Conciliation Court and HOA’s – a Win-Win for All Parties

On behalf of Roeder Smith Jadin, PLLC posted on Thursday, November 9, 2017.

Enforcing covenants and conditions can be the biggest nightmare for an HOA board, especially once the break-even point has been reached and the developer is no longer involved. The HOA then has to make a series of decisions about when and why to enforce covenants—CC&R’s—and sometimes when not to. Everyone has read horror stories on the Internet about HOAs enforcing covenants on residents for lawns a quarter-inch too long, or not watering in drought conditions; yet most of the time, CC&Rs are essential to maintain the look and value of a development.

Litigation to enforce covenants, conditions, and restrictions leaves everyone angry, and can be an expensive and lengthy process, even if the HOA is entirely in the right. Moreover, by the time most people get around to litigation, the violations have gone on for a very long time, the dollar amounts are very large, and attorneys are discussing liens, foreclosure, and judgments. In some cases, the violations have occurred because, due to sale of the property, the homeowner may be unaware of the violation; in others, the CC&Rs may be unclear or ambiguous, and the violation may not be as cut and dried as the HOA board believes.

Conciliation Court – Advantages for the HOA

In Minnesota, conciliation court, also known as small claims court, may be an alternative to expensive foreclosure litigation, if the dollar amount is low enough. In Minnesota, the limit is $15,000. Although the rules for filing and service of process are the same, the filing fees are lower and the rules of court are less strict. Parties do not have attorney representation; although business entities may be represented by their in-house counsel, they do not have to be.

The advantages to the HOA are many. A board member can appear in court, and explain to the judge exactly why certain covenants and restrictions are part of the deed, where an outside attorney may not really understand. Board members comprehend the need for a development to maintain its appearance and character, and why “just one deviation” really can’t be allowed.  And if a compromise can be reached, the board member will be able to agree or offer alternatives more readily than an attorney who must consult with the board.

In addition, conciliation courts, or small claims courts, often require mediation as part of the process. Mediation is an informal sit-down between the parties prior to formal adjudication, a last effort to hash out differences before the judge makes everyone unhappy with her ruling.

Conciliation Court – Advantages for the Homeowner

HOA boards must represent all their residents, even the ones against whom they are litigating. If they can encourage residents to accept conciliation court instead of dragging things out to a lengthier lien or foreclosure process, it only benefits everyone. To that end, HOA boards should be aware that small claims courts have a number of advantages for homeowners as well.

The filing costs are lower, as noted above, and the rules more relaxed, since attorneys are not allowed to argue in court. Judges allow, and often encourage, both parties to have their full say, and often that is what the homeowner wants, a chance to air his grievances before a sympathetic audience.  Judges in small claims courts are apt to suggest compromises unlikely to occur in civil courts, such as payment plans or reduction of attorney fees. All these are benefits to the homeowner, who may need to be coaxed or encouraged to participate.

Other Considerations

Obviously, for serious violations, excessive outstanding fees, and other issues, conciliation court is not an option. HOA board must always have the best interests of their homeowner’s association in mind. But for new cases and minor violations, conciliation court is ideal, and should always be considered before things become too large and emotions run too high. Remember that attorneys should always be consulted before any action is taken in any court of law.

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Roeder Smith Jadin, PLLC

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