HOAleader.com - Tip of the Week - November 25, 2011
Published: Fri, 11/18/11
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HOA Litigation: Loose Lips Sink Ships
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In this week's tip, we begin to answer an HOAleader.com
reader's question: "How much information must a board of
directors divulge to the HOA when involved in court
litigation ... especially when members of the association
are the litigators?"
Boards are in a bind when it comes to pending litigation.
They must disclose to members some details. But just how
much to reveal is tricky.
"Owners are entitled to some information, but how much
becomes a real problem," says Robert Galvin, a partner at
Davis, Malm & D'Agostine PC in Boston who specializes in
representing condos and co-ops. "For example, the board
can say, 'We're now conducting six lawsuits against people
who haven't paid charges.' But you shouldn't name the
people. Other lawsuits--the kinds associations bring or are
subject to--can be discussed in general terms. But litigation
strategy should never be discussed. After the public
meeting, the board should go into executive session, and
that's where board members should discuss litigation strategy.
"The big issue here for new condos are construction defect
lawsuits," Galvin adds. "The board can say, 'We're going
to sue the developer because the HVAC systems are defective,
or the developer said the elevator would be replaced, but
it was just patched.' The board shouldn't say, 'We're going
to bring a lawsuit and try to disqualify the developer's
lawyer for this reason,' or 'We're going to bring a motion
for attachment of the developer's property.' Strategy like
that should never be discussed with unit owners because
there's too much risk of a leak."
State laws usually allow boards to refrain from divulging
that type of information to too-curious owners. "Nevada law
allows a board cover about how to talk about pending
litigation with owners," explains Chris Yergensen, senior
vice president and corporate counsel of RMI Management,
a Las Vegas-based company that manages about 300 condo
association and HOAs. "The board can at least tell owners
that discussion of litigation can happen only in a board
meeting, which doesn't allow owners a right to hear the
discussion. But from a business side, anything that's
filed in Clark County with respect to litigation is
public knowledge. So if owners request something that's
been filed, we give it to them, whether it's the complaint,
the answer, or any motions for summary judgment. And those
documents can certainly be talked about by the attorney.
The attorney can say, 'Here's the motion. It lays out
why we think this case should be dismissed.' Obviously,
if it's early in litigation, typically, the board says,
'We're talking with our attorney and preparing our
response, and as soon as we file it, we'll provide a copy.'"
However, boards sometimes run into trouble simply because
they're trying to be open. Learn how to avoid common
pitfalls in our new article:
http://www.hoaleader.com/members/650.cfm
Best regards,
Matt Humphrey
President
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Click here to read full article:
< http://www.hoaleader.com/public/649.cfm >
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Should Managers Attend--and Participate In--HOA Meetings?
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< http://www.hoaleader.com/members/648.cfm >
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< http://www.hoaleader.com/public/647.cfm >
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Click here to read full article:
< http://www.hoaleader.com/members/646.cfm >
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How Strong Are Your HOA Owners' Privacy Rights?
In this week's tip, we help you determine whether to strip search
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on how intrusive you can be when it comes to "searching" owners.
Click here to read full article:
< http://www.hoaleader.com/public/645.cfm >
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