Awarding Legal Fees in Association Lawsuit

May 17, 2018
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Q: A homeowner in the community I manage is suing the association. We’re concerned not only about the cost of litigation, but also that we might be on the hook for the homeowner’s attorney’s fees, not just our own. If the homeowner loses the case, what is the likelihood that we’ll have to pay for his costs, too?

A: Unfortunately, litigation can be a reality for community association managers and boards. While going to court can be expensive, the good news is that members who are suing the association are often not entitled to have their attorney’s fees paid by the association—if they lose the case. A California condominium unit owner in a planned community asked a court for his legal fees to be paid by the association and was denied that request.

There, the owner alleged that a board of directors election for the community had been improperly conducted. He claimed that there were statutory violations. He asked a trial court for declaratory relief—that is, a judgment of a court that determines the rights of the parties without ordering anything be done or awarding damages—but the court denied it. The unit owner appealed. A California appeals court affirmed.

The appeals court agreed with the trial court, holding that the unit owner's allegations did not present an “actual controversy” warranting declaratory relief because the owner did not allege “continuing or habitual violations, nor was there any evidence indicating that the association would continue to operate under any allegedly unlawful rule or practice.”

The unit owner had also asked for attorney fees to be awarded. But the appeals court noted that, although the unit owner had initially been successful in obtaining preliminary injunctive relief prior to the trial court’s decision, that did not entitle the unit owner to interim attorney fees and costs because there was nothing in either the statutory language or the legislative history suggesting any intent to abandon the general rule that “fees and costs could be awarded only at the conclusion of the litigation.” So because the unit owner had ultimately failed, he wasn’t entitled to fees despite early success. What was relevant for fees was the final outcome [Artus v. Gramercy Towers Condominium Assn., January 2018].