Responsibilities of HOA’s and Condominium Boards
The Board of Directors of a condominium cooperative or Homeowners Association (HOA) constitutes the governing body for a residential building or community. Serving on a board can be rewarding in that it allows one to be part of the decision-making process for the community. While a professional management company may handle day-to-day maintenance and operations, board members retain a number of important duties and responsibilities, which can vary greatly. Such responsibilities typically include dealing with unhappy and disruptive shareholders or residents that may cause unending misery in the community.
Unfortunately, many boards and managing agents of cooperatives report ongoing problems with shareholders who continually break co-op rules. Sometimes, these problems take up the board’s energies, funds, and time and require meeting after meeting. Sometimes the offending shareholder becomes threatening to board members or neighbors. On occasion, the shareholder is the owner of an apartment occupied by an unrecognized, non-purchaser sub-tenant who can wreak havoc on the building and is often totally unrepentant.
Legal Counsel of HOA’s and Condominium Boards
Our firm has counseled numerous cooperative, HOA and condominium boards on the issue of objectionable conduct exhibited by shareholders, homeowners and condominium unit owners, which unfortunately have the ability to drag the cooperative and even board members themselves into costly and annoying litigation.
Cooperatives are not anyone’s landlord. Rather, individuals buy shares of stock in the cooperative in exchange for the right to live in one of the cooperative units. Cooperative buildings that are plagued by residents who repeatedly violate the proprietary lease, or who create a continuing nuisance, can usually rely on one way to evict an objectionable shareholder or occupant. In relying on a cooperative’s by-laws, cooperatives can hopefully prevent an overly complex and long-drawn-out litigation process in such instances.
Proprietary leases in by-laws provide authority for a cooperative board and/or the shareholders to bring an action to enjoin the unit-owners and other parties from objectionable conduct of a difficult shareholder or other related parties. Nearly every cooperative corporation’s proprietary lease contains a section on dealing with a difficult shareholder/occupant, whether that be via a default or objectionable conduct provision. While the cooperative still needs to prove in a Landlord/Tenant Court trial or hearing that the occupants’ behavior is in fact objectionable and warranted eviction, including this provision in the by-laws, provides the board reasonable recourse and allows the cooperative to pursue a clear cut remedy.
Such objectionable conduct on the part of a difficult shareholder/occupant, which allows the cooperative to proceed in court under an “objectionable conduct” clause, can include repeated instances of excessive noise; offensive odors; creation of an unhealthful situation; chronic failure to pay; a shareholder’s commencement of baseless lawsuits against the cooperative, its board or other residents; and use of an apartment as a B&B or other business. Such a provision is also significant given the COVID-19 public health emergency, which has posed new problems in light of the mortarium on evictions and caused significant delays in proceeding with evictions and other related issues in the landlord/tenant process for cooperatives.
While the cooperative cannot always protect itself from being unnecessarily involved in a dispute by virtue of one of its shareholder’s disputes with a subtenant, an objectionable conduct provision can assist in court. Although it is ultimately left to the judge’s discretion, some courts will likely find against the offending shareholder and determine that the conduct did occur or was serious enough to warrant an eviction. Moreover, paving the way for a speedy litigation process in landlord/tenant court could also reduce the need for some neighbors and building employees to testify in a court proceeding against the offending shareholder, making the process faster and less costly. Furthermore, strategically worded provisions in by-laws assist all future board members in accounting for potential yet unforeseeable problems arising from shareholder misconduct.
This use of the provision is effective provided that the cooperative is acting in the best interests of the shareholders for a proper business purpose, and has documented its case properly and followed all procedural requirements of the lease. Each situation is unique and requires analysis by counsel to determine which remedy fits the situation at hand and how to go about addressing the problem, keeping in mind laws and regulations.
While such clauses are not a complete panacea, strategically worded language in by-laws together with a strong commitment to strongly enforcing those by-laws can ensure the cooperative has a variety of options in which to seek remedies, especially when a cooperative is unfortunately involved in litigation based upon a shareholder’s breach. Access to such options is crucial in light of the kinds of problems a cooperative may face over even a simple by-law violation that seems easily curable.
Eccleston & Wolf’s Success in Representing HOA’s and Condominium Boards
Eccleston and Wolf recently litigated a nearly two-year-long case in which a shareholder violated their proprietary lease by allowing a subtenant to move in unlawfully, without the signed sublease required by the cooperative’s by-laws. This failure caused a myriad of problems for the board including being unnecessarily dragged into a landlord-tenant dispute, which turned into a massive lawsuit in Court and named, as parties to the suit, the cooperative’s board, the building itself, third-party management companies, concierge services, and other building employees.
Not only did the shareholder fail to obtain a signed sublease prior to allowing the subtenant to move into the building, but the shareholder also failed to obtain the necessary District of Columbia Rental Authority (DCRA) license to sub-lease and rent out to other occupants. Thus, the lack of a sublease and lack of a valid license formed the basis of the squatter tenant’s refusal to pay rent to the shareholder.
Not only could the cooperative not step in with regard to the squatter subtenant as there was no contractual nexus between the cooperative and subtenant without a lawfully executed sublease, the subtenant also had no access to the cooperative’s amenities, including concierge and package retrieval services. Although the cooperative was fully in the right in refusing access to its amenities, the subtenant felt so wronged that she filed approximately six different actions, as well as a 353-paragraph amended complaint, including counts for Preliminary and Permanent and Injunction, Negligent Gratuitous Bailment, Tortious Interference with Business Relations, Private Nuisance, Trespass to Chattels, Conversion, and damages for destruction to property and slander. While these cases may seem frivolous, they can carry enough weight to go on for lengthy periods of time, costing the cooperative and its insurance company hundreds and thousands of dollars in fees to defend itself. At least, with strategically worded provisions in by-laws, cooperatives can eventually seek to pursue damages and compensation from the violating shareholders whose violation caused the cooperative misery in the first place.
Contact Our Team of Experienced Litigation Attorneys
In addition to a broad range of complex commercial litigation matters, Eccleston and Wolf regularly provides legal representation to Homeowners Associations, Condominium Associations, Community Organizations and Management Companies that is wide-ranging in scope, including tort claims, contract disputes, by-law enforcement, employment issues, and premises liability claims. To see how the qualified attorneys at Eccleston and Wolf can assist you, contact us at our Maryland, Virginia, or D.C. office today.