HOA Law

Congratulations to our firm’s clients, Phil and Susan Swartztrauber, for winning a court order obtaining insurance coverage against Travelers Casualty and Surety Company of America.

The case was handled by Alex Beard.  The Swartztraubers were board members of their Home Owners Association (HOA), and were sued for alleged defamation in an underlying suit filed by the HOA’s President.  Travelers insured the HOA, but refused to provide the Swartztraubers with a defense to the defamation suit.

U.S. District Judge David Hittner disagreed, and ruled that Travelers breached its policy contract, and violated the Texas Prompt Payment Statute, by failing to provide the Swartztraubers with a defense.  So, Travelers will have to pay for the defense, legal fees and costs of the coverage case, as well as the underlying lawsuit.

Great work, Alex!

 

Freedom of Speech is Alive and Well in Texas.  The Texas Citizens Participation Act Strikes Again: This time in an HOA dispute.

If you run for office these days, you probably need to have pretty thick skin.  People have always “talked about” leaders, but now with the advent of community websites, neighborhood websites, and texting, information spreads like wildfire.  Even local positions, like little league President or Board Member of your Homeowners Association (HOA), can become hotbeds of controversy.  The information people spread should be relatively accurate (“substantially true” in legal terms), or you can be held liable for defamation of character.   Spreading lies, rumors, or innuendo can get you sued – and rightfully so.  However, I keep coming across cases where people get their feelings hurt over tiny things and they want to run to the courthouse to shut up their opposition; or as they see it “demand justice”- through intimidation. Said another way, they want to file “Strategic Lawsuits Against Public Participation” (SLAPP).

      I just finished handling one such case where a couple of homeowners who were Board members of their local HOA took offense to people questioning their business judgment.   To stop the criticism, they decided to file a lawsuit against their fellow homeowners (and the HOA, and the past Board) for “defamation”, “slander,” and for “ruining their reputation”.

We represented the homeowner that was the alleged “slanderer.” He had disagreed with the approach taken by members of the Board who decided it was best to pay off or “settle” with people who had issues with the Board rather than fight them.  He wrote a strong, but professional letter to the community stating his position that he felt the Board was wasting their money and should be replaced.   This letter was the basis of the “slander” claim as alleged by the Plaintiff.

Unfortunately for the Plaintiff, the letter, while direct, was simply one homeowner exercising   his right of free speech to question the direction of the current Board.

For those of you who follow our blog, you might guess what happened next.   First, we nicely asked them to non-suit the case and pointed out their risks.  They refused to nonsuit (as I’ve found is common, “how could we be wrong?”), and instead demanded money.    I consistently find it revealing when someone who “stands on principle” wants dollars in exchange for his principle.    So we were then forced to ask the Judge to award our client all of his legal fees, costs, and sanctions under the Texas Citizens Participation Act (often referred to as the Anti-SLAPP statute).

We are proud to report, that once again, freedom of speech prevailed.    The   Ellis County Judge defended the right of Texas citizens to exercise their right of freedom of speech.  The case was dismissed and the Plaintiffs were ordered to pay our client’s attorneys’ fees of over $10,000.00 plus costs.  Further, the Judge ordered the Plaintiffs to pay “sanctions” to our client in the amount of $25,000 to deter the Plaintiffs from filing another lawsuit attempting to quash Freedom of Speech.  Hopefully, the Plaintiffs in that suit will reconsider before trying to SLAPP someone in the future; because they learned the hard way: Texans slap back.

