The perversity of HOA's
HOA boards have perverse incentives to keep litigating bad cases because the board members never face any real consequences.
My clients have recovered a great deal in attorney's fees from HOA's over the years, but time and time again, I see HOA's digging in their heels in litigation, even in cases where they've already lost the main issue in contention at the pre-trial phase (that is, at summary judgment). Why won't HOA's ever admit defeat, even when they've been defeated?
The answer, I believe, lies in the nature of HOA governance. When people with axes to grind seize control of HOA's, they wreak all kinds of havoc by imposing draconian new rules without getting broad community approval. Most people in the subdivision or condo don't have time to fool around with local-local government (HOA's), so they don't get involved or know what's going on until busybodies and fascists have taken over the board. By then, it's too late to do anything but fight the HOA in court since the new officers and directors won't respond to reason or criticism and can draw on the HOA's bank account to hire expensive lawyers to enforce the board's will. There are always lawyers willing to take HOA money to stick it to homeowners, and HOA lawyers are sometimes the same kinds of people as those who take over HOA boards!
But here's where it gets really ugly and perverse. When an HOA fights a homeowner, the homeowner (in Texas) faces the threat of paying the HOA's entire legal bill if the homeowner loses, which can be a terrible burden for one homeowner. The HOA, however, draws on all its members to pay an adverse attorney fee award, often amounting to less than a few hundred dollars per member under the worst-case scenario. Bad HOA boards have every incentive to keep litigation going, and their lawyers have every incentive to egg them on, so long as the downside risk is low for every homeowner in the HOA. An HOA can crush a homeowner, but all a homeowner can do is collect a small sum from each owner for horrendous HOA board misconduct.
You can't generally sue an HOA officer or director. Those lawsuits belong to the HOA itself. In cases where homeowners finally do oust bad directors, having the new board sue the old board only compounds the problems. The HOA usually bought insurance for its directors, so suing the former directors just triggers the HOA's own insurance. The HOA pays a deductible, and the insurance pays out, but then the insurance carrier jacks up the premium or refuses to insure the HOA in the future. All the HOA has done is get money to pay for more insurance!
The only brake I've ever seen on bad HOA boards is the lawyers the HOA's insurance company hires when my clients file suit. Typically, the HOA's general counsel (who may have egged the HOA on) steps aside so that the lawyer provided by the insurance company handles the case my client has brought against the HOA. I have found, almost without exception, that generalist attorneys who come in to do HOA defense work are seasoned, reasonable, fair-minded attorneys who are aghast at what their HOA client has done. At that point, it is often -- but not always -- possible to resolve a case that the HOA seems destined to lose. Nevertheless, when an HOA board is deeply entrenched, power-crazed, and fascistic, even a good lawyer can't tame that beast, and the people who pay the price, ultimately, are all the other homeowners, not the bad board members.
What a system!
The answer, I believe, lies in the nature of HOA governance. When people with axes to grind seize control of HOA's, they wreak all kinds of havoc by imposing draconian new rules without getting broad community approval. Most people in the subdivision or condo don't have time to fool around with local-local government (HOA's), so they don't get involved or know what's going on until busybodies and fascists have taken over the board. By then, it's too late to do anything but fight the HOA in court since the new officers and directors won't respond to reason or criticism and can draw on the HOA's bank account to hire expensive lawyers to enforce the board's will. There are always lawyers willing to take HOA money to stick it to homeowners, and HOA lawyers are sometimes the same kinds of people as those who take over HOA boards!
But here's where it gets really ugly and perverse. When an HOA fights a homeowner, the homeowner (in Texas) faces the threat of paying the HOA's entire legal bill if the homeowner loses, which can be a terrible burden for one homeowner. The HOA, however, draws on all its members to pay an adverse attorney fee award, often amounting to less than a few hundred dollars per member under the worst-case scenario. Bad HOA boards have every incentive to keep litigation going, and their lawyers have every incentive to egg them on, so long as the downside risk is low for every homeowner in the HOA. An HOA can crush a homeowner, but all a homeowner can do is collect a small sum from each owner for horrendous HOA board misconduct.
You can't generally sue an HOA officer or director. Those lawsuits belong to the HOA itself. In cases where homeowners finally do oust bad directors, having the new board sue the old board only compounds the problems. The HOA usually bought insurance for its directors, so suing the former directors just triggers the HOA's own insurance. The HOA pays a deductible, and the insurance pays out, but then the insurance carrier jacks up the premium or refuses to insure the HOA in the future. All the HOA has done is get money to pay for more insurance!
The only brake I've ever seen on bad HOA boards is the lawyers the HOA's insurance company hires when my clients file suit. Typically, the HOA's general counsel (who may have egged the HOA on) steps aside so that the lawyer provided by the insurance company handles the case my client has brought against the HOA. I have found, almost without exception, that generalist attorneys who come in to do HOA defense work are seasoned, reasonable, fair-minded attorneys who are aghast at what their HOA client has done. At that point, it is often -- but not always -- possible to resolve a case that the HOA seems destined to lose. Nevertheless, when an HOA board is deeply entrenched, power-crazed, and fascistic, even a good lawyer can't tame that beast, and the people who pay the price, ultimately, are all the other homeowners, not the bad board members.
What a system!