HOA trustees can enforce covenants, even though they didn’t have annual meetings

If you want to stop a homeowners association from collecting assessments or enforcing restrictions, often the best tactic is to smear the HOA.

Here’s how the smear works. A lawyer defending a homeowner the HOA says the HOA isn’t legit, questioning:

• whether the HOA is the same HOA as the one empowered by the subdivision’s covenants, conditions and restrictions (CCRs),
• whether its assessments were imposed in the manner required by the CCRs or
• whether the officers of the HOA were elected following the procedures established by the CCRs or the HOA’s bylaws.

HOAs are generally operated by volunteers, who often lack the training, professional advice, community support and leadership needed to do their jobs well, so they are often easy targets.

Sometimes the smear works, but for Mr. and Mrs. Greeves, it backfired. Take a look at the Missouri’s Eastern District Court of Appeals opinion handed down February 10, 2009, Trustees of Indian Springs Owners Association v. Greeves.

Greeves built a shed without obtaining the HOAs approval, as required by the CCRs. The HOA asked the court to order the removal of the shed and to require Greeves to pay the HOA’s attorney fees. At trial, but not in their answer filed early in the lawsuit, Greeves claimed that the HOA’s trustees didn’t have the right to sue because they were not properly elected representatives of the HOA. The trial court agreed with Greeves and dismissed the suit.

The HOA appealed, claiming:

• the issue of the HOA’s capacity to sue was waived by Greeves, and
• the HOA did have standing to be in court.

The appellate court agreed with the HOA on both points, reversing the trial court’s judgment.

The appellate court looked to case law that defined capacity to sue as the authority to bring suit or the right to have access to the courts.

Missouri’s procedural rules require that challenges to capacity to sue must be raised at first opportunity, usually in a motion to dismiss or an answer filed in response to the plaintiff’s petition. Had Greeves raised this issue then, rather than at trial, the argument that the HOA’s failure to hold annual elections of trustees for the past three years might have been successful.

The requirement of standing is to keep the courts from wasting resources and making decisions about controversies in which one of the parties really doesn’t have anything at stake, or “no dog in the fight.” Missouri’s procedural rules, like those of most jurisdictions, say that standing is never waived. The defense that the plaintiff lacks the capacity to sue is waived if not asserted by the defendant early in the case.

The appellate court ruled that the CCRs gave standing to the HOA and any owner of a lot in that subdivision. It didn’t matter whether the HOA trustees were properly elected, since Greeves had conceded that point by failing to assert it at the first chance.

The final nail in the coffin for Greeves is the appellate court’s language about attorney fees. After making clear that the HOA had the capacity to sue and the standing to do so, the appellate court directed the trial court to determine whether Greeves’ shed violated the CCRs. If the shed violates the CCRs, Greeves would have to pay the HOAs attorney fees. What an expensive shed!

If Greeves had raised the issue of capacity to sue early in the case, the dynamics of the litigation would have been different, because the trustees would not have been able to show that they were properly elected, and they could have ended up personally paying the defendant’s attorney fees. Not having been properly elected, they could not have used the association’s money for the lawsuit.

The suit could have been brought by any lot owner in the subdivision, but many owners are unwilling to take on such a suit to benefit most of their neighbors, while earning the emnity of a few.

It’s really important for an association to follow the procedures for elections  and budgets outlined in its CCRs and bylaws. Otherwise, the best efforts of volunteers go to waste to the detriment of the whole neighborhood.