Enforcement of Covenants - Part 4
 
ENFORCEMENT OF COVENANTS
 
PART IV
 
    This edition of the e-Lawyer is the fourth in a multi-part series which addresses the enforcement of the covenants that regulate deed restricted communities (e.g. HOAs and Condominiums). For purposes of these articles, the term 'covenants' will include the restrictions found in Declarations, Articles of Incorporations, By-Laws, Rules & Regulations and Architectural Guidelines. These e-Lawyer articles will not, however, address issues relating to the non-payment of assessments.
 
    In Part I (Volume V, Issue 4), we addressed the various options that may be available to community associations to enforce their covenants.
 
    In Part II (Volume V, Issue 5) , we addressed the mediation/litigation process that is now required for the enforcement of HOA covenants.
 
    In Part III (Volume V, Issue 6), we addressed the arbitration process that is required by Chapter 718, Florida Statutes, for the resolution of most condominium disputes.
 
    In this Part IV, we will address prevailing party attorney’s fees.
 
PREVAILING PARTY
ATTORNEYS FEES
 
ATTORNEYS’ FEES VS COSTS:
 
    As a beginning point, it is important to understand that 'attorneys’ fees' and 'costs' are not the same. Attorneys’ fees are those monies paid for the legal services performed by attorneys and their staff (e.g. paralegals). Costs, on the other hand, are the funds paid for such things as HOA mediation fees, filing fees, service of process fees, deposition charges paid to a court reporter and sometimes, but not always, telephone and copy charges.
According to Florida law, prevailing parties are always entitled to recover their 'Costs'. Therefore, this article will only discuss attorney’s fees.
 
REALISTIC EXPECTATIONS MUST BE ESTABLISHED:

    Many community association board members vote to take actions against a violator only because they believe that the association will be reimbursed for all of the attorneys fees expended in that effort. As will be addressed below, this isn’t always possible, thereby leaving these persons disillusioned and discouraged.

    One of the purposes of this article is to assist board members and managers in establishing realistic expectations concerning this issue.

WHAT IS THE BASIS FOR THE ENTITLEMENT TO PREVAILING PARTY ATTORNEYS’ FEES:

    It is critical to understand that a prevailing litigant is not entitled to recover its attorneys’ fees from the losing party unless entitled to do so by contract or law. Thankfully, Community Associations can claim this right based on both contract and law:

    Contract: Because written and recorded deed restrictions (i.e. Declarations) are considered 'contracts', and because the vast majority of Declarations provide for prevailing party attorney’s fees, Community Associations almost always can claim contractual attorney’s fees.

    Law: Even if a Declaration does not provide for prevailing party attorney’s fees, the following Florida Statutes do:

    a. Section 718.1255 for condominium arbitrations
    b. Section 718.303 for condominium litigation
    c. Section 720.305 for homeowners association litigation
 
NOTE 1:    It must be remembered that if the violators prevail, they will likewise be entitled to these fees from the Association.
 
NOTE 2:     718.116 provides for fees relating to the collection of assessments, however that section will not be addressed in this article.

MUST YOU FILE SUIT TO BE ENTITLED TO PREVAILING PARTY ATTORNEY’S FEES:

    A question that is often asked is whether a Community Association is entitled to prevailing party attorney’s fees if no lawsuit is ever filed. The answer to this question will depend on the language in your Declaration.

    All the above cited statutes, and the vast majority of Declarations, require that a lawsuit be filed and that a party actually prevail to be entitled to attorney’s fees. In those cases, a claim made for pre-litigation fees may violate the Fair Debt Collection Practices Act.

    However, some Declarations do provide for 'pre-litigation' attorney’s fees and some of those documents permit a lien to be filed against the property of the violator for such pre-suit fees. These provisions, while valid, can result in serious repercussions for associations; therefore, caution must always be used when exercising this right.

ARE YOU ENTITLED TO ATTORNEY’S FEES IF A CASE IS SETTLED AT THE MANDATED HOA MEDIATION PROCESS:

    As addressed in Part II (Volume V, Issue 5) of this series, most HOA disputes must proceed through a mediation process before litigation can be filed. The law that requires such mediation, however, is silent as to the recovery of attorney’s fees for such mediation process. Accordingly, whether the HOA will be entitled to attorney’s fees as part of the mediation process will be based on the same standards addressed in the immediately preceding section of this article.

    If the matter is not settled at mediation and litigation is then filed, the attorney’s fees incurred during mediation may be included in the claim made by the prevailing party at the end of the case.