Recent changes in the law finally give Texas homeowners a stick to fight back against abusive practices by Texas homeowners associations.  If you are reading this, you’ve no doubt heard of HOA horror stories. Perhaps you’ve been a victim of HOA harassment or bullying.  HOAs are not regulated by the state or federal government. They are often formed as “non-profit” corporations and claim to be “self-governing entities,” but all too often they act more like private governments, claiming the power to tax, have a police force, impose regulations, and dictate zoning. They’ve often treated their members unfairly and even illegally and gotten away with it.  Common examples include:

• Arbitrary or personally motivated enforcement actions;
• Making serious decisions outside of an open meeting;
• Assessing fines or sanctions without due process;
• Failure to provide proper notices;
• Failure to permit inspection of books and records;
• Breaches of fiduciary duty by Board members;
• Wrongful foreclosure actions;
• Filing lawsuits to cover their wrongful actions;
• Attempts to restrict the display of flags or religious items

             Because of the disparity in financial resources available to support legal actions, individual homeowners have always been at a serious disadvantage in disputes with their HOA. Essentially, the Board members are never required to use their personal funds in legal disputes with individual homeowners. The HOA uses your dues to fund their actions against you.  Homeowners, on the other hand, must use personal funds to pay their own legal expenses. Faced with this economic reality, homeowners, as a practical matter, often have no way to fight back.  In that regard, the HOA laws have historically failed, and failed miserably.

            Fortunately for Texas homeowners, things have gotten much better.  The Texas legislature has begun to level the playing field by making changes to the HOA laws, some of which only went into effect on September 1, 2015.  While not perfect, the HOA laws now give homeowners more rights which will often enable them to stop HOA abuse.

            If you believe your HOA has treated you unfairly or not acted properly in any manner, you owe it to yourself to contact an attorney with experience in this area to discuss your specific situation.  With the changes in the law, it is now much more likely that something can be done to change your situation for the better.

Ahh, HOA’s.  You either love ‘em or you hate ‘em.  And those who hate ‘em usually have a good reason.  Maybe the HOA is on their case about a fence needing repair.  Maybe it’s that dues haven’t been paid on time and the HOA is threatening foreclosure (yes, strange as it may seem, most HOA’s have the authority to take your home if you do not pay).  Maybe it’s a fine that was imposed because you went on vacation and forgot to have someone cut the grass. No infraction is too small for some HOAs.

I’ve represented homeowners in disputes with their HOAs, and let me tell you, nothing surprises me anymore.  Sure, there are some good HOAs out there.  But there are also a lot of bad ones, ones that will spare no expense in “ensuring a homeowner’s compliance.” That often means legal action, with the homeowner viewed as easy prey.

It doesn’t have to be that way. Fortunately the laws governing homeowners associations are beginning to change, with more protections built in for homeowners.  But a lot more work is left to be done.  I will be attending a conference in a couple of weeks where some of these changes will be discussed.  I’ll make another blog entry upon my return.

In the meantime, check out Jacquielynn Floyd’s editorial in Dallas Morning News about how living is easy IF you bow to your HOA.

https://www.dallasnews.com/news/2015/10/05/are-you-on-your-homeowners-association-s-radar/

Under the Texas homeowners association laws passed several years ago, HOAs are required to make the meetings of their respective boards “open.”  But open to who?  The public?  Can just anyone attend?  Can I bring a lawyer?  A local news crew?

            The answer is, just the owners (the persons who hold legal title to property within the residential subdivision) and their personal representatives are entitled to attend.   That’s it.  Regular and special board meetings must be open to all owners, subject to the right of the board to adjourn and reconvene in a closed section.   So if you’re an owner or the owner’s personal representative, you can attend the regular meeting, but if the board goes into a closed session, you’re not allowed in.

            What matters are appropriate for a closed, executive session?  Actions involving personnel, pending or threatened litigation, contract negotiations, enforcement actions, confidential communications with the HOA’s attorney, matters involving the invasion of privacy of individual owners, and matters that are to remain confidential by request of the affected parties and agreement of the board.  Everything else is fair game for a regular or special meeting.

            The new laws now also require that owners be given advance notice of any regular or special board meetings.  The date, hour, place and general subject matter have to be disclosed in the notice, along with a general description of any matter to be brought up in executive session.  The notice can be given in several ways.  It can be mailed, but the mailing must occur at least ten days before the meeting, but not more than sixty days before the meeting.  Alternatively the notice can be e-mailed to owners who have registered an email address with the HOA, or it can be posted on the HOA’s website.  These electronic forms of notice must be given at least 72 hours before the meeting.  An HOA can also provide notice by posting it in a conspicuous manner in a common area at least 72 hours before the meeting.

