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The Importance of Budgeting for Legal Expenses for HOAs

Dec 4, 2023

At McCabe, Trotter & Beverly, we can certainly appreciate that homeowners’ associations (“HOAs”) are not necessarily excited about the prospect of allocating funds for legal expenses. Nevertheless, we have found that HOAs frequently budget dangerously little for legal expenses, exacerbating already difficult situations in which an HOA is forced to hire counsel. This is a great concern in light of the relative likelihood that an HOA will need the assistance of a legal professional.

Of course, Board members owe a duty to their HOAs to act in the best interest of the HOA, and among the central purposes of an HOA is the protection of property values and welfare of the community.

The furtherance of these purposes can require the assistance of legal counsel in many different capacities. Unfortunately, there are times when the HOA has to take legal action to enforce the community’s covenants against a homeowner to protect these values. An HOA Board does not want to find itself in the unenviable position where legal action is needed to enforce the covenants for the good of the community, but the funds to do so were not budgeted, which may require the HOA to resort to a special assessment, if allowed, or a substantial increase of the regular assessments. Furthermore, HOAs often find that they require amendments to their governing documents to meet the changing needs of their community and require legal assistance to ensure the process is handled effectively and properly under their governing documents and South Carolina law. It is also common for HOAs to find themselves in need of a legal opinion from counsel to explain their options and authorities with regard to various issues that may arise in the community.

It is easy for HOAs to fall into ways of thinking such as, “Our community gets along with each other, so we won’t need an attorney,” or “If we have to go to court, we’ll just recover the costs of the fees after we win at trial.”

This reasoning can lead to a scramble for funds when the unexpected occurs. Often, HOAs are unaware of how quickly and unforeseeably a situation leading to litigation can arise. Moreover, in the unfortunate event that the HOA is brought into litigation, the determination of whether the HOA is entitled to recover its legal fees is extremely dependent on numerous factors to include, but not be limited to, the specific provisions of the HOA’s governing documents, the underlying facts of the case, and the court’s own discretion. As to non-litigious reasons for which an HOA may need legal counsel, an HOA is likely to find it was better to spend money on counsel to ensure that a document amendment or other situation is addressed in a legally proper manner than to incur the significant costs that may arise should one of the aforementioned situations be handled improperly. 

There are tremendous benefits to an HOA budgeting for adequate funds toward potential legal expenses.

In any community, unexpected circumstances are bound to arise, and it is important to be as prepared as possible. Our attorneys at McCabe, Trotter & Beverly, P.C. are experienced and well-equipped to answer questions and discuss issues you may have regarding an HOA legal budget. Please contact us at (803) 724 – 5000 for further information. 

McCabe, Trotter & Beverly, P.C. blogs and other content are for educational and informational purposes only. This is not legal advice and does not create an attorney/client relationship between McCabe, Trotter & Beverly, P.C., and readers. Readers should consult an attorney to understand how this information relates to their personal situation and circumstances. You should not use McCabe, Trotter & Beverly, P.C. blogs or content as a substitute for legal advice from a licensed attorney.

Written by Christian Saville
Image Credit: Adobe Stock

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