Responding to a Lawsuit

Some believe that Association living is relatively idyllic due to the heightened sense of community and camaraderie in some Associations. However, the reality is that Community Associations are just as likely to face legal issues as other organizations are — regardless of whether or not the Association and its board members are actually at fault. Thoroughly understanding legal action in an Association will help the Board of Trustees feel more prepared to handle any lawsuits should they arise.

Know Your Suit

When the board is facing legal action, it can be tempting to do what it takes to try to resolve the issue as quickly as possible. However, it is important to take the necessary time to understand exactly what the lawsuit entails. Only by recognizing the total scope of the claims will a board be able to react appropriately and most prudently.

Failure to maintain common areas or units, disputes over board elections, and rule or bylaw violations are among the most common reasons that homeowners and other entities bring a lawsuit against an Association. Additionally, an Association could also find itself in legal trouble over any discriminatory policies, new developments or renovations that could be viewed as contract violations, and any misuse of funds, among other transgressions.

Proper Representation

Fully comprehending the details surrounding the lawsuit will also give the board clues as to what type of representation it might need. For example, if a resident slips on a patch of icy sidewalk in the community and breaks her arm, any resulting legal action would be handled by a lawyer appointed by the Association’s insurance company — not the Association’s general counsel. This is because liability issues are covered under the Association’s liability insurance.

For this reason, it is vital to keep an insurance broker well-informed of any goings-on in the community that could result in legal action, even in the case of something as small as an angry email from a disgruntled resident. This ensures that the insurance company has ample opportunity to either reach out to the injured individual or prepare for an impending lawsuit.

Regardless of the type of lawsuit, all Associations should retain the services of a competent, experienced lawyer, as he or she will take the lead on any lawsuits involving outside vendors, contractors, and other third parties, for example, as well as handle other essential legal responsibilities on the behalf of the Association.

Alternatives to Litigation

Hashing out issues in court is expensive, time consuming, and can wreak havoc on the morale and community of an Association. Fortunately, alternative methods of conflict resolution exist for Associations in the form of arbitration and mediation.

Mediation involves both parties attempting to reach a common solution or compromise to the conflict. This solution can only work if both parties are committed to working together toward a resolution, but is usually a better solution for many Associations, as conflicts are often between neighbors who will then spend months or even years living in close proximity. In the case of especially heated arguments, both parties might consider involving a neutral third party mediator, who is there solely to help each side better understand the other’s point of view.

Arbitration, on the other hand, is more like a traditional courtroom set-up: A neutral third party is invited to hear evidence presented by both sides before making a final decision on which party is right and which one is in the wrong. However, unlike in a court of law, arbitration usually does not offer any opportunity for a repeal of the final decision. It can also end up being just as time-consuming and expensive as a more traditional legal trial.

When considering if an alternative dispute resolution is the right recourse for an Association’s legal issues, it’s best to be clear on the individual state laws that govern such practices. 

Preventative Steps

No Community Association wants to be embroiled in a costly, onerous legal battle. One of the best ways to ensure that doesn’t happen is to take preventative action. Drafting clear, reasonable, and enforceable rules that all community members are familiar with — as well as the entirety of the governing documents — can allow everyone to operate under the same expectations. Additionally, board members should take steps to avoid liability issues that could result in legal action. Maintaining a close adherence to all proper procedures and reaching out to knowledgeable legal professionals for advice will keep everyone in the Association happy and lawsuit-free.