Although the right HOA insurance strategy can cover the cost of lawsuits, most HOAs would certainly rather go without the stress, expenses, and damaged reputation. Luckily, a few simple tips can help avoid these common types of HOA lawsuits.
Board election and recall rules can be quite complicated. They usually require a quorum and involve strict rules on absentee voting. Many elections and recall efforts are effectively canceled when the quorum, or minimum number of voters, is not met—though residents can easily call this count into question. When it comes to elections, the residents are not generally able to petition the board and therefore are left only with the option for a lawsuit.
HOAs can help avoid these scenarios by ensuring residents understand quorum and absentee voting policies before the day of voting, including in which cases absentee ballots may be discarded.
Board Action Disputes
Residents can sue their HOA if they believe the board has violated its CC&Rs or local, county, or state law. This often occurs after a board vote passes a new rule with which a resident disagrees. The board can help avoid this kind of lawsuit by having printed references to the rules, regulations, and laws that allow them to pass a particular action.
Hawk-eyed residents are often on the hunt for instances of misappropriation. Lawsuits can be brought if a resident finds the HOA board has spent money inappropriately. Some well-known culprits are exorbitant attorney’s fees, board lunches, parties, and other expenses not expressly outlined in the budget or approved by a vote. Here the best solution is for HOAs to be mindful of small expenses that may not seem problematic in piecemeal but which, when added up, can point toward a breach of fiduciary responsibility.
Pet policies are some of the first to be questioned by HOA residents. Whether its the species of pet, size of pet, number of pets, or breed of pet, HOAs are usually within their rights to establish rules and regulations on keeping animals within the community. Common lawsuits involving HOA pet policies include unfair enforcement (going after some pet owners and not others) and violation of the Fair Housing Act, which covers both trained service animals and emotional support animals for disabled residents. Some state laws, like California’s Davis-Stirling Act, do not allow HOAs to ban residents from owning a single pet.
Putting new pet policies to a resident vote is a common way to settle this controversial matter. Board members should also be educated on the FHA and Americans with Disabilities Act to ensure they do not violate any residents’ rights.
About Scott Litman Insurance Agency
At Scott Litman Insurance Agency, we are dedicated to protecting HOA’s like yours. We have a unique understanding of the industry and the common risk exposures that you face in your daily operations. In fact, we find that 90% of the policies we review are missing coverages that violate the Covenants, Conditions and Restrictions (CC&R), exposing the board, HOA and management to lawsuits– which is why our comprehensive policies are tailored to meet your specific needs at competitive prices. For more information about our products, contact our experts today at (818) 879-5980 ext. 201, or fill out our online form.