Lawsuits against HOAs are expensive and time-consuming for all

October 30, 2014 on 1:04 pm | In Common Interest Community, General Interest, HOA, John Tarley, State & Federal Litigation, Susan B. Tarley | No Comments

A Virginia Circuit Court case highlights the expense and time commitment required when a homeowner sues a common interest community (referred to as “HOA” in this article). Furthermore, this case illustrates that HOAs can rarely predict or control when they may be dragged into a lawsuit.

In this case, Hornstein v. Federal Hill Homeowners Association, a homeowner had her house for sale with a pending sales contract. Pursuant to Va. Code Ann. § 55-509.5, the HOA provided a disclosure packet that revealed that the homeowner’s fence was not located on her property. In fact, the homeowner’s own survey confirmed that fact. The pending sales contract fell through.

The homeowner sued the HOA in Fairfax Circuit Court for slander of title and tortious interference with contract, including a claim for “bodily injury,” and “mental anguish.” The HOA prevailed in the case, leading to the homeowner’s petition for appeal to the Virginia Supreme Court. [UPDATED: The Virginia Supreme Court refused to hear the case, meaning that the Circuit Court’s decision stands].

Another battle has been waged regarding whether the HOA’s insurance carrier had a duty to defend the HOA in the underlying litigation. When the HOA’s insurance carrier denied coverage and representation, the HOA sued the insurance carrier. The case was removed to the federal court. The 4th Circuit District Court agreed with the insurance carrier. The HOA appealed and the 4th Circuit Court of Appeals reversed the trial court and held that the insurance carrier had a duty to defend. The insurance carrier has appealed for a rehearing. [UPDATED: the insurance carrier lost its appeal and was ordered to pay the HOA $217,308.86 for the attorneys’ fees the HOA incurred].

For a brief review, the HOA provided the disclosure packet in February 2006. After the homeowner’s pending sale fell through, she sued the HOA in August 2007. As we near August 2010, the underlying case may be close to resolution, but litigation with the insurance company may be far from resolving. Based upon the amount of litigation, we can assume that the HOA’s attorneys’ fees have reached six figures. Obviously, payment for these attorneys’ fees is then passed onto the homeowners (unless the case shifts payment of the attorneys’ fees to the losing party, but even then, courts rarely award the full 100% of the incurred fees).

Many lessons can be drawn from this experience. Most importantly, HOAs need to review their insurance policies to make sure they are covered fully for worst case scenarios. Our experience has shown that “anybody can sue anybody for anything at any time.” Although the plaintiff may not win (and did not win in this case), the ensuing litigation will take abundant resources. We can help you review your documents and insurance policies with the necessary professionals to protect your HOA, and homeowner interests.

Tarley Robinson, PLC, Attorneys and Counsellors at Law

Williamsburg, Virginia

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Arbitration instead of Court? Be careful what you ask for

October 30, 2014 on 1:04 pm | In Business Planning, Common Interest Community, John Tarley, Real Estate Strategies, State & Federal Litigation | No Comments

Over the past 15 years or so, “arbitration” provisions have appeared with increasing frequency in a wide variety of contracts. For example, declarations of covenants and restrictions recorded for homeowners associations, construction contracts, employment contracts, and commercial leases all may contain arbitration clauses. Arbitration may be a good idea, but you should know what “arbitration” means before you agree to be bound by such a provision.

Many people confuse the terms “mediation” and “arbitration.” Mediation refers to a process whereby a third-party helps facilitate a negotiated settlement between two or more parties. A mediator does not make decisions, does not take evidence, and does not conduct hearings. Parties simply negotiate and the mediator helps foster those negotiations.

Conversely, arbitrations are conducted like regular trials, with a judge-like arbitrator (or arbitrators) making a final decision based upon the evidence presented, and hopefully the law of your jurisdiction. Appeals of an arbitrator’s decision are virtually nonexistent.

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Small Business Break-Ups – The High Cost of Litigating a Forced Separation

October 30, 2014 on 1:03 pm | In Business Planning, John Tarley, State & Federal Litigation | No Comments

A recent Virginia Supreme Court Case, Cattano v. Bragg, illustrates two points we have made time and time again: 1) Make sure your small business is prepared for an eventual “divorce” between the shareholders; and 2) Litigation is very, very expensive.

In this blog post we will review the Supreme Court’s decision and provide some tips for your small business so that you can avoid the calamity that occurred in this case, which included an attorneys’ fee award of over $260,000 for the prevailing party.

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Part 2 of The Rule of Caveat Emptor in the Sale of Real Estate vs. a Seller’s Duty to Disclose

October 30, 2014 on 1:03 pm | In Construction litigation, General Interest, John Tarley, Real Estate Litigation, Real Estate Strategies, State & Federal Litigation | No Comments

We wrote earlier about a Charlottesville case in which the court analyzed the duty to disclose for a seller of residential real estate. Although Virginia follows the general rule of caveat emptorthe court ruled that the seller, who was also a licensed real estate agent, may have violated a duty to disclose material adverse facts.

The purchasers alleged two other counts, alleging that the seller failed “to disclose the adjacent drain problems and history of flooding, constituting both fraudulent misrepresentation and constructive fraud.” The court dismissed those claims while providing a nice, succinct history of the law of fraud in the sale of a home. This blog post reviews the general rules of fraudulent misrepresentations in residential real estate sales.

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When is a “Contract” not a Contract?

