Virginia’s HOAs getting ready to hold homeowners in contempt

Legislation careening toward the Governor will streamline HOA’s power to force homeowners to comply with architectural guidelines or be held in contempt by a judge.

On January 14, here, I described SB1327 and its identical house counterpart HB2289.  These bills are flying through both chambers and there is substantial risk that nearly identical bills will pass both chambers before crossover (the time after which each chamber may only consider bills passed by the other chamber).  If this happens citizens are essentially assured that broad new powers will be put into the hands of HOAs.

The major problem: SB1327 and its identical house counterpart HB2289 give HOA’s the power to obtain a court order from a General District Court [GDC] Judge forcing a homeowner to comply with architectural guidelines under threat of being held in contempt of court.

Why the HOAs want this power:  Right now if there is a violation of architectural guidelines (or other covenants) the HOA can fine you up to $900.00 for an ongoing violation.  The HOA can put a lien on your property for that amount.  The HOA can sue in the GDC obtain a judgment and garnish your wages.  But, if they actually want to force you to change your property they must sue in the Circuit Court.  The Circuit Court is the only place that can enter an injunction forcing you to do or not to do something.   

So why does it matter if HOAs can sue in either the Circuit Court or the GDC?:  It is best to use a specific jurisdiction as an example, Fairfax.  A Fairfax Circuit Court civil case that is actively contested will generally take 8-12 months.  Attorneys’ fees are counted in the tens of thousands.  For a GDC civil case that is actively contested, the case will generally take 2-3 months, and attorneys’ fees will often run $5,000.00 or less.  Another major difference between the two courts is the success of default judgment.  Default judgment is what happens when the party being sued fails to properly respond.  It is a lot easier to obtain default judgment in the GDC, and a lot harder to overturn default judgment in the GDC. 

So aside from cost, time, and ease of default judgment, isn’t the current system good enough for HOA’s?: No.  When bringing a lawsuit for violation of covenants the HOA must bring all claims and seek all remedies regarding a transaction or occurrence in the same proceeding, or they are waived.  This means under the current system an HOA can not sue in GDC for money, and then later sue in Circuit Court later for an injunction.  If the HOA ever thinks it might want the injunction, the entire case must be filed in the Circuit Court.

How does the injunction work anyway?:

Virginia HOA’s to gain more cost effective control over unit owners under potential new legislation

Updated January 14, 2011 - companion bill

Home Owners Associations [HOAs] are private organizations designed to provide common benefits to unit owners and maintain preferable standards in the community to ensure higher property values.  To maintain preferable standards a mixture of private contracting and public laws have been enacted to control the procedures  for enforcing maintenance standards.  

Although I could criticize these procedures from a myriad of perspectives, on the whole they present a generally fair system.  The one major deficiency is lack of available affordable judicial intervention. 

SB1327 has been offered by Sen. Mark Herring (D - Leesburg) as an attempt to make the Court system more accessible when there is an alleged problem with architectural guidelines.  The problem is it makes the court system more accessible to HOA’s without similar accessibility for homeowners. 

Unnecessary limitations on Virginia’s General District Courts

Most residents of the Commonwealth of Virginia will have some experience with the General District Court system at some time while they reside here.  The GDC happens to be where almost all traffic and parking matters are adjudicated in a final manner.

For those practicing outside traffic and criminal law the GDC is where small civil cases are adjudicated.  For non landlord tenant matters the jurisdiction of the GDC is limit to claims of less than $15,000.00 pursuant to Va. Code § 16.1-77(1).  If your case exceeds the jurisdictional limit it must be filed in the Circuit Court where the procedures require payment of additional attorneys’ fees by an exponential factor, and almost a year of extra time to get to trial.

A GDC civil case can usually be concluded in 2-4 months, and even a heavily contested matter can usually be completed for $7,500 or less in attorneys’ fees.  There are certain limitations on the GDC case such as the automatic right of appeal, but even that imposes limitations on the losing party.

In short the GDC is faster and cheaper for civil litigants, and therefore a more efficient way to adjudicate claims.  The jurisdictional limit makes it difficult to adjudicate claims in the $15,000.00-$30,000.00 range in an efficient manner. 

Although I might personally advocate for a slightly higher jurisdictional limit two bills going before the General Assembly this session would raise the jurisdictional limit to $25,000.00.  The raise in the jurisdictional limit to $25,000.00 is being suggested by Sen. Don McEachin (D- Richmond) in bill SB774, and Del. Sal Iaquinto (R-Virginia Beach), in bill HB1590.