            Can any board meetings be held without the required notice to owners?  Yes, in limited circumstances.  Boards can meet, even by telephone or other electronic means, without prior notice, if each director may hear and be heard by every other director, or the board may take action by unanimous written consent to consider routine and administrative matters or a reasonably unforeseen emergency or urgent necessity that requires immediate board action.   But any  action taken without notice to the owners must be summarized orally  and documented in the minutes of the next regular or special board meeting.

If the board is going to consider or vote on certain issues, the board cannot hold the meeting without giving the required notice to the owners.  These issues include the imposition of fines, damage assessments, initiation of foreclosure or enforcement actions (except TROs or violations involving a threat to health or safety), increases in assessments or levying special assessments, appeals from denials of architectural control approval, and suspending a right of an owner before the owner has had the opportunity to attend a board meeting and present the owner’s position.  Since this list is mostly what HOAs do anyway, it’s obvious that in passing these laws the Texas legislature intended for all owners to have sufficient notice of board meetings where the owners’ important rights might be at stake.

A man walked into a lawyer’s office and inquired about the lawyer’s rates.  “$50 for 3 questions,” replied the lawyer.  “Isn’t that awfully steep?” asked the man.  “Yes,” the lawyer replied.  “And what was your third question?”

            Lawyers generally have a negative reputation in society.  Unfortunately, many people believe lawyers are all about the money.  While that certainly might be true for some lawyers, most of us never pursued a legal career to chase the almighty buck.  It’s like my father used to say about money and marriage.  “Son, there are two ways to make money in this world.  You can marry it or you can earn it; and if you marry it, you more than earn it.”  Sage advice, and it applies to lawyering as well.  Lawyers who are in it only for the money are usually unhappy and most of them don’t last very long.

            But we lawyers do have to make a living, and that means we have to get paid by someone.  That someone is usually the client.  But unfortunately in many instances the nature of the matter is such that it simply makes no sense to hire a lawyer, especially if the benefit to be gained does not outweigh the cost of obtaining it.  Why hire a lawyer to pursue a negligence claim that might be worth only $5,000, if it will cost $10,000 or more in fees to get a judgment?  I was liberal arts major in college, but even I can do that math.

            Fortunately in most actions involving homeowners associations, there exist mechanisms in the law to recover attorney’s fees from the losing party, whether that party be the HOA or the homeowner.   This often makes it worth the fight to pursue a claim that might not otherwise justify the hiring of a lawyer.

            One means of obtaining an award of fees against the opposing party is by requesting a declaratory judgment from the court.  Under the Texas Uniform Declaratory Judgments Act, a court is authorized to award reasonable and necessary attorney’s fees as are “equitable and just.” Under this Act, a court is not required to award fees, but it has the discretion to do so.  You often can enhance your chances of obtaining such an award if you can show that your client attempted to resolve the issue without having to file suit.

            Another method for obtaining fees can be found in the Texas Property Code.  In an action based on breach of a restrictive covenant pertaining to real property, the court “shall” allow to a “prevailing party” who asserted the action reasonable attorney’s fees.  The code’s use of the word “shall” means that an award of fees is mandatory.  The factors a court considers in determining the reasonableness of the fee include (1) the time and labor required, (2) the novelty and difficulty of the questions, (3) the expertise, reputation, and ability of the attorney, and (4) any other factor.

            Restrictive covenants are considered contracts, and as such they often contain provisions which authorize recovery of fees (at least for the HOA).  But even as to homeowners, fees can be awarded pursuant to Section 38.001(8) of the Texas Civil Practice and Remedies Code, which authorizes recovery of fees in actions founded on oral or written contracts.

            There exist other mechanisms in the law for recovering attorney’s fees, but those mentioned above are the ones most often relied upon by litigants in HOA matters.   If you’ve ever been successful in obtaining a fee award in an HOA matter using some other mechanism, I hope you will share it with me (the method, not the fee).  I’ll save for another day my thoughts on fee splitting among lawyers.

