I live in WV and we have a small homeowners association. We had a contract to have the streets paved in the Summer of 2007. The contractor did not start the work as quickly as promised and before the winter months did some minor prep work and patching and then kept putting us off this Spring. Our board members got another contractor to come in and do the work. Now the first contractor is mad that he lost the job and has sent a bill for the work he did in 2007 - it amounts to about 30% of the entire original job cost. The homeowner association is refusing to pay and now the contractor is threating to place a lien against the association and says no one will be able to sell their house until his lien is satisfied. Can the contractor do this? Our board made this decision to change contractors without a vote - can they do this which now affects all homeowners?

Thanks

There is nothing to stop the contractor from suing the HA.

If he wins, then he can certainly execute a lien and depending on the law in your area, could very well tie up all the properties in that HA.

If what he is charging, is a fair value for what little work he did, I would suggest that he be paid.

I also question the legality of the HA decision without presenting it to the members first.

Yes they can. If they sue, and win ( and of course if they did work but was not paid, they will well win something) So yes they can do all of this most likely in many states.

Hmm... let's think about this one for a minute.

Yes, the contractor can sue and, if he wins, he gets a judgment against the HOA. But I don't think that can immediately tie up the homes that are members of the HOA. When a title company does a search for judgments they only search the names of the owners of the home and the prior owners. They don't search for judgments against the HOA.

If the HOA owns any property, such as the streets or open space, that won't show up on the homeowners' title search. So any liens against those properties are not in the homeowners' chain of title.

The only way I can see this tying up the individual homes is that the contractor gets a judgment against the HOA and then moves to seize the bank accounts. At that point the HOA must hit each of the homeowners with a special assessment for their share of the judgment amount. If there is going to be a closing involving an individual home then the title company will require a statement from the HOA that the homeowners' dues are paid in full and the homeowner is in good standing. If there is an outstanding special assessment (due to the judgment) then the HOA will say that in the statement and the title company will require that the outstanding assessment be paid in full.

However, if I were representing that homeowner in the closing I would recommend that they file suit against the HOA and put the special assessment amount in escrow pending resolution of the lawsuit. The title company would hold the escrow and would most likely issue a title insurance policy on that basis.

(Just thinkin' out loud here.)

But then is not the homeowners at the end liable for the debts of the HOA, and could not each home owner be included in the law suit as members

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Originally Posted by Fr_Chuck

But then is not the homeowners at the end liable for the debts of the HOA,

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At the end, yes, in the form of special assessments to restore the working capital. But not immediately. And maybe not at all. If the HOA has D&O insurance, and if a lawsuit gets filed and the actions of the board are eventually found to be improper, it's possible that it would be covered by insurance.

Quote:

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Originally Posted by Fr_Chuck

and could not each home owner be included in the law suit as members

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I don't think so. The HOA is most likely a non-profit corp and the homeowners are shareholders, so there is no individual liability.

If the contractor did work he has to be paid an equitable amount of his contract amount, unless the work was unacceptable and had to be removed, and there has to be plenty of documentation. Even if the contractor didn't finish within the alloted time assuming there was a firm completion date in the contract. He has the right to request additional time if he can prove weather was unusually wet or cold, etc. he also has the right to request reimbursement of his costs for what sounds like breach of contract. His home office overhead, lost profit and many other factors are considered. What I am saying is that if he put down $ 1,000 worth of pavement, that doesn't mean you only owe him $ 1,000. You interrupted his plan to make money on the job based on the now breached contract.
What you have is a request for an equitable adjustment to the contract by the first contractor. The Board has to negotiate a settlement amount with contractor #1.
I was on an HOA in the WV panhandle. We were gearing up to prepare a road paving contract and we got lucky and the state took our roads over. We were about to have to collect $ 2,200 from each homeowner to pay for the special project and we couldn't get them to come to vote on the proposal let alone collect the money. Our Board was going to have to put liens on homes ourselves because we would have had half (50) owners that wouldn't pay.
My recommendation is that the Board get rid of that 1st contractor asap or you are going to get into very costly legal fees, if you can find a lawyer that will touch it. And homeowners in WV are very much against their HOA spending money on lawyers.
You are going to need a lawyer to check into the liens that are threatened, if you can't settle the dispute with # 1. I would be very surprised if he can put liens on members homes because they are represented by the HOA and if they are paying their dues they are fulfilling their obligation. #1 can't show that any particular homeowner failed to pay him because no individual Howner entered into a contract. Of course, whatever settlement amount is agreed to with #1, comes equally out of the pockets of indiv owners.
Bite the bullet and pay that guy. I would predict lawsuits against the Boardby some owners if that guy even tries to put liens on owners houses.