My hoa lost a 5 million lawsuit. Am I on the hook?

Rental Property Investor · Las Vegas, NV · Member since 2017 · 69 posts · 16 votes

My hoa lost a lawsuit and has a judgment to pay 5million. Am I on the hook? Should I expect a huge assessment fee? What legal rights do I have?

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JD MartinBusiness Member

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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes

11mo

Quote from @Jake Langley:

Thanks Chris, the policy does not cover it, but it seems crazy that we would have to pay as homeowners.

@Chris Seveney

Why would that seem crazy? The homeowners *are* the HOA. I can't picture what the level of negligence or fraud was involved here. How many homes is the HOA? What was the case?

Yes, if you don't have enough insurance to cover the judgement, then your options are going to be an appeal, an assessment, or an agreement with the victorious party. It depends on your state but it's highly likely if the HOA defaults the winner can get possession of the HOA and then simply levy assessments against all the homeowners.

Unless you're talking about small potatoes here - IE 500 homes is just $10k/home - I would seriously consider selling if the HOA appeals and you can get a reasonable price even disclosing the ongoing appeal and current judgement.

This is precisely why people who live in an HOA need to stay involved. If your HOA board sucks, and/or your management sucks, your assets are at risk.

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
11mo
Quote from @Jake Langley:

My hoa lost a lawsuit and has a judgment to pay 5million. Am I on the hook? Should I expect a huge assessment fee? What legal rights do I have?

not enough information to respond. They may have insurance that covers this. If not and its responsibility of HOA then yes the HOA would be responsible.
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Jake Langley
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Rental Property Investor · Las Vegas, NV · Member since 2017 · 69 posts · 16 votes
11mo
Thanks Chris, the policy does not cover it, but it seems crazy that we would have to pay as homeowners.
@Chris Seveney
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- JD MartinBusiness Member
  Moderator
  Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
  11mo
  Quote from @Jake Langley:
  
  Thanks Chris, the policy does not cover it, but it seems crazy that we would have to pay as homeowners.
  @Chris Seveney
  
  Why would that seem crazy? The homeowners *are* the HOA. I can't picture what the level of negligence or fraud was involved here. How many homes is the HOA? What was the case?
  Yes, if you don't have enough insurance to cover the judgement, then your options are going to be an appeal, an assessment, or an agreement with the victorious party. It depends on your state but it's highly likely if the HOA defaults the winner can get possession of the HOA and then simply levy assessments against all the homeowners.
  Unless you're talking about small potatoes here - IE 500 homes is just $10k/home - I would seriously consider selling if the HOA appeals and you can get a reasonable price even disclosing the ongoing appeal and current judgement.
  This is precisely why people who live in an HOA need to stay involved. If your HOA board sucks, and/or your management sucks, your assets are at risk.
  Podcast Guest on Show #243
  Skyline Properties
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  2 Reply
Don KonipolBusiness Member
Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
10mo
Quote from @Jake Langley:

My hoa lost a lawsuit and has a judgment to pay 5million. Am I on the hook? Should I expect a huge assessment fee? What legal rights do I have?
First, you are almost certainly NOT personally liable, but the value of your property is significantly affected by the judgement.
The Board will have to decide how to proceed. As a general rule, there are 4 alternatives

1. Pay the judgement either out of general operating funds (if the HOA has the necessary amount in reserves, or a general assessment or special assessment)
2. Appeal or negotiate a settlement and then (1) above
3. Ignore the judgement as long as possible
4. File bankruptcy

The homeowners themselves can see if there is liability deriving from the action(s) of the BOARD itself as per the lawsuit. If so the homeowners may be able to sue the board or individuals on the board.
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