Selling or Buying a Property
in a Home Owners Association
with an Ongoing Litigation
Facts and Myths
If you are thinking of selling or
buying a property located in a community with an ongoing litigation, the
question you should ask yourself to make an informed decision is the following:
What types of HOA litigation can adversely impact the value of a property? To help you answer to this
interrogation, you will find below some information which outline the most
common type of HOA litigation as well as their possible impact on the worth of
a property, for informational purposes only.
1. HOA vs. Homeowner
If this is a private litigation
against a resident which is not related to any structural damages to the common
areas of the building, this issue will most likely have no consequences on the
value of a given property unless you are the homeowner targeted by the lawsuit
or if you intend to sell or buy a property which has been deteriorated because
of the actions of such homeowner.
2. Homeowner vs. HOA
This issue will most likely have no
consequences on the value of the property unless you are the homeowner who
started the legal action against the HOA and the issue at stake has to do with
the condition of some common areas of the building which generated some kind of
damages in your unit.
3. Homeowner vs. Homeowner
This type of litigation will most
likely have no consequences on the value of the property unless you are one of
the homeowners involved in the legal action as a plaintiff or as defendant and
you want to sell your property.
4. HOA vs. Third Parties
This is the type of litigation which
will most likely have repercussions on the value of the property as they
usually are related to the condition of the common areas of the
community. The two most common legal action under these circumstances are
as follows: Lawsuit against the builder for construction defects (SB 800),
lawsuit against the property management company for failure to perform.
In these situations, on the seller
side, the consequences on the sale price of the property will depend on the
gravity and the extent of the issues in the common areas as well as on the
estimated length of the legal action. On the buyer side, the most important
effect is that only lenders specialized in HOA litigation will be able to fund the
purchase of such dwellings, which will come at a cost, i.e. a higher interest
rate which can be renegotiated once the legal action is over.