Rob Samouce: Attorney fees are a cost of doing business for community associations

Most directors sitting on the board of well-run community associations, both condominium associations and homeowners' associations, understand that (although the associations they run are not-for-profit corporations under Florida law), the associations are businesses and must be run like any other good business.

This means that there are costs of doing business that must be taken into consideration when an association board tries to balance providing competent services for the operation and control of the community and at the same time try to keep assessments in check.

For some not so well-run community associations, though, their directors, for some unknown reason, don't understand, or do not want to understand, that attorney fees are one of the costs of doing business. These are the associations that usually end up spending the most on attorney fees because they go too long thinking that they do not need an attorney and can save money by not budgeting for attorney fees and then try to figure out those legal issues on their own. Lo and behold, those little legal problems they try to summarily sweep under the rug all of a sudden jump out and bite them when they least expect it. Usually, they receive the costly bite when they are served a lawsuit concerning that little matter that did not mean much before.

It ceases to amaze that some community associations have no problem spending $50,000 a year on mulch (that washes away every summer) but do not budget adequately for (at even a tenth of the mulch costs) or engage and utilize an attorney in the operation of the association.

Many community association attorneys will provide low-level general counsel association representation on a yearly fixed price retainer basis. Such a known yearly retainer price makes it easy for the association to estimate the attorney fees costs for yearly budgeting purposes.

Both Chapter 718 (The Condominium Act) and Chapter 720 (The Homeowners' Association Act) of the Florida statutes state that the officers and directors of the association have a fiduciary relationship with the unit owners or members. Jack Holeman, a columnist for many years for the Miami Herald, once defined this fiduciary relationship as "a relationship of trust and confidence. An association, and its board, maintain the common property of, and do business as agent for, the folks, who own the complex, i.e., the unit owner members. The unit owners therefore can expect to have complete trust in these elected leaders. It follows that as trusted agents; the law holds such board and officers to a higher standard of 'trust' than would apply in usual business transactions. Board members must always act in good faith, in the best interest of the unit owners, while operating within the scope of their authority. In other words, they can be trusted to act prudently and responsibly in every circumstance when dealing with and for the unit owners of the association."

One of the main duties of the board of directors of an association is, of course, to enforce the rules and regulations contained in the governing documents of the community. The rules and regulations exist for the purpose of making the community the kind of place the majority of the owners want. Some owners want to live in diversified community with few rules, while others are attracted to communities with very similar type owners (such as 55 and older communities) and very structured rules. Although, with the proper membership or board vote, the rules and regulations of a community can be altered to better fit the wants of the majority of the owners living there, if the rules are on the books, the rules need to be enforced by the board when allegations of violations arise by other owners. If a board fails to enforce the rules when violations are reported by owners, the board can be sued for failing to carry out its fiduciary duty in enforcing the rules.

How do rules get enforced? Usually a phone call is made and letter is sent to the alleged violator by the president or management requesting the violation to cease. If the violation continues, then usually a letter will need to come from association legal counsel warning the alleged violator to cease or be sued. If the violation still continues, a suit may have to be filed by the association against the violator. The attorney letter to the violator, and, if necessary, the cost of the lawsuit, is inevitably part of the costs of doing business in running the community association. Many directors do not understand this because they think the violator should pay all the costs of the violation, including the association attorneys fees, and the members should not have pay these costs. However, the attorneys' fees were necessary in order to obtain a remedy to the violation and that is what the officers and directors are supposed to do as part of their fiduciary duty to enforce the covenants.

If a board of directors tries to save these costs by not engaging an attorney to enforce the covenants when the alleged violator fails to comply with the president's or management's request to cease a violation, many times an owner who is being affected by the violation will go after the board of directors by way of a lawsuit for the board's failure to enforce the governing documents. All of a sudden, what would have been a little in attorney's fees to ensure compliance now becomes a lot in both defending a lawsuit brought against the board by one owner and having to then bring a compliance lawsuit against another owner.

In addition, a board could be in real trouble if it waits too long to bring a lawsuit against a violator because such delay could result in not being able to enforce the violation because of legal concepts known as estoppel and laches. In these cases, the owners having to suffer the violation will have even more damages because of the inability to cure the violation.

Running community associations has costs of doing business, and association counsel legal fees is one of these costs just like all the other costs of running the association and should be adequately budgeted for and responsibly spent when association legal issues arise.

Rob Samouce, a principal attorney in the Naples law firm of Samouce, Murrell, & Gal, P.A. concentrates his practice in the areas of community associations including condominium, cooperative and homeowners' associations, real estate transactions, closings and related mortgage law, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.

© 2005 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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