Association homeowners may foot the bill if their HOA loses a lawsuit. Typically made up...
The homeowners’ association’s (HOA) attorney represents the HOA as an entity. The HOA is separate and distinct from the individual directors, homeowners, and community managers. Typically, the HOA attorney is charged with looking out for the best interests of the HOA, such as by reviewing the HOA’s rules, regulations, and governing documents to make sure that they are up-to-date and do not violate existing laws. If there is a dispute between the HOA and an unhappy homeowner, for example, the HOA attorney advises the Board on the best interest of the entity and the entity’s obligations to its members. Should formal mediation or litigation be necessary, the HOA attorney may represent the HOA during the proceedings.
An HOA Is a Separate, Distinct Entity
The homeowners’ association is a separate entity, much like Walmart is a separate entity from that of its shareholders, board of directors, and corporate officers. The board for the homeowners’ association – like the board of directors for Walmart – acts on behalf of the association by, for instance, creating regulations and rules that protect and further the interests of the homeowners’ association and its community. The HOA can own property, have a bank account, enter into contracts to buy goods or services, and to sue or be sued.
HOA Attorneys Represent the Association as an Entity
The HOA attorney represents the homeowner’s association as an entity, rather than the individual board members or directors.
An HOA attorney is the legal counselor for the HOA. The HOA board members are charged with ethically acting on behalf of the HOA, such as by voting for regulations and rules, and subject to the Business Judgment Rules. The HOA general counsel (another name for an HOA attorney) legally advises the HOA board on the governing laws that may impact the association. An HOA attorney will also assist the HOA board in amending governing documents for the HOA. The HOA attorney is additionally responsible for reviewing the homeowner’s association’s governing documents to make sure that the HOA complies with its own rules and regulations.
General counsel for the HOA may also evaluate decisions that are made or contemplated by the board to ensure that the decision is in the best interest of the HOA as an entity, rather than the board members as individuals. For example, if the board is voting on whether to raise the HOA fees and the compensation for the board members, the board members have an inherent interest in raising the fees and the compensation for the members. The board members can still vote on these matters; however, an HOA attorney can act as a neutral third party to make sure that the proposed terms of the resolution for the increase in the HOA fees and board member compensation is fair and in the best interest of the HOA, not any or all individual board members.
Further, as the Nevada state legislators pass new state laws in Nevada and society changes, it may become necessary for the HOA board to update its rules and regulations. For example, some common regulations for HOA’s include prohibitions against homeowners running businesses out of their home and restrictions on noise. If the legislators pass a new law prohibiting homeowners’ associations or landlords from restricting a homeowner’s ability to run a remote consulting business out of his or her home, for example, an HOA attorney might help the board understand the new law and amend the HOA’s documents accordingly.
Additionally, one of Nevada’s new laws makes it so that from May 1st through September 30th of each year, the State and City laws about the hours during which construction may commence takes precedence over an HOA’s rule about construction hours. If the HOA’s regulations and rules prohibit construction after 3 pm, for instance, but the State or City law says that construction should stop at 8 pm, then the State or City law may apply, not the HOA’s regulation.
Having an HOA attorney review the HOA’s governing documents, rules, and regulations, in part, serves the goal of protecting the best interest of the HOA as an entity by making sure that it remains compliant with new laws. Without an HOA attorney, an HOA might be subjected to a lawsuit by a homeowner because the HOA’s restrictions are contrary to the law. An HOA’s attorney might help limit the HOA’s liability, thus protecting the interests and purpose of the HOA.
Does an HOA Attorney Represent Directors Individually?
The HOA attorney does not represent directors individually; however, the HOA attorney can – and should – advise the HOA board and have conversations with the individual HOA directors about the legal rights and responsibilities of the HOA board and the HOA.
The board of directors for the HOA have obligations to act in the best interests of the HOA by, for example, making sure that the individual members are making business decisions or voting for or against something because it would help the HOA, rather than the board member’s personal interests. As discussed above, an HOA attorney represents the HOA as an entity, but, as part of that representation, may review contemplated resolutions or proposed changes to ensure that the action would not unduly harm the HOA’s interests (such as by excessively increasing the compensation of the board members when the HOA is in financial distress).
Does an HOA Attorney Represent Individual Homeowners?
As discussed earlier, the HOA attorney represents the HOA as an entity; however, the attorney may act as a buffer between the HOA board and an unhappy homeowner. Furthermore, the HOA attorney may attend meetings where homeowners are present and are expressing their concerns about the HOA. Following these meetings, the HOA attorney may recommend that the HOA board take steps or actions based on the homeowner feedback or concerns.
As of 2013, it is the law in Nevada that, in disputes involving a homeowner’s association, the “disputing parties must complete the Alternate Dispute Resolution (ADR) process” before commencing a lawsuit. If the HOA’s governing documents have a process of resolving disputes in-house, that process must be fully followed before participation in ADR. At all times, the HOA attorney will typically represent the HOA, rather than an individual board member or homeowner. HOA boards are encouraged to communicate with an HOA attorney openly and clearly about what the HOA attorney can provide to the HOA and any limitations on the terms of representations.
Does an HOA Attorney Represent the Community Manager or Management Company?
No, the HOA’s attorney does not represent the community manager or management company. The HOA attorney can, for example, field questions that the community manager or management company has, with the permission and knowledge of the HOA board.
During the COVID-19 pandemic, for example, the HOA attorney may be directed to explain to the community managers the social distancing, masks, and sanitation rules for indoor and outdoor common areas, such as what notices must and can be posted. In some cases, the HOA may be subject to fines or other penalties for not complying with these rules, so the HOA might be responsible for advising the board on these obligations as well.