WHAT DOES IT MEAN TO 'PREVAIL':

    The word 'prevail' is defined in Wester’s Dictionary as follows:

'To gain victory by virtue of strength or superiority...Triumph'

    However, sometimes there are complicating factors that make it difficult to determine who actually prevailed in a lawsuit. The following are the typical circumstances where this question must be addressed by a Judge or Arbitrator:

    a. Single-Issue Lawsuits:

    If a violation lawsuit involves only one issue (e.g. failure to maintain the yard), it is typically a simple matter to determine who prevailed.

    b. Multi-Violation Lawsuits:

    Sometimes a lawsuit is filed concerning several violations (e.g. failure to maintain the yard and having a commercial vehicle). In these cases, it sometimes happens that each party will prevail on some, but not all, of the claims. When this occurs, the Judge or Arbitrator must decide who prevailed based on the following two concepts:

        i. First, the Judge or Arbitrator must decide which party prevailed as to the most significant issue raised in the case. For instance, if the Association filed a two count action based on the complete failure to maintain the home and on the fact that a car had no tag, and then only prevailed as to the home issue, it seems clear that the Association prevailed as to the more significant issue and should be awarded its fees.

        ii. If, however, a Judge or Arbitrator is unable to decide if either party prevailed as to the most significant issue, then they have the discretion to decide that neither party prevailed or that one party should be awarded its fees based on other factors.

    These complexities can result in some unexpected decisions.

    c. Counterclaims Against the Association

    Sometimes when a suit is filed, the homeowner will file a counterclaim back against the Association (e.g. in response to an action concerning a commercial vehicle, the owner sues for damages resulting from a roof leak). In these cases, the question of attorney’s fees is decided in the same fashion as addressed above for Multi-Violation lawsuits.

    d. The Violation is Cured After the Suit is Filed:

    Sometimes a violation is cured after the suit is filed but before a judgment can be obtained. When this occurs, the Association may still be entitled to recover its fees, but only if it can prove that the violator cured the violation as a direct result of the lawsuit being filed and not as a result of some completely independent event. While generally the Association can prove that the lawsuit resulted in the cure, the following will serve as an example of a circumstance where this may not occur:

Mr. & Mrs. Jones live in a community for older persons but they allow their young grandchild to move in with them. Suit is filed. The owners file an answer alleging that the community did not qualify for such Fair Housing treatment. The child is then removed from the community because the child’s parents, who had been involved in a contentious divorce, have reconciled and are now in a position to again take care of him.

    In this circumstance, the Association may or may not be entitled to recover their fees because there is a real question as to whether the child was removed as a result of the lawsuit or because of the reconciliation of the parents.

    e. The Violator Sells and Moves After the Suit is Filed:

    Sometimes, but not often, a violator sells and moves after a suit is filed but before judgment is obtained. In these instances, it is many times impossible to recover fees from the former owners.

    In those instances, however, when the violation continues, the Association can, after proper notice, substitute the new owner for the old owner in the lawsuit and continue forward with the suit if the violation is not cured. The new owner would then be responsible for the fees incurred after they became the owner if the Association ultimately prevails in the suit.

MUST THE COURTS GRANT THE FEES TO THE PREVAILING PARTY:

    According to Florida law, a Judge or Arbitrator must award attorneys’ fees to the prevailing party, but see the next section for a better understanding of this obligation.

WHAT AMOUNT OF FEES WILL BE ASSESSED AGAINST THE LOSING PARTY:

    Unlike assessments and other damage claims that can easily be determined from a written instrument (e.g. unpaid promissory note), attorneys’ fees are classified by Florida law as 'unliquidated damages'. In practice, this means that, if the losing party objects to the amount of the fees, a Judge or Arbitrator must ultimately establish the exact amount of fees that must be paid.

    While Judges and Arbitrators must award some attorneys’ fees to the prevailing party, they are only legally required to award 'REASONABLE' attorney’s fees. This means that they are not required to reimburse the Association the full amount of attorney’s fees that were incurred in the case, instead they are only required to award the amount of fees that they believe to be 'reasonable' for that case. As to this question, Judges and Arbitrators have great latitude as to the exact amount of fees that they will award. For this reason, in non-assessment cases, the amount claimed and the amount awarded is almost never the same, especially in protracted, complicated cases.

NOTE 1:     Arbitrators typically are less likely to award the full amount of fees requested by an Association based on a public policy position that Associations have more assets than do unit owners.

NOTE 2:     No fees incurred after the determination of the prevailing party is made may be charged back against the losing party. Accordingly, attorney’s fees incurred proving the amount of fees cannot be recovered by the prevailing party

HOW DO YOU COLLECT THE AWARDED FEES:

    Except in those rare cases where the Declaration allows attorney’s fees to be converted to an assessment, Associations must collect attorney’s fees using the same process utilized to collect personal judgments. In addition, in Florida, a person’s homestead is protected against such claims. Accordingly, while in the majority of cases the losing party voluntarily pays the fees, sometimes the collection process can be very difficult, if not impossible:

NEXT EDITION:

    In Part V of this series we will discuss the various defenses that are raised by violators.

The firm of Taylor & Carls, P.A., with offices located in Maitland, Melbourne, Tampa and Palm Coast, Florida, was founded in 1981 and has practiced in the area of community association law since that date. This edition was prepared by Robert L. Taylor, Esq. of Taylor & Carls, P.A. The information contained in The Association e-Lawyer should not be acted upon without professional legal advice.

©2006 Taylor & Carls, P.A. All Rights Reserved.
The firm can be reached Toll Free at 1-800-395-6235 or locally at 407-660-1040.
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