Small Condo, Big Condo Governance Problem

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D.A. from Los Angeles, CA writes:

Dear Mister Condo,

Question: Can I sue another unit owner for financial damage if I can’t sell my unit?

I have a condo in Los Angeles. It is up for sale. One unit owner is contesting the board elections from last September and a special assessment to paint the exterior of the building, which was approved by a wide majority of 12 owners. This one owner has not only relentlessly abused and accused the board and management company wrongdoing, but wants both the board and special assessment elections overturned by the court. This has required the board to hire legal counsel to review its practices and procedures. The attorney has indicated that the board is “substantially compliant”. The board could hold elections again, which would be another HOA expense from a time standpoint and out of pocket costs for mailings, secret ballots, etc. The outcome would likely be the same. The attorney has suggested a petition be signed by owners to the effect that they support the decisions of the board, which will hopefully help strengthen the HOA’s position if this one owner takes us to court.

The HOA has been in existence for 30 years and has spent the last year becoming compliant with the Davis-Stirling Act. The DS election rules were not formally adopted before these two elections, but the rules were followed to the letter. They have since been adopted. In the 30+ years this condo association has been in existence, there was never a formal way of doing business, i.e., 12 neighbors would meet in the common living room and discuss what was needed, vote and move forward. This owner is angry about the decision to paint and is, therefore, as the attorney said, “damaging” the HOA financially, which brings me to the larger question regarding my own unit. My unit is up for sale and buyers are deterred due to the open-ended legal issue with this owner. I have an offer on the table, but the buyer is concerned about this legal issue. Can I sue this owner for financial damage if my unit won’t sell due to this unending situation?

Mister Condo replies:

D.A., I am sorry for the ongoing legal battles your association is experiencing. I am not an attorney nor am I an expert in California law regarding common interest communities. However, I can offer some friendly advice that might help you direct your efforts in bring resolution to these issues.

In America, just about anybody can sue somebody else for any reason. The real question is whether or not it is worth the time and effort to do so. In my opinion, you would not prevail against your neighbor as his suit against the association was not brought about to block the sale of your unit; it is an unfortunate side effect. It does speak to the larger issue of how one disgruntled unit owner can do a lot of damage to an otherwise well-run association. This is true not just in California but all across the country.

From what you have told me, the law is on the side of the unit owner who has brought suit against the Board. “Substantially compliant” and “fully complaint” are two different scenarios when it comes to lawsuits. Until your Board is fully compliant with the Davis-Sterling Act (and any other condominium or common interest community laws in California) it is vulnerable to similar suits from this or any other unit owner who doesn’t agree with an action the Board takes. The simple solution is to follow the letter of the law and the association’s own governing documents. Since the association has been run in a “substantially compliant” manner up until recently, I am guessing there are just a few adjustments that need to be made for full compliance. At that time, the actions of the association are bullet-proof and the lawsuits brought against the Board would have no merit. With no lawsuits pending against the association, I can see no reason you and any other unit who wishes to do so would not be able to sell their unit. You just have the unfortunate consequence of trying to sell at a time when there is an active lawsuit against the association.

Of course, I recommend that you seek out a legal opinion from a qualified attorney. However, unless the attorney encouraged you to bring suit against the unit owner in question, I would recommend that you continue to encourage your Board to be fully compliant with all state laws and hold additional meetings and votes as needed to get the actions of the Board (such as the elections and the decision to paint) on the official minutes of the association in such a way as their validity cannot be questioned. All the best!

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