

Civil Code Section 1360 generally requires homeowners associations (“HOA”) to allow a disabled owner to, at the owner’s expense, make modifications to the owner’s units and potentially to the HOA’s common areas in order to accommodate the owner’s disability. When a HOA receives a request for an accommodation, what steps can and should the HOA take to verify the owner’s disability and to determine whether or not the owner is indeed entitled to the accommodation? This article addresses three questions that may be useful to an Association in this regard.

Our HOA lawyers have also published this information in our new article entitled “Responding to Requests for Accommodation,” available for download from our library.

Turning up the Heat on Residential Design Professionals

Published on: February 4, 2013 | by Steven J. Tinnelly, Esq.

*New Case Law hoa law firm residential design professionals architects.jpg

California’s 1st District Court of Appeal recently ruled that “design professionals” may be liable under both common law and Senate Bill No. 800 (“SB 800”) to third party purchasers for construction defects.

In Beacon Residential Community Association v. Skidmore, Owings & Merrill LLP et al., the defendants (the “Architects”) had performed architectural and engineering services, as well as construction administration and construction contract management, for a 595 unit condominium project located in San Francisco. The plaintiff homeowners association (the “HOA”) alleged that multiple construction defects in the project were caused in part by negligent architectural and engineering design. Included in those defects was the presence of “solar heat gain” allegedly caused by the Architects’ approval of cheap and non-functional windows paired with a defective design that failed to provide for adequate ventilation within the units. During periods of high temperatures, the solar heat gain had rendered many of the units “uninhabitable, unhealthy and unsafe.”

The Architects successfully argued at the trial court level that they could not be held liable for the alleged defects because, under common law, the Architects owed no duty of care to third parties (to the HOA or its members). The trial court agreed, holding that the Architect could not be held liable for negligent design and that the HOA was required to show that the Architects had “control” in the construction process; the Architects had to have “assum[ed] a role beyond that of providing design recommendations to the [developer].” Accordingly, the trial court sustained the Architects’ demurrers and the HOA then appealed…

New Client: Bridgeporte Community Association, Inc.

Published on: January 24, 2013 | by Steven J. Tinnelly, Esq.

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We are proud to announce that Bridgeporte Community Association, Inc. has selected Tinnelly Law Group as their new legal counsel.

Bridgeporte’s 216 condominiums are nestled in a park like setting, surrounded by mature trees and beautiful landscape. Residents have convenient access to the association’s pool, hot tub and clubhouse.

Located in the Heart of the Bay, Bridgeporte is a wonderful addition to our growing Bay Area client portfolio. Our HOA lawyers and staff look forward to working with this beautiful community.

New Client: Alegria at Spanish Walk Homeowners Association

Published on: January 17, 2013 | by Steven J. Tinnelly, Esq.

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We are proud to announce that Alegria at Spanish Walk Homeowners Association has selected Tinnelly Law Group as its new legal counsel.

Located in the city of Palm Desert, Alegria at Spanish Walk is a new community with beautiful Spanish inspired condominiums and townhomes within resort style surroundings.

Alegria’s residents enjoy a gated community and many amenities including a fitness center, pool, spa, and community clubhouse. Alegria is also only a short distance to one of SCPGA’s top 10 ranked golf courses, Desert Falls Country Club.

Our HOA lawyers and staff look forward to working with the Alegria Board and management and to developing another lasting relationship with a HOA client.

Legislative & Case Law Update (2013) Now Available!

Published on: January 7, 2013 | by Steven J. Tinnelly, Esq.

hoa laws Our annual “Legislative & Case Law Update” newsletter for the year 2013 is now available in our library!

The Legislative & Case Law Update provides an overview of the new legislation and case law impacting California Homeowners Associations (“HOAs”) as we head into 2013. The new legislation includes, among other items, bills that impact Bank foreclosures, the re-organization of the Davis-Stirling Act, EV Charging Stations and fees charged by HOAs in producing certain records. The new case law includes rulings that may impact the architectural restrictions placed on the installation of solar panels, arbitration provisions for construction defect disputes, “no-cost” HOA collections contracts, election disputes and defamation claims. The Legislative & Case Law Update also addresses some new Fannie Mae and FHA regulations impacting condominium insurance and certification requirements.

Click here to read our Legislative & Case Law Update (2013)

Have questions on any of the new legislation or case law? Click here to send us a question online.

New Client: Solera (Sun City) at Apple Valley Community Assn

Published on: January 4, 2013 | by Steven J. Tinnelly, Esq.

active adult HOA

We are proud to announce that Solera (Sun City) at Apple Valley Community Association has selected Tinnelly Law Group as its new legal counsel.

Located in the city of Apple Valley, Solera was built and thoughtfully planned by Del Webb to provide Solera’s residents with the ultimate active-adult community experience.

Solera’s 1,210 gorgeous single family homes are nestled against the verdant fairways of Ashwood Golf Course and a magnificent mountain backdrop. Its numerous amenities include clubhouses, ballrooms, state-of-the-art fitness facilities, indoor and outdoor pools, and an impressive menu of activities geared toward the active-adult lifestyle.

Our HOA lawyers and staff look forward to working with this amazing community and to developing another lasting relationship with an active-adult HOA client.

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