AZ SB 1468 – holding HOA boards personally liable for going to court

SB 1468 is one of three bills that will put into place strong and effective penalties against HOA boards who use the threat of law suits to intimidate and punish homeowners into keeping their mouths shut. This bill will hold directors personally liable for the HOA’s attorneys fees if they lose in court.

This long needed enforcement of HOA laws against the boards, rather than just the members, comes about as a result of the HOA industry failing to police itself and to oppose intentional and rogue HOA violators. HOA lobbyists pay lip service to the ”5%” bad boards, but oppose any meaningful attempt to reign them in, a gross failure to act as a good corporate citizenship. Well, it’s time to pay the piper! HOAs “have gotten away with murder” against widows, retirees, single parents, minorities, and those who do not have the money or stamina to buck the HOA. Many of which are simply having the board to just comply with the law and governing documents.

Not only are the boards themselves directly at fault, they are also guilty of abdicating their duties and responsibilities under the law and governing documents to their hired hands, the attorneys and management firms. They are negligent in allowing their agents to act without accountability and without proper oversight and restrictions. The HOA attorneys make money win or lose by going to court. The HOA attorneys often step across the line and collude with the president and wayward boards to violate the laws and governing documents under the excuse of “in defense of my client.” They violate Arizona R. Civ. P. 11(a) (federal rule 11(b)) that requires,

The signature of an attorney or party constitutes a certificate . . . that to the best of the signer’s knowledge, information and belief formed after reasonable inquiry it [the complaint] is well grounded in fact and is warranted by existing law . . . and that it is not interposed for any improper purpose, such as to harass . . . or needlessly increase the cost of litigation.

and Supreme Court Rules of Professional Conduct, 1.2(d), counseling client to break the law, and  1.13(b), Organization as Client, with respect to knowledge of client breaking the law.

Former Arizona Supreme Court Disciplinary Commission Chair, David D. Dodge, wrote about attorney “overzealousness” in the June 2005 edition of Arizona Attorney. (See my Commentary, HOA attorney fiduciary duty to homeowners).

The pro-HOA forces will immediately cry, “NO one will want to become a board member and the HOA will fail.” Well, I got news. Not too many members are rushing to become board members today, anyway. This bill requires the legislators to not only make a just and proper approval of the SB 1468, but to take a proper and just ethical and moral stand against authoritarian, undemocratic private governments that abuse the citizens of Arizona. Violations of the laws and our principles of democratic government cannot be allowed to continue! There are existing legal mechanisms today — just as there are mechanisms for HOAs to obtain public street variances, but HOAs prefer their independent principality status rather than be part of the greater community — that will maintain the perceived planned community benefits while holding the HOA government subject to the 14th Amendment as required of all government entities. (See A proposal for the “Muni-zation” of HOAs; Stop developers from granting private government charters).

Homeowners in HOAs have been waiting a long, long time for effective enforcement against HOA violators. Passing SB 1468 would be a very good start!

PS. The other bills are HB 2445 and SB 1240.

SB 1468 changes to the law

Notwithstanding any provision in the condominium documents, if a unit owner incurs attorney fees in a court action between the condominium or the board and the unit owner regarding enforcement of the condominium documents and the unit owner substantially prevails in the action, the following apply:

1. The members of the board of directors who voted on the record to support the court action against the unit owner are personally liable to the association for attorney fees and costs incurred by the association in the action.

2. If there is no record of who voted to support the court action against the unit owner, all of the members of the board of directors are personally liable to the association for attorney fees and costs incurred by the association in the action.

Published in: on February 10, 2012 at 7:30 am  Comments (15)  
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15 CommentsLeave a comment

  1. can a person or persons who is/are a director on a HOA board be sued by a homeowner?

  2. We currently have an HOA who is going rogue. The President set up a recall which failed and then got herself elected President (her husband is under investigation for running an illegal enterprise out of their home) along with a few cronies. So far they have admitted to collusion in an open meeting, have deemed a fellow board member from the old board “irrelevant” and refuse to provide him with any documents, have failed to send large contracts out to bid, etc. And we are on our third management company in less than a year. Is there nothing we can do? No one to complain to?

    • What is it about some people that have their egos totally tied into being on a Board despite the fact that other owners do not approve of them? I strongly believe that in Arizona we need strong laws and legislature to govern and control HOA Boards and Board of Directors. Example: each Board of Director should be required to pass a background and fingerprin
      t clearance within 30 days of being elected or not be allowed on the Board or have the HOA insurance company insure them as Board members. In addition, complete open disclosure should be required before they run to be on the Board. Have they been in lawsuits against any HOA or owner? Have they done anything that can be considered illegal or have they acted in such a way to benefit themselves at the HOA? If so, one would hope that other owners will be smart and not vote for individuals that do not show the right qualities in terms on honesty and integrity. There should be a HOA Board of Director rules and conduct which they should be required to sign and they should be required to agree that if they do not act in the best interest of all owners and violate the HOA Board rule of conduct for members of the Board they will be required to resign.

      I also believe that the HOA rules should be submitted annually to the Attorney General’s office and anyone that approved them who is on the Board or committee should be required to sign as being responsible for the rules.

      We need to have every member on an HOA Board held responsible for their actions and decisions.

      We should also require that every meeting whether it is an Executive Meeting or Open Meeting to be recorded by the HOA in case any issues of misconduct arise. This would prevent Boards from making decisions that are unfair or not in the best interest of all owners if they know that every meeting is recorded and every member on the Board who is participating is noted.

      • See HOA regulatory bill post here.

  3. I would like to know if this Bill passed and the governor signed it into law. If so, when? Thank you.

    • None of these homeowner protection bills became law.