October 30, 2014 on 1:03 pm | In Business Planning, Construction litigation, General Interest, John Tarley, Real Estate Litigation, State & Federal Litigation | No Comments

We know that in Virginia, the parties to a contract are bound to the terms of that contract. We also know that Virginia courts look to the terms of that contract to determine each party’s rights and obligations. But what is a “contract?” This blog post looks at a recent Virginia Supreme Court case that gives a little guidance to answer that question.

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Real Estate Listing Agreements for the sale of property: Are they enforceable even if not in writing?

October 30, 2014 on 1:03 pm | In General Interest, Real Estate Litigation, Real Estate Strategies, State & Federal Litigation | No Comments

Generally speaking a party can enforce an oral agreement. However, courts will not enforce certain contracts unless they are in writing. For example, under Virginia Code § 11-2, commonly known as the Statute of Frauds, an agreement or contract for services to be performed in the sale of real estate by a real estate broker or real estate sales person is not enforceable “[u]nless a promise, contract, agreement, representation, assurance, or ratification, or some memorandum or note thereof, is in writing and signed by the party to be charged or his agent . . . .”

Most real estate agents and brokers understand the importance of having written listing agreements with their sellers. However, a recent decision of the Supreme Court of Virginia points out that even in the absence of a written listing agreement, an oral listing contract may be enforceable if there is sufficient documentation to remove it from the bar to enforcement of the Statute of Frauds. The Virginia Supreme Court, in the case of C. Porter Vaughan, Inc., Realtors v. Most Reverend Francis X. DiLorenzo, Bishop of The Catholic Diocese of Richmond, 279 Va. 449, 689 S.E.2d 656 (2010), better defined what is meant by “sufficient documentation.”

House For Sale

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Employee Non-Competes: Why Must Prospective Employers Be Wary?

October 30, 2014 on 1:03 pm | In Business Law, Business Planning, General Interest, State & Federal Litigation | No Comments

We have written previously about employee “non-competes” (a/k/a covenants not to compete or non-competition agreements). You may have come across them in your own business, either by requiring them of your own employees or seeking to hire someone subject to a non-compete.   However, the area of law surrounding non-competition agreements can be tricky, and a new decision has added to the intrigue.

In DePuy Synthes Sales, Inc. v. Jones, the Eastern District of Virginia denied two motions to dismiss filed by the new employers of employees governed by non-compete agreements. DePuy employed two salespersons pursuant to employment agreements that contained non-compete provisions. They eventually left DePuy and began working for a competitor, Sky Surgical. DePuy sued the employees and Sky Surgical. This blog post examines the tortious interference of employment contract claim made by DePuy against the new employer, Sky Surgical.

employee noncompete agreement

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4 Tips to help your HOA protect its Attorney-Client Privilege

October 30, 2014 on 1:03 pm | In Common Interest Community, General Interest, HOA, HOA litigation, State & Federal Litigation, Susan B. Tarley, Unit Owners Association | No Comments

The Attorney-Client Privilege protects confidential communications between an attorney and his or her client.  This privilege includes communications made to the attorney and communications from the attorney. The Attorney-Client Privilege is designed to encourage clients to communicate with their attorney freely, without fearing disclosure of those communications made in the course of representation. The Attorney-Client Privilege is important because it permits clients to give their attorney complete and uncensored information, enabling their attorney to provide informed and thorough legal advice.

For community associations, the Attorney-Client Privilege belongs to the association and can only be expressly waived by the a decision of the association board or executive organ. However, the privilege can be impliedly waived based on the client’s conduct.  A determination on whether the privilege has been waived will depend on the specific facts of each case. The association will have to establish that the attorney-client relationship existed, that the communication is privileged, and that the privilege was not waived.

Here are four basic tips for the board of your Common Interest Community to follow so that it protects the association’s Attorney-Client Privilege:

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Does your Business use Employee Noncompete Agreements?

October 30, 2014 on 1:02 pm | In Business Planning, Merger & Acquisition, Neal J. Robinson, State & Federal Litigation | No Comments

The legal issues related to employee “non-competes” (also known as covenants not to compete or non-competition agreements) are often not well understood by employees subject to them, the companies insisting upon them, or the companies intending to hire persons subject to them.  That may well be especially true in the Commonwealth of Virginia where one frequently hears, “That agreement is so broad it will never be enforced and Virginia doesn’t ‘blue pencil’ these agreements, so no problema.”

Williamsburg Virginia Business Lawyers

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Who pays when a tree falls on my property?

October 30, 2014 on 1:02 pm | In General Interest, HOA, HOA litigation, John Tarley, Real Estate Litigation, State & Federal Litigation, Unit Owners Association | No Comments

Hurricane Irene left a lot of damage in Virginia. Although the damage was not as great and widespread as caused by Hurricane Isabel, many of us had in excess of ten inches of rain and suffered from many fallen trees. This tree fell in my back yard.

We  previously blogged about issues arising when a neighbor’s vegetation, including trees, encroaches upon our property. In that situation, we can cut the offending vegetation, including roots, back to the common property line. However, if the vegetation is also damaging our property,  the Court can order the complete removal of the offending vegetation and award us compensation for our expenses, including compensation for damages.

After Hurricane Irene, we should visit another question: who pays for damage when my neighbor’s tree falls on my property? Generally speaking, this property law question involves an issue of negligence and insurance. Each situation would require a review of the facts, and a review of your homeowner’s insurance policy, but here is some general guidance:

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