The Orange County business and real estate litigation attorneys at Buffington Law Firm have dealt with many cases involving homeowner’s associations (“HOAs”). HOAs play an increasingly important role in California and other states. Courts have recognized that HOAs often function as quasi-governmental entities that exercise significant control over the members within a given association. This can be a good thing. A well-run HOA can help preserve home values by preventing disharmonious or substandard architecture or landscaping within a neighborhood, and by enforcing reasonable standards. On the other hand, HOAs can be intrusive and sometimes can unreasonably interfere with a homeowner’s quiet enjoyment of his or her property. Because of the power that HOAs usually wield, this can and sometimes does lead to litigation between homeowners and the HOA. In this brief Blog article, I will discuss a common conflict of interest issue involving HOA attorneys.
Avoid Attorney Conflicts of Interest: Using Common Advisory and Litigation Counsel is a Bad Idea. Almost all HOAs within my experience have a law firm that advises the HOA directors and officers how to deal with disputes and other legal issues. These problems come up frequently. Mr. and Mrs. Smedlap painted their home an unauthorized and jarring color and are resisting repainting it. Mrs. Jones built a wall that is higher than the Architectural Standards allow. Mr. Gilani’s new gazebo is blocking Mr. Higashi’s view. And so forth. HOAs usually have a relationship with a law firm to advise them as to how to deal with these sorts of problems. HOA directors are ordinary citizens who do not always understand the requirements that the law imposes on HOAs and their directors. It is a good idea for HOAs to have a law firm on retainer to advise them. Many law firms make a good living advising HOAs and these lawyers are usually very knowledgeable about what the law expects.
Sometimes HOA advisory attorneys must choose between advising that HOAs pursue litigation against a homeowner, or some other less drastic solution, such as some form of compromise or alternative dispute resolution. And this is where the problem often arises. When the advisory attorneys also serve as litigation counsel there is an inherent conflict of interest. Litigating a lawsuit on behalf of the HOA against a homeowner can be a very profitable enterprise for a law firm. The law firm stands to gain financially by advising litigation. Of course, most law firms can set this fact aside and will give unbiased advice. But this is not always what happens. I have been involved in HOA disputes in which it was notorious within an HOA that the HOA attorneys were constantly advising directors to take a confrontational “in your face” approach to homeowners, to the exclusion of other alternatives. Litigation within these HOAs had become a chronic, expensive, and yet largely avoidable problem. No one wins when an Association is constantly plagued by this kind of litigation. And yet, when a law firm advises the HOA directors that they have a “fiduciary duty” to resolve a dispute by bringing litigation, most directors feel compelled to follow this advice.
A very good first step in avoiding this kind of chronic problem is for the HOA directors to insist that litigation counsel be completely separate from the law firm that provides day-to-day advice to the directors. This eliminates the obvious conflict of interest. Additionally, it is usually the case that lawyers that focus on providing day-to-day advice to HOAs and their directors are not really skillful litigators. Providing advice and counsel, in the one instance, and prosecuting a lawsuit, in the second instance, involve very different skill sets. An HOA that insists on keeping these functions separate will very likely find that it avoids a great deal of expensive litigation and gets better results when it really does need to go to court.
Buffington Law Firm’s Orange County litigation attorneys have broad experience in litigating HOA matters. If you have an HOA issue that you believe may require a lawsuit, this is our business. We invite you to call for a free legal consultation to discuss the matter.