Pete Reid Law recently completed the successful representation of a Home Owner in a lawsuit against the Home Owners Association (HOA) that managed her Condominium.
For more than a year, the Home Owner had tried unsuccessfully to inspect the books and records of the HOA. She suspected that some of the board members were misusing HOA funds. The Home Owner had also tried to convince the HOA to complete an accounting audit of its books, as it was required to do by the Declaration, the By-Laws, and by Statute. The HOA had ignored the Home Owner’s requests.
The Home Owner retained Pete Reid Law who promptly reviewed the HOA documents and sent notice to the HOA that financial books and records should be produced, and that an annual audit should be prepared.
Not only had the HOA ignored its own Declaration and By-Laws by neglecting to cause an annual audit, but the HOA was ignoring Section 81.209(c) of the Texas Property Code which states that:
“[t]he books and records of a condominium regime must comply with good accounting procedures and must be audited at least once each year by an auditor who is not associated with the condominium regime.”
Despite several assurances by the HOA’s lawyers in response to the notice, another six months passed and no audit was performed.
With little progress being made, Pete Reid followed through on his promise and filed a lawsuit in Travis County District Court against the HOA and each of the board members individually. The lawsuit alleged a breach of fiduciary duty, a breach of the Declaration, Bylaws, and Statute, and sought a Declaratory Judgment that the HOA should complete a financial audit every year. The HOA and each of the board members were served with the lawsuit separately.
After the lawsuit was filed, Pete Reid attended a somewhat contentious Annual Meeting where he explained the purpose of the lawsuit, and the potential consequences for the HOA to the other homeowners in the condominium. A motion was made and seconded by the other homeowners for the HOA to conduct an accounting audit of its books and records. The motion passed.
Ultimately the matter was resolved before trial with the HOA and Board Members acknowledging in writing that it was subject to the stated requirements regarding annual audits. The HOA also agreed to produce all of its financial records for inspection within three weeks, and to perform annual audits for all past and future years in accordance with the legal requirements.
Further, the HOA agreed to pay the Home Owner $6,500.00 for the attorney’s fees and court costs relating to the investigation and filing of the lawsuit.