Not long ago, the Texas Legislature passed a series of laws which significantly alter the rights and responsibilities of homeowners associations.  While some associations or HOA’s have complied with these new rules, many still have not, probably because they are unaware of them.HOA’s need to be aware of these new laws, however, because a failure to follow them can prevent the HOA from exercising its rights and enforcing various restrictive covenants against its members. 

• If it isn’t filed, you can’t enforce it.

          The laws now in effect prohibit HOA’s from enforcing against homeowners certain provisions in their “dedicatory instruments.”  Dedicatory instruments are the documents which govern the establishment, maintenance, or operation of an HOA.  They include the HOA’s restrictive covenants, rules and regulations, by-laws, etc.  The new laws require HOAs to file all dedicatory instruments in the county’s property records.  The laws provide that dedicatory instruments have “no effect” until they are filed.  Consequently, HOAs seeking to enforce rules or restrictive covenants against one of its members must make sure the instrument has been filed before it can enforce the rule or restrictive covenant.  HOAs are now also required to post on their or their management company’s website copies of all dedicatory instruments.

• Notice of Member and Board Meetings 

The new laws also contain specific requirements regarding HOA meetings and board meetings.  Open board meetings are now required, and members of the HOA must be given written notice of the meeting at least ten days (but not more than sixty days) prior of the meeting. Specific methods for notifying the homeowners are set forth in the new provisions, and board meetings without notice can be held in only limited circumstances.  However, a board cannot without prior notice to members consider or vote on:  (1) fines, (2) damage assessments, (3) initiation of foreclosure actions, (4) initiation of enforcement actions, excluding temporary restraining orders or violations involving threat to health or safety, (5) increases in assessments, (6) levying of special assessments, (7) appeals from a denial of architectural control approval, or (8) a suspension of a right of a particular member before the member has an opportunity to attend a Board meeting to present the member’s position.

Similar notice requirements exist regarding meetings of the HOA where an election or vote will take place.  The new laws provide various methods for casting votes, but explicitly require that all such votes be in writing and signed by the member, except in uncontested races.   Annual meetings are also now required; otherwise, a homeowner has a right to call an election meeting.

• Open Books; Records Production and Copying Policy

          With certain exceptions, HOAs are now required to make available to their members the HOAs’ books and records.  Each HOA board must adopt a “records production and copying policy” which sets forth the charges for compiling, copying and producing the information which has been requested.  This policy must also be filed in the county property records.

          For HOA’s comprised of more than 14 lots, the requirements become even more onerous.  HOAs of this size must adopt a record retention policy which meets certain requirements.  They must also adopt reasonable guidelines for establishing an alternate payment schedule for delinquent assessments.  These, too, must be filed in the county records.

• Certain Restrictions Prohibited

          In addition to specifying what HOAs must do, the new laws also outline what HOAs cannot do in terms of enforcing various restrictive covenants.  With certain exceptions, the new laws prevent HOAs from enforcing provisions which prohibit: satellite dishes one meter or smaller, certain rooftop antennas,  certain composting measures, installation of rain barrels or rain harvesting systems, implementing efficient irrigation systems,  using drought resistant turf, installing solar energy devices, limiting the display of the American flag, installing certain roof shingles, and displaying or affixing religious symbols on the entry to the member’s dwelling.

• Enforcement Actions and Related Notices

Some of the most significant changes in the new laws pertain to enforcement actions.  Before an HOA may suspend an owner’s right to use a common area, file suit against an owner other than to collect a regular or special assessment or foreclose under an association’s lien, charge an owner for property damage, or levy a fine for a violation of the restrictions or by-laws or rules of the HOA, the HOA or its agent must give written notice to the owner by certified mail, return receipt requested.  The notice must give the owner a reasonable period of time to cure the violation, inform the owner that the owner may request a hearing before the board within 30 days, and advise that the owner may have special rights or relief under federal law, including the Service Members Civil Relief Act, if the owner is serving on active military duty.