Thought Leadership

Don’t Be Penny Wise and Pound Foolish When it Comes to Spending Money on Legal Fees

Association boards are often looking to cut costs and save money wherever they can. In doing so, they often look to avoid spending money on legal fees and costs by trying to handle things on their own. As the saying goes, “he who represents himself has a fool for a client.” Most board members simply do not have the knowledge or expertise to handle legal matters that may arise, which is why it is best to know your limitations and seek outside professional help and advice when needed – and to make sure that the professional advice is coming from someone who is experienced and knowledgeable in that particular area, whether it is community association law, accounting, engineering, etc. Boards that fail to heed this advice and take matters into their own hands or do things on the cheap (i.e. being penny wise and pound foolish) often find themselves in difficult situations as a result and usually end up paying a lot more money on the back end to fix the problem than they would have spent on the front end to do things right in the first place.

A prime example of a situation where boards try to take short cuts by doing things themselves rather than seeking competent legal advice is in amending governing documents. All too often I run into cases where a board has attempted to amend its governing documents without the assistance of an experienced attorney and, as a result, the amendment is either completely invalid because they did not follow the proper process to amend in the first place, or it is worded improperly and does not accomplish what the Association attempted to accomplish, or, even worse, it creates unintended consequences that are far worse than whatever situation they were seeking to address in the first place. Like many problems, these issues with the documents tend to come to light at the worst times when the association is seeking to enforce the documents and the owner or resident on the other side points out the flaw in the association’s case. While the Minnesota Common Interest Ownership Act (“MCIOA”) does contain a 2-year statute of limitations on challenging the validity of an amendment, that only protects the association from arguments that the amendment was procedurally invalid but does not protect against poor drafting or other issues with the amendment itself. In many cases, these amendment mishaps are so bad that the only way to fix them is to completely rewrite one or more of the association’s governing documents, which often ends up costing much more than it would have had the board not tried to do things on the cheap and instead hired a knowledgeable attorney to assist with the process from the beginning.

Similarly, many boards do not think to have an attorney review their rules and regulations periodically to ensure that they are enforceable and are not going to get the Association into any trouble. When I do review rules, I am still surprised to see so many rules aimed at children and families with children that violate fair housing laws. Then there are those associations that attempt to accomplish through the rules things that require an amendment to their declaration or bylaws. And don’t even get me started on satellite dishes. Almost every set of rules that I have ever reviewed in my 20+ year career have been in conflict in some way with the Federal regulations governing satellite dishes and similar antennas. Each of these improper or unenforceable rules is a lawsuit waiting to happen. If you think hiring an attorney to review your rules is expensive, wait until you have to pay to defend claims that may not be covered under the Association’s insurance.[1]

Another area that gets many boards in hot water is with requests for reasonable accommodations and modifications. This is another very specialized area of law that even most attorneys are not knowledgeable about, so how can boards and managers expect to navigate these issues on their own? Ideally, every board member and property manager would receive regular training on fair housing issues, particularly in responding to reasonable accommodation and modification requests. In reality, boards and managers who do not have this specialized training should be seeking appropriate legal advice before responding to any such requests to ensure that they are doing so in a proper and non-discriminatory manner. These boards also need to include as part of their annual budgets an appropriate amount of legal fees for obtaining such advice. Associations that have significant pet restrictions in particular should include in their budgets fees for addressing requests for service and support animals or other accommodations from those rules. For the most part, the association will not be able to assess those fees back to any of the owners (doing so may be deemed retaliation, which is a separate fair housing violation), so boards need to consider this a cost of doing business and budget accordingly. Failure to properly respond to reasonable accommodation or modification requests can result in discrimination charges being brought by the Minnesota Department of Human Rights or the U.S. Department of Housing and Urban Development and/or a discrimination lawsuit. Defending such claims will almost always cost an association more than it would have to obtain an upfront review and advice to ensure that the matter is handled properly.

Regardless of what type of property or demographics you are dealing with, most association boards simply do not have the right type of education or expertise to handle their own legal matters. Even if there is an attorney on the board, that doesn’t mean that he or she has experience in this type of law or that he or she should be acting as both a board member and the attorney for the association[2]. Boards need to remember that they are running a business and that engaging outside professional help, including but not limited to experienced legal counsel, to ensure that they are operating in compliance with their documents and applicable law and/or to assist in handling disputes or other matters is not only prudent but is also good business and is likely to save the association money in the long run.

[1] This is also a good argument for having good insurance coverage to pay for the defense of claims that may arise from time to time.

[2] This would likely be a conflict of interest in any case.

ABOUT THE AUTHOR

Phaedra J. Howard
Phone: 952-746-2142
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