Q: I want to buy a condo & found out there is a lawsuit being filed against the HOA re insurance issue should I walk away?
HOA for the past 12 yrs has been undercharging some units while overcharging some units for the insurance.
A:
That does not make sense since insurance is a common expense. Insurance is not charged to individual units as a separate charge but included in the total of all expenses. The way budgets for condo associations work is the board determines how much is needed to pay all operating expenses for the year and either divides that by the total number of units or it is pro rated to each unit based on square footage, with all units paying a combined 100% of the total expenses. Reserves are then added into this.
While a rumor or comment there is a lawsuit "being filed" is a red flag you probably do want to walk away, it is not proof that one is being filed or one will be filed. Angry owners threatened to sue associations all the time but it doesn't always happen. It's more of a red flag that you have one or more unhappy owners and they can make everyone's life miserable and/or cause everyone to incur a special assessment if there is a lawsuit the insurance does not cover.
If you are going to buy or sell real estate you need to hire a real estate lawyer to represent you because there are so many things that could go wrong and this is just one of so many. Your attorney could find out if the association has obtained the proper reserve studies, engineering inspections, adequate insurance coverage, etc. A real estate lawyer can also make sure there are no clouds on the title or outstanding liens and judgments against the association. This is an example of a few issues.
A: HOA=Bad, all you see and hear on this Q and A sights is the horror stories of HOA related matters, you should always think twice when an HOA is involved, if one is involved in litigation and potentially protracted ones, those are larger assessments and costs to the owners eventually. HOA's also can move faster than anyone related to foreclosures when issues arise and on and on the list goes. While HOA's are very common, you can see I am not a fan (not in the least and I freely admit it), all we see is the headaches on these Q&A forums so I encourage you to move forward with caution, expenses are ever increasing and special assessments/costs are always an unwelcome surprise.
Anthony M. Avery agrees with this answer
Justia Ask a Lawyer is a forum for consumers to get answers to basic legal questions. Any information sent through Justia Ask a Lawyer is not secure and is done so on a non-confidential basis only.
The use of this website to ask questions or receive answers does not create an attorney–client relationship between you and Justia, or between you and any attorney who receives your information or responds to your questions, nor is it intended to create such a relationship. Additionally, no responses on this forum constitute legal advice, which must be tailored to the specific circumstances of each case. You should not act upon information provided in Justia Ask a Lawyer without seeking professional counsel from an attorney admitted or authorized to practice in your jurisdiction. Justia assumes no responsibility to any person who relies on information contained on or received through this site and disclaims all liability in respect to such information.
Justia cannot guarantee that the information on this website (including any legal information provided by an attorney through this service) is accurate, complete, or up-to-date. While we intend to make every attempt to keep the information on this site current, the owners of and contributors to this site make no claims, promises or guarantees about the accuracy, completeness or adequacy of the information contained in or linked to from this site.
