When to Use Legal Counsel for an HOA
When people think of obtaining legal advice, a specific image often appears you sitting across from a cigar-chomping man in an expensive suit. However, competent, ethical legal expertise is an important asset for all boards to acquire and lean on. In many situations, the right legal counsel can make the difference between running a successful community, or not.
Various legal stipulations stemming from the governing documents and federal, state, and local laws dictate many aspects of HOA management. The right attorney – one who specializes in HOA law – can help ensure all parties, from the homeowner to the board and even the management company, are staying compliant to all the various statutes in a way that reduces the HOA’s overall risk.
Though attorneys’ play an important role in protecting your association, many board members, especially new ones, may ask, “what exactly does a lawyer on retainer do for the HOA?”
Your legal representative can help you in the following instances:
Interpret and review the governing documents
Legalese is confusing to many people, and it’s possible to misinterpret rules laid out in your association’s documents. Your attorney can break down the different elements of your governing documents in a way that is easy to understand and legally sound.
Review your association’s articles of incorporation, bylaws, CC&Rs, and rules and regulations yearly to ensure they are still in compliance with all federal, state, and local statutes.
If your association’s documents need any amendments, an attorney can draft revisions that are statute-compliant and favorable to the HOA.
Obtain outstanding balances
Occasionally, homeowners fall behind in their payments to the association. When it comes to collecting accounts receivable, involving your attorney is often the last step in the process. Attorneys can file liens and foreclose on properties in order to collect the necessary funds.
Assist in negotiations
If you’re partnering with financial institutions, contractors, vendors, employment issues, or foreclosures, leaning on legal counsel can assist with the legal aspects of the negotiations.
Acquire the correct insurance
HOAs have unique insurance needs, and board members may need assistance in navigating complex insurance claims and negotiating and adjusting specific policies (think earthquake, fire, water, etc.)
While insurance assistance is a service that many attorneys traditionally perform, if you’re reluctant to seek – and pay – a lawyer to help with your insurance, consider reaching out to our friends at Blue Lime. They specialize in finding policies that offer the right amount of coverage for their HOAs. They also guide their customers through the claims process from start to finish.
Aid the board in financial matters
Every money-related decision a board makes affects the HOA’s members. Since boards are required to exercise fiduciary responsibility, legal consultation is highly recommended in instances where the board might make financial decisions that risk them falling out of compliance with laws and regulations.
If you’re not sure what is included in a board’s fiduciary duties, we recommend working with your community manager to review your governing documents. As long as you are performing the duties listed in your documents, the chances of facing legal action are low.
If legal action based on a breach of fiduciary duty is brought to the board’s attention, retaining legal counsel is a must, and your attorney will be able to talk you through your options.
Represent the HOA in other, non-money related disputes
A qualified attorney can help the board navigate many other legal disputes and provide general legal counsel when the board is unsure of the long-term legal implications of a potential decision.
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Mitigate the effects of construction defects and other land use issues
Whether you’re having problems with the contractor using sub-par materials for the construction of your clubhouse or you’re facing a homeowner who’s trying to encroach on common property, getting your attorney involved as early as possible with help avoid more problems down the line.
Many people think of lawyers as someone you go to as an absolute last resort. However, in the context of HOA management, your attorney can be an invaluable resource to go to.