Lawsuits are usually not an association’s go-to method for dispute resolution. Expensive and time-consuming, they can quickly turn into a financial burden and may create strained relations in the community. Unfortunately, in some cases there’s no other way out. Last year a couple filed a suit against a neighbor, the association, individual board members, and property managers who all neglected to respond to the couple’s complaint of odors infiltrating their unit, the result of 20 cats inhabiting the neighbor’s unit below.
This may have been an extreme case but most associations will be involved in a lawsuit at some point, though the length and certainly, price tag may vary. “The variables are how complicated are the causes of action. I could file a simple complaint but if the defendant hires an attorney and cross claims, it could get very complicated. It depends on how much discovery is necessary, depends on how much motion work, if it goes to trial. It's impossible to predict, really,” says Anne Ward, an attorney at the law firm of Ehrlich, Petriello, Gudin & Plaza in Newark, New Jersey.
Regardless of the cost or type of complaint, there are a few basic points about lawsuits that all associations should be aware of.
Unless you live in a utopian condo association, lawsuits are bound to happen. The most common ones include noise complaints between neighbors, construction defects in units and attempts to collect delinquent payments from residents. Boards should know what to do if they're the target of litigation. “The first step when a board is sued is they should first immediately reach out to their attorney,” says Eric Goidel, a partner at the Manhattan-based law firm of Borah, Goldstein, Altschuler, Nahins & Goidel in Manhattan. “The attorney should reach out to the insurance broker because all co-ops and condominiums should have general liability insurance and that will cover you for things like personal injury and property damage issues, and almost all boards have directors and officers liability, which will cover the actions of the board taken over the course of representing the interests of the co-op or condo,” says Goidel.
In the case of maintenance fees, boards have to be strategic in going on the offensive. “The board has to decide whether they want to take legal action against that delinquent unit owner. Under the Fair Debt Collection Practices Act, the attorney or any debt collector is required to send a demand letter, that says how much is owed, who the creditor is, and they have 30 days to dispute that amount,” says Ward. “If the debt has not been paid by the 30th day, the association files a complaint. If it's less than $15,000, and it typically is, I usually file it in the special civil court as opposed to the criminal court. The process is easier and quicker. It's very limited discovery, so you get a quick decision,” says Ward.