      • Why not?

  4. Very nice blog post. I certainly love this website.

    Stick with it!

  5. Our HOA has had the same president for 23 years! Management co for over 15 years. I recently got interested in the election process (semi- retired) and saw how absolutely corrupt it is. the president and other board members are puppets of the LARGE management company.I documented the corrupt vote counting and had 5 people from the MGMT Co. in my face telling me that I could not leave the room unless I gave them my notes. I see now why we have had the same president for 23 years. The election resulted in TWO ties! No doubt in my mind that if I had not called them on their questionable way of counting that there would have been the same result as for 23 years.

    I have owned here for 14 years and wish I had seen what has gone on earlier. I am certain that an ambitious lawyer could bring down our Mgmt co. on raketeering charges. What a big fish to catch, it would make headlines. 600 employees and 400 accounts. Located in Scottsdale. Just my notes of corruption from last winter would open
    multiple investigations. I am from Chicago and I KNOW CORRUPTION

    We were able to get a new person ELECTED to the board, but they would not declare a winner. Our new guy has identified false billing and
    numerous inconsistencies in where our $ go….SOOO they have labled him and adversary and banned him from the executive meeting.He was made treasurer, but can’t see the bills until AFTER they are paid by the MGMT Co. They have had the same roofer for 15 years and seeing some areas of question, The board has injoined our roofing committee chairmen from any contact with the roofer because he doesn’t want any oversight. The guy who was in charge of roofing for 23 years was put back in charge. He has never gone on a roof to check before the work, during, OR after. He just says to the MGMT CO. “Pay the man.”
    The meeting minutes are full of lies. The minutes are recorded by the same guy for 23 years. I have only attended 4 meetings and the minutes are so biased that the truth is obscured .

    Much more …Don’t know where to start. I have pages of notes about conflict of interest, collusion, and illegal practices. Intimidation. No bidding. Management Co. profits on EVERY aspect of our HOA by creating a problem to perpetuate continued patronage through dependance on them FOR EVERYTHING. We are being charged for legal fees for problems they create for profit. Coincidentally it is by their lawyers.

    An aging poulation of snowbirds is being DUPPED!.

    Who do I contact? The States Attorney’s office? Please help.

    I own a small managemnt company in Illinois and am able to see what others don’t . WOW! Raketeering charges are in order.

    Cynthia Santomarco

  6. Any news on the results if the new rule passed today?

    • The bill passed, but there was a lot of “time to rethink my position.” Passing this comittee is just the first important step to becoming law. Other votes are required before becoming law.

  7. Our HOA president after unsuccessfully trying to convince the board of the “folly of their actions” (meaning she KNEW they were wrong)…decided to to sue my family anyway.
    When I approached her and told her we would counter-sue the association and board…she laughed and said….”sue us! We have insurance! ”
    These HOAs are disgusting dictatorships of morons, egged on by ethicless attorneys.

    • Directors can be sued for intentional wrongful acts and gross negligence, as I believe is happening here by the president’s flippant remarks, and insurance will NOT cover these acts. Furthermore, ARS 10-3830(C), and 10-3842 for officers, says, “A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection B unwarranted,” which also applies here to leave the board and president out in the cold. They cannot say that they relied on expert attorney opinion and clam no liability.

    • This is why every Board member should be required to pass a background clearance and fingerprint security clearance as well as integrity test where they have to disclose their past actions and present actions against HOAs and homeowners before any HOA insurance company will insure the individuals. The Board of Directors have access to confidential and financial information yet they have not passed an security clearance. It makes absolutely no sense that our AZ HOA laws are so flawed and careless. We need to have HOA Board of Directors held accountable for their actions and decisions especially when they do not act in the best interests of all owners and in a fair manner to all members. We need strict laws to govern HOA Boards.
      We should also hold any attorney who is support bully HOA boards to be held equally liable.

  8. There is a lot of HOA Attorney and HOA President ‘collusion’, probably most of the ‘entrenched’ board presidents who cannot seemingly be ousted for decades – despite the fact that everyone seems to despise them – have some type of ‘financially mutually beneficial’ arrangement.

    Our Board President, entrenched for 9 years and counting, IS an attorney, yet he felt no compunction to fact check any of his property manager’s false claims before filng a $220K suit against my family. In which essentially all of their claims had not a shred of evidence to back them up, they didn’t even try…They finally just clung to a flower bed border which was arguably not well presented in submitted plans by an ‘approved’ landscape architect…One claim out of about 10 that MAY have had an inkling of legitimacy, the others were just blatantly false and outrageous, piled on to pressure us into just shutting up and paying.

    The worst part? There is NO DOWNSIDE TO THE HOA for the Board, the property manager and the HOA Attorney to just lie their asses off, have a field day at the homeowner’s expense and just chortle about the legal harrassment. Its all great money in the end for the HOA Attorney, win or lose – who makes it well worth the while of the other entities to go along with all glee and winks. The homeowner is punished severely for not just caving in and paying for all the lies, as well as any slightly legitimate complaint – what a criminal farce.

    Got an entrenched Board President? Then there is an astronomical probability that you’ve got a serious crook…Got an HOA home? Well, I’ve made sure that thousands of people have heard my story, directly from me, so you have a dwindling supply of victims. Clean up – or fade away…The internet isn’t going away. Most of us know how to ‘talk’ to a LOT of people.

    It wouldn’t suprise me if the CAI was one of the big lobbying crooks for SOPA and for censorship,,,because the only thing I despise more than HOAs now is the CAI who pretends that these HOA crimes aren’t widespread. Sorry, they are growing daily. Go bury yourself in your own smarm CAI.

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