Three times an HOA needs an attorney

HOAs can benefit from legal counsel in these situations.

Homeowners associations help address the various needs of a community. More specifically, a publication from Delaware’s Attorney General website defines a homeowners associations (HOAs) as a group that provides a “communal basis for preserving, maintaining, and enhancing homes and property.” The organizations are characterized by three common components: membership, paperwork and fees. Owners of property within the association are members of the HOA, documents are present that provide guidance on the governance of the HOA and economic fees are required of each owner to support the HOA.

These associations can serve a variety of functions, ranging from the relatively low-key association that simply provides guidance on basic community rules to a more involved group that provides specific regulations on pets, landscaping, noise levels and the presence of home-based businesses as well as offering members various services.

Regardless of the level of involvement, legal issues can arise. There are instances when HOAs are wise to seek legal counsel. Three specific examples include:

• Development of the HOA. Putting together an HOA requires the creation of various legal documents. This can include bylaws and other contracts. Each should be crafted to the community’s HOA. A boilerplate or fill-in-the blank document could leave the HOA vulnerable to a legal conflict. Documents that are specifically crafted to your community’s needs are less likely to fail in the event of a legal challenge.
• Presence of a conflict. Allegations of a conflict of interest or the need to enforce restrictions and association rules as listed within the bylaws of the HOA can result in a conflict between homeowners and the association. Legal counsel can help navigate these issues while reducing the risk of court battle.
• Financial issues. HOAs generally have a set financial reserve. In the event the reserve falls below an accepted amount or an unexpected bill requires payment, the HOA may raise the monthly or annual fee to replenish these funds. This could lead to questions about how the funds are used and potentially result in allegations of a breach of the board members’ fiduciary duties. If this occurs, it is wise to seek legal counsel to better ensure the rights of the board members and the HOA are preserved.

Any HOA that experiences one of these common legal issues is wise to seek the counsel of an attorney. An attorney experienced in real estate law and the disputes that can arise within a homeowners association can provide your HOA with the legal services needed to navigate through the issue.