Avoiding Litigation

Below is an article that was recently published in the Dallas/ Ft. Worth Community Associations Institute Chapter magazine, Community Contact, Fall 2014, which discusses how to avoid litigation:

Stay on Track: 10 Hurdles to Overcome and Survive Litigation

By Julie E. Blend, Esq.

In today’s litigious society the threat of a lawsuit is a harsh reality for owners’ associations. Many times litigation can be avoided by taking a proactive approach to governance. Here are 10 hurdles to overcome to survive, or better yet, avoid, being sued:

  1. Board members should set up a separate e-mail account used exclusively for association business. The rules of discovery in litigation are broad and it would be unfortunate if your work or personal e-mail account became subject to discovery because association communications were made using those e-mail accounts.
  1. Have proper insurance in place and understand your coverage. Consult a community association insurance specialist to determine what coverage is available and makes the most sense for your association. Be sure to assess your insurance protection on a calendar basis to address changes in your insurance needs.
  1. Treat owners consistently the same without selective enforcement of covenants. Selective enforcement is a legal defense and nothing looks worse to a judge or jury than a board that shows favoritism to one or more owners. Owners are more likely to sue an association when they are incensed over unequal treatment of owners.
  1. Follow proper procedures in holding meetings, elections and votes. Improper procedure is subject to challenge. An excellent property management company and attorney can help your association follow legal requirements.
  1. Read, understand and follow your governing documents. Conduct an annual audit of your governing documents to determine whether amendments or new policies are necessary. Be sure all governing documents are filed in the county real property records or they are not effective.
  1. Keep accurate records and document matters with a paper trail when necessary. If a difficult conversation takes place, send a follow-up e-mail to confirm what was said. If a conflict is brewing, take notes to help you remember the answers to who, what, when, where and how.
  1. Do not make harsh decisions out of anger. A good rule of thumb is the 72 hour rule: if you want to send a nasty e-mail or letter to let them know what you really think, write it out on paper and hold it for 72 hours. Read it again and ask yourself how a jury would perceive the e-mail or letter if you actually sent it.
  1. Communicate with the members openly and often about what is going on in the community. For example, if a special assessment is needed, have open communication about it first before springing it on the owners as a surprise. An owner who feels “kept in the dark” is more likely to twist a suspicion into a fiduciary duty claim.
  1. Stay current on areas of potential liability through CAI publications, programs or industry presentations. The law evolves and changes constantly. For example, don’t wait to learn about fair housing laws by reading the petition filed against the association alleging familial status discrimination.
  1. Have a community association attorney on Favorites on your smart phone.  Many legal bloopers are preventable by taking the time to call your attorney before you send the letter, pass the rule, etc. A phone call can save you from thousands of dollars in defense costs and headaches, and preserve your association’s goodwill.