When to hire HOA counsel

Four situations worth a phone call

Most board business, approving a landscaping invoice, scheduling the annual meeting, adopting a parking rule, does not need a lawyer. A handful of situations reliably do, because getting them wrong exposes the association to real legal risk: a dispute headed toward litigation, negotiating or signing a contract with a vendor, disciplining a member for a violation, and personnel matters involving staff or a manager.

California's open meeting statute happens to list exactly these four as topics serious enough to justify closing part of a meeting to an executive session, plus one more: meeting with a member about a delinquent assessment. The exact list of matters serious enough to close a meeting, and whether your state's statute names one at all, varies by state. But the underlying pattern holds almost everywhere: litigation, contracts, discipline, and personnel are the recurring places a legal read earns its fee.

"litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member"

Source: Cal. Civ. Code Section 4935, California Legislative Information

Asking first, and following through, is what protects the board

Boards get sued over decisions, not over outcomes. A director does not have to be right, only reasonable, and one of the clearest ways to show a decision was reasonable is that the board asked a qualified professional first and did what the professional recommended.

"A director is entitled to rely on information, opinions, reports, or statements prepared or presented by legal counsel, accountants, or other professionals or experts."

Source: Understanding the Business Judgment Rule for Boards, Barker Martin, P.S.

That protection, the business judgment rule, is not automatic. Courts generally require the board to have acted in good faith, with the care an ordinarily prudent person would use in a similar position, and in a manner it reasonably believed served the association.

"(1) 'good faith'; (2) with care of an 'ordinarily prudent person in a like position would exercise under similar circumstances'; and, (3) 'in a manner the director reasonably believes to be in the best interests of the corporation.'"

Source: The Business Judgment Rule, Colorado Homeowners Association Law

At least one state, North Carolina, writes this reliance defense directly into its nonprofit corporation statute, letting a director rely on legal counsel's advice on matters within counsel's professional competence. Whether your own state's nonprofit corporation act contains an equivalent provision, and its exact wording, varies by state; check your state's statute or ask your attorney.

What hiring a lawyer does not do

Retaining counsel is not a substitute for the rest of the hierarchy that actually governs a decision: federal and state statute first, then your declaration and bylaws, then the specific scope of what you asked the attorney to do. A lawyer's advice cannot override a statute, and it cannot expand authority your bylaws do not give the board.

The protection also disappears the moment the board ignores what counsel actually said. Following advice on paper while voting the opposite way in the room removes the reasonableness the business judgment rule depends on. And a lawyer's presence on the call is not, by itself, a reason to close a meeting; the topic still has to be one your state actually lists, and even then the confidentiality of that conversation belongs to the association, not to any one person in the room. That is its own lesson: Attorney-client privilege.