Board is not obligated to disclose legal actions to titleholders

Question: A developer is suing both our master and maintenance associations for not allowing new development on vacant lots in our association. Since our monthly assessments are being used to pay legal fees for this lawsuit, does the board of directors have a fiduciary duty to notify the homeowners of the pending legal issues as well as the costs involved? As of this date, no notice has been given to the owners.

I also believe that potential buyers should be given written notice of the current legal issues in case of a special assessment to pay settlements if the association does not prevail in court. Am I correct?

Answer: Although the association must inform potential buyers of such litigation, it is not obligated to disclose those same facts to existing titleholders. Somehow the rules regarding association-related disclosures to its own titleholders have been interpreted to yield this result. Even if made aware of the litigation, by law only the board has the authority to liaise with the attorneys prosecuting or defending that lawsuit. In an association-related lawsuit, titleholders are merely the bankroll for litigation, not active participants.

One of the best methods for existing owners to stay aware of activities that the board is not required to disclose to them is to regularly examine the association’s records. Titleholders may review books, records, documents and bills pertaining to all the association’s vendors, including the attorneys. Although in some instances the association may edit certain information about attorney-specific services, chances are you will still be able to determine whether there is any litigation involved.

Another method for uncovering association-related litigation is to access the court index, free at the local courthouse. Some courts offer Internet access to their databases for a fee. Search using the developer’s name and/or the association’s name to see whether they are a party to any lawsuits. If the association is listed in a lawsuit, note the case number, as you will be able to access any documents filed by either party and may also have copies made at your own expense.

Check the court docket for dates and times of court appearances and hearings. With few exceptions, anyone may attend hearings and, if a trial ensues, homeowners as members of the public can attend that too.

In addition to those suing and being sued, once a lawsuit is filed, you or anyone else can disclose that fact to all the other owners. Neither the board nor its attorneys can prevent disclosure of that public fact to anyone.

Depending on the type of insurance policy the association carries, a judgment may or may not be covered. If not covered, then, you are correct that all the titleholders could be assessed to pay the judgment and perhaps even damages.

Send questions to Box 11843, Marina del Rey, CA 90295 or e-mail noexit@mindspring .com.