Unit Owners Can Be Liable For Condo Association’s Legal Fees
Written by: Alan Nochumson
A judgment entered by Philadelphia Court of Common Pleas Judge Gary S. Glazer in 315 Arch St. Condominium Association v. 315 Arch St. Realty 2005 LP, 2014 Phila. Ct. Com. Pl. LEXIS 193 (April 1, 2014), in favor of a condominium association and against a unit owner reminded me of the enormous power condominium associations across the state possess in collecting condominium assessments against their unit owners.
In 315 Arch St. Realty, Glazer found that a condominium association was entitled to judgment of approximately $100,000 against its developer, who still owned several units in the building, as a result of the developer’s failure to pay condominium assessments due to the condominium association. What is most telling about the nature of the judgment is that the judgment included the imposition of almost $30,000 in legal fees and costs the condominium association incurred as a result of litigating the dispute with its unit owner.
This recent trial court ruling merely highlights that unit owners in Pennsylvania must pay their condominium assessments or face some rather dire consequences.
The seminal case in this area of the law is Rivers Edge Condominium Association v. Rere, 568 A.2d 261 (Pa. Super. Ct. 1990).
In Rivers Edge, the state Superior Court held that a unit owner cannot withhold condominium assessments even when they believe that their condominium association is not performing its obligations properly. In a strongly worded opinion, the Superior Court stated that such self-help by a unit owner would not be tolerated.
Instead, according to the Superior Court in that case, when the unit owner believes that the condominium association has not performed its obligations under either the condominium declaration or Pennsylvania’s Uniform Condominium Act, 68 Pa. C.S. Section 3101 et seq., the unit owner must still pay their assessments due to the condominium association and then institute a separate legal action against the condominium association for the condominium association’s failings or misdeeds.
The Superior Court in Rivers Edge emphasized that a unit owner’s obligation to pay condominium assessments is not contingent upon a condominium association’s performance or the lack thereof.
Since the Superior Court’s ruling in Rivers Edge, Pennsylvania courts have consistently ruled that a unit owner does not have a right of setoff or deduction against a condominium association even when the condominium association is in the wrong. In doing so, these courts have refused to undertake a fact-finding examination of the management of the condominium building, realizing the serious financial difficulties condominium associations would face if they had no recourse to collect unpaid condominium assessments against their unit owners.
Despite the foregoing, many unit owners unwittingly still withhold their condominium assessments as leverage in disputes with their condominium associations. What many of these unit owners do not consider when doing so is that the condominium association is entitled to the reimbursement of its legal fees and costs under most condominium declarations and Section 3315 of the Uniform Condominium Act.
Condominium associations are created by a document that is called a condominium declaration. The condominium declaration describes the most important rights and obligations of the unit owners. Most, if not all, condominium declarations contain a provision requiring a unit owner to reimburse the condominium association if the unit owner breaches its terms and conditions.
Additionally, under Section 3315(f) of the Uniform Condominium Act, a condominium association is entitled to collect its legal fees and costs as part of any judgment obtained against its unit owners for unpaid condominium assessments.
From my experience, most disputes between condominium associations and their unit owners tend to spiral out of control and the legal fees and costs sometimes outstrip the amount in controversy.
Pennsylvania courts, however, are unmoved by the amount in controversy when awarding legal fees and costs to condominium associations, as evidenced by the judgment obtained by the condominium association in 315 Arch St. Realty.
In Mountain View Condominium Association v. Bomersbach, 734 A.2d 468 (Pa. Commwlth. Ct. 1999), the Commonwealth Court refused to strike an award of legal fees and costs in the approximate amount of $50,000 even though the amount in controversy was originally $1,200.
The Commonwealth Court in Mountain View noted that the unit owner engaged in legal “trench warfare” for more than a decade. As the condominium association elected not to back off, it was entitled to the collection, by way of the condominium declaration, of the legal fees and costs it incurred during this extended period of time.
In reaching this conclusion, the Commonwealth Court in Mountain View indicated that any holding to the contrary would cause chaos in condominium associations whose compliant unit owners would have to bear the cost of dealing with noncompliant unit owners.
In Centennial Station Condominium Association v. Schaefer Co. Builders, 800 A.2d 379 (Pa. Commwlth Ct. 2002), the Commonwealth Court clarified that, in order for a condominium association to obtain an award consisting of legal fees and costs against its unit owner, the condominium association has the burden of proving the actual legal fees and costs so incurred. In doing so, the Commonwealth Court refused to allow the award of a flat fee charged by the attorney representing the condominium association in handling the collection of the unpaid assessments.
In Wrenfield Homeowners Association v. DeYoung, 600 A.2d 960 (Pa. Super. Ct. 1991), the Superior Court outlined the evidence required of a condominium association that seeks reimbursement of its legal fees and costs.
While the parties in Wrenfield Homeowners stipulated at trial that the hourly rates of the attorneys representing the condominium association were fair and reasonable, they disputed the reasonableness of the time expended by these attorneys.
At trial, the condominium association offered expert testimony attempting to establish the reasonableness and necessity of the time spent by the attorneys representing the condominium association. Based upon that testimony and the trial court’s independent evaluation of the record, the trial court determined that the time expended by these attorneys was reasonable under the circumstances.
As the condominium association did not engage in unnecessary legal efforts aimed at prolonging the litigation, the Commonwealth Court in Wrenfield Homeowners agreed that the trial court did not abuse its discretion in awarding the total amount requested by the condominium association for its legal fees and costs.
The judgment obtained by the condominium association in 315 Arch St. Realty merely confirms that a unit owner has no choice but to pay their condominium assessments and, if they do not, they will also be liable for the legal fees and costs incurred by the condominium association in connection with the collection of the unpaid condominium assessments.
Since the amount of legal fees and costs incurred by the condominium association typically outstrips the amount of the condominium assessments due, if a unit owner truly has objection to the management of the condominium building, the unit owner’s best and only course of action is to commence a lawsuit against the condominium association and possibly others and, in the meantime, continue paying the condominium assessments while the litigation is taking place.
Reprinted with permission from the August 19, 2014 edition of The Legal Intelligencer © 2014 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, firstname.lastname@example.org or visit www.almreprints.com.