How common are Lawsuits against HOAs?

Asked by Douglas Becker, Studio City, CA Wed Jun 11, 2008

We are looking to but a condo and after receiving the documentation from the HOA, discovered a lawsuit pending. Is this common or is this a huge red flag that should cause us to look elsewhere?

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4
Laurie Manny, , Long Beach, CA
Thu Jul 10, 2008
Hi Douglas,

Lawsuits against HOA's are becoming more common, at least in my neck of the woods. It's not unusual to find one against an HOA while you are in escrow. The lender will consider the amount of the judgment against the funds the HOA is in possession of, and will assess their risk. If the suit is minor and the HOA is well funded, it most likely will not affect your close of escrow. If the judgment is large and will deplete the HOA funds to a dangerous level, the lender will likely refuse to fund until there is resolution at which time the lender can reconsider.

If this is the case this would not be a smart purchase anyway. When HOA's are poorly funded there is not enough money to cover necessary repairs and upgrades which would cause an assessment or a series of them. Assessments often throw condo owners over the edge of what they can afford to pay monthly and can prove to be disastrous for some.
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1 vote
Michael Barr…, Agent, Irvine, CA
Wed Jun 11, 2008
Hi Douglas, I would try to find out a little more about the lawsuit, Contact the HOA legal dept, Try to fid our what was it over. There are a lot of frivolous lawsuits out there so it may be one of them.

Hope this helps
Michael Barron
First Team Real Estate
(714) 552-6917
1 vote
Don Tepper, Agent, Burke, VA
Thu Jul 10, 2008
It's not a huge red flag, but it's definitely something you should look into. You should determine the HOA's potential exposure. And you should also try to determine whether the legal fees are likely to be astronomical.

I've sued a condo association (in small claims court) and won. I had a friend who was engaged in a long, protracted lawsuit against a condo association and lost.

Remember, anyone can sue anyone over anything. It doesn't mean the suit is justified. But it does mean that it'll take some time and money to resolve the issue.

HOAs get sued. Often they win. Sometimes they don't. I wouldn't rule out your potential purchase just because there's an ongoing lawsuit. Get the details on the suit. Determine the exposure. And be guided by that.

Hope that helps.
0 votes
Franklin Far…, , West Los Angeles, Los Angeles, CA
Wed Jun 11, 2008
It has been my experience that there are very few lawsuits against HOAs.

Should one surface it is likely related to an injury someone incurred within the common areas of the development.

Best to contact the management company regarding the details of any legal action. They may be somewhat coy about releasing details of any lawsuit and might ask that you attend a HOA meeting or read the HOA minutes where such issues are discussed..

Best regards,
0 votes
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