Assessment of Rules Enforcement Legal Fees in New Hampshire
Note: This article pertains solely to New Hampshire Condominiums and is not applicable to Massachusetts Condominiums
I am often writing letters to unit owners to inform them of their rules violations and to make demand that such violations stop. The legal fees associated with the letter are typically assessed to the unit owner as the fees are based on misconduct. The basis for assessment is two-fold. One, almost every set of condominium documents provide that legal fees incurred relative to an owner’s failure to abide by the rules and regulations contained in the governing documents shall be assessed to the unit. However, this same provision usually also states that the condo is entitled to such legal fees if the condominium prevails in court. The second basis for assessment is section 15 of the NH Condominium Statute (RSA 356-B). This section of the statute provides that the “prevailing party” in a suit over the condo’s governing documents is entitled to legal fees.
But, most rules violation cases never make it to Court, the owner simply stops committing the violation and everyone moves on. In such instances, there is no prevailing party. So is it acceptable to assess legal fees to the unit if there is no court case and therefore no prevailing party? The answer is yes, but it’s complicated. As an aside, some sets of documents do allow to recoup rules enforcement related legal fees without need of suit and becoming the prevailing party, so a review of your specific set of documents is in order.
As I see it, the owner can pay the legal bill associated with the demand letter, or the owner can first require the association to file suit and take the case all the way to judgment in order to become the “prevailing party” entitled to legal fees under the docs and statute. There is a clear cost/benefit computation that weighs heavily in favor of payment. Should the owner pay a $200 legal bill relative to an infraction she undoubtedly committed, or should she force the association to file suit and win a judgment at a cost of thousands of dollars? Remember, if the association prevails in suit, they get all legal fees, not just the $200 for the first letter. Clearly the answer is to pay the legal bill and move on.
The take away here is that board members, managers and offending unit owners must understand that recoupment of rules enforcement legal fees is not automatic and there is some nuance. The unit owner should understand that, while they are not happy to pay the bill, it is far better than forcing the condo to file suit.
The solution to this issue over the ability to assess legal fees is amendment. Boards are encouraged to amend their documents (via owner vote) to make it explicit that any legal fees incurred relative to an owner’s misconduct (i.e., violation of the rules and regulations) may be assessed to the unit. Period. The amendment would make clear that the assessment of legal fees to the unit is not contingent upon being the prevailing party in a lawsuit. Owners should be happy to approve such an amendment since every dollar paid by the offending unit owner is a dollar that is not paid from common funds. Moreover, no owner ever thinks they’ll be on the receiving end of a violation letter, so all the more reason to support the amendment.
If you would like to amend your documents as recommended above, please contact your MEEB attorney.
Written by
Dean Lennon