Every Condo Owner – and Board – seeks to live in a harmonious community – one where people have great parties and other events, special assessments don’t happen, and things are great. Unfortunately, that’s not the world we live in. Sometimes, despite the best of intentions, things go south. In today’s litigious society, when things go south, lawyers get involved. But no matter who you are – Owner or Association – no one wins when it comes to Condo Association lawsuits. Therefore it is in your best interest – both from a financial and sanity perspective – to avoid Condo Association lawsuits. Today’s article involves extensive contributions from Scott K. Petersen of The Law Office of Scott K. Petersen, PLLC, a Florida-based firm with substantial experience with community Association issues. I appreciate Scott taking the time to weigh in on this topic.
Know Who You’re Up Against
Board members tend to know their Owners fairly well. The ones who can be troublesome usually establish that track record quickly. You’ll know who has bark and who has bite. You might also even know which ones are lawyers themselves and thus more likely to sue without retaining outside counsel. When you’re dealing with a possible litigation situation, you need to weigh the personalities. Will the person back down if you call their bluff? Or are they going to file a lawsuit?
If you don’t know the Owner well, you can research if they’ve filed lawsuits before. All court proceedings are public, so some quick research by you or your lawyer will tell you if they’ve filed similar lawsuits previously. If you can’t find anything on them, communication is your best advantage. “One of the Board’s greatest tools is communication. Be open with Owners, even difficult Owners, and give them a sense that you are listening to their concerns and are amenable to reasonable compromise,” Scott Petersen advises.
Understand Your Legal Basis
Most good lawyers will tell you litigation is not the answer. “I am constantly counseling my clients to think proactively on how to avoid litigation,” Mr. Petersen says. If despite your best efforts you find yourself hurtling towards a legal adventure, first things first. Talk to your Association’s lawyer and find out the legal merit of the case. A good lawyer will explain to you not only what your legal standing is, but any precedent or practical considerations in your jurisdiction that might influence things.
Figure Out the Cost of Litigation vs. Other Remedies
Remember that in a Condo Association you have a fiduciary duty towards the Association. At the end of the day, your job is to look out for the financial health of the Association – which means you want to avoid Condo Association lawsuits. You can break this into a few layers of increasing complexity:
- Comparing the cost of litigation to the cost of settling. If an Owner is suing over $3,000 of damage where the Association is clearly at fault and legal fees are estimated at $10,000, you have a no-brainer. This is the easiest scenario.
- Calculating unintentional downstream costs. For example, say you have a construction project with lots of noise, and an Owner sues you because they want a hotel room for two nights. The cost of two nights is only $500. Under law, the noise is CLEARLY allowed. Legal fees might cost $5,000. Do you settle? Well, if you settle, maybe your 1,000 other unit Owners will also want two nights of hotel rooms. Or maybe in the next project, everyone will want hotel rooms. That $500 could turn into $50,000.
- Calculating the value of amenities or other property. This happens most often when you’re dealing with neighboring Associations. Say you have a shared area of parking, and your neighboring building is alleging you’re parking on their property, and the land deeds aren’t clear. At stake (hypothetically) are 10 parking spaces. What’s the value of that lawsuit? That’s a trickier consideration.
- Calculating the value of discouraging frivolous lawsuits. This is a very nebulous, yet at the same time, very relevant cost. On principle, you may need to win a few defensive lawsuits simply to make the point to Owners that the Association will fight and counter-sue for frivolous lawsuits. This issue often comes up during major projects or special assessments.
When dealing with these situations, best action a Board can take is a thoughtful exploration of the cost of litigation in consultation with your lawyer as a way to avoid Condo Association lawsuits.
Mediation is another often-cited option for disputes. It has many benefits, including dramatically reduced legal costs. You should consider mediation when seeking to avoid Condo Association lawsuits. “I like to recommend mediation early in a dispute,” Mr. Petersen says. “Pre-suit mediation may allow the Board to resolve an issue without having to file a lawsuit.”
There are considerations to take into account as far as the precedent of mediation, at least in Florida. “In the case of mediation, a settlement typically does not set any sort of precedent that needs be followed in the future,” Mr. Petersen says. “However – and it’s a big ‘however’ – at least in Florida, a settlement agreement becomes part of the official records and may be examined by other Owners upon request. And, because of the defense of selective enforcement, certainly something the Board must keep in mind when mediating is how it will treat similarly situated owners in the future.”
From the perspective of this blog, precedent can be tricky. Mr. Petersen noted that at times Boards can overestimate the “precedent” effect, but that it does need to be considered depending on the circumstances.
Remember the Goal – Avoiding Lawsuits
At the end of the day, no one wins during a lawsuit except for the lawyers who are billing. It is in everyone’s best interest to do everything they can to avoid Condo Association lawsuits. Unfortunately, however, sometimes you have to fight for your perspective. Being on a Condo Association Board means honoring your fiduciary duty towards the Association – and that can mean pain up front to avoid pain – for everyone – later.