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Texas lawyer collects $12,000 in legal fees for suing a condo renter for allowing her cat outside without a leash
Senate State Affairs Committee
Texas State Senate
P.O. Box 12068
Austin, Texas 78711-2068
Dear Senate Committee Members:
My name is Sharon Tucker, and I would like to share with you a personal experience relating to homeowners associations. In May of 1998, I became a first time homeowner at a condominium complex in Houston, Texas. Shortly thereafter, my neighbor informed me that she was involved in a lawsuit with the association. When I asked her the nature of the lawsuit, she explained that she was being sued by our homeowners association for having allowed her cat to go outside without a leash. This sounded frivolous to me, and even more frivolous when she later mentioned that she did not even own the condominium. Apparently, the attorneys representing the association believed she was the owner and filed suit against her by mistake. It was not until weeks later that the attorneys discovered they had sued the wrong person.
Rather than dismiss the suit, the attorneys then demanded payment from the owners for thousands of dollars in legal fees. This is true in spite of the fact that notification of the alleged cat violation was never given to the owners prior to suit being filed. Due to the injustices which I believed to be occurring, I offered to represent my neighbor pro bono, as she could not afford to hire an attorney.
The details of this lawsuit are far too lengthy to address at this time. However, I will try to highlight some of the main events. The lawsuit was originally filed in October 1997. The cat and my neighbor moved to Fort Worth in 1998, but yet the associations legal fees continued to accrue. In response to a counterclaim I later filed against the association, the case was referred to mediation. This mediation resulted in a final settlement of the dispute. Although the association had paid approximately $12,000 in legal fees at the time of mediation, the association agreed to accept only $600 from the owners as full settlement. This, of course, was a positive outcome for my client and the owners.
Ironically, the end result was also positive for the association, at least in the long run. In response to this lawsuit, the association created a new rules violations committee comprised of homeowners. The sole function of this committee is to review complaints regarding alleged violations and attempt to resolve all disputes with homeowners in an amicable fashion before the matter is ever referred to an attorney for enforcement. I firmly believe that this committee will not only save the association thousands of dollars in legal fees, but will also result in greater harmony among homeowners.
The reason for sharing this story with you is to illustrate the need for legislative safeguards in this area. For example, if the owners had simply been notified of the violation, I believe the suit would never have been filed. A hearing conducted before the board or early mediation might also have prevented a lawsuit. However, because under current laws it is much easier for an association to simply assign the matter to an attorney for enforcement, lawsuits begin needlessly.
I am, therefore, very much in favor of the legislation proposed by Senator Ellis which provides for dispute resolution committees, mandatory hearings before the board after notice, appeal processes, alternative dispute resolution procedures, reasonably prudent business person standards for board members, enforcement by the attorney general, and penalties and damages for abuses by associations. Without such protective measures, I believe the balance of power will continue to remain unequally in favor of the association. Most homeowners simply cannot afford to pay an attorney thousands of dollars to challenge an association who they legitimately feel is unfairly enforcing deed restrictions. By contrast, the association has the financial ability to strong arm the homeowner into compliance, no matter how arbitrary or capricious the requested compliance, because of the threat of foreclosure and the costs of litigation.
Lastly, I would like to say that I do not view this legislation as a battleground between associations and homeowners. I recognize the important and necessary role associations play in enforcing deed restrictions, collecting needed assessments, and, by so doing, maintaining the quality of living and property values in neighborhoods. However, I do feel that homeowners are afforded very little protection under current laws against abusive acts by associations. Through your efforts and concerns, legislation will hopefully be passed that will benefit both associations and homeowners alike.
SHARON R. TUCKER
Attorney at Law
7555 Katy Freeway, #158
Houston, Texas 77024
Abusive Collection Activities of Homeowner Association Lawyers
Senate State Affairs Committee
Texas State Senate
P.O. Box 12068
Austin, Texas 78711-2068
Dear Senate Committee Members:
I realized I did not have enough time to discuss all the many issues that I would have liked to in person, so I decided to submit the rest of my intended comments in written form. These comments deal specifically with the collection of attorney’s fees in homeowners association matters.
As an attorney who specializes in consumer bankruptcy cases, I have been exposed to many homeowners associations, as well as the attorneys who represent them. Due to my strong beliefs in debtor rights, I realize that I am somewhat biased toward the debtor/homeowner perspective. Even so, my hope is that I might be able to provide you with additional information that will enable you to better understand the issues at hand from not only the association viewpoint, but the homeowner viewpoint as well.
Homeowners often come to my office seeking legal counsel regarding the collection activities of homeowners associations and their attorneys. In many cases, a homeowner will provide me with a fee statement where the actual assessment fees are relatively small (i.e. $500 or less), but yet the attorney’s fees run into the thousands. These same homeowners have usually also been sent a demand letter stating that, unless the assessment fees and attorney’s fees are paid in full, the association will foreclose on the homeowner’s property. When a homeowner then asks what he or she can do to stop the foreclosure, I am usually left in a position where the only advice I can give is to file Chapter 13 bankruptcy. This is true even for clients who have very little debt and, if not for the homeowners association, would never have had to file bankruptcy.
A significant number of homeowners have also come to my office after the foreclosure sale has already taken place. In such cases, I unfortunately have no options available to help these clients save their homes. Occurrences of homeowners losing their homes over assessment fees that were only a few hundred dollars are surprisingly quite common. Among the most tragic examples are homeowners who are disabled, elderly, on a fixed income, and so on.
Of course, I realize that some of the proposals in SB 954 and SB 699, such as the right of redemption and mandatory notice provisions in sales contracts, are definitely steps in the right direction to provide homeowners with added protections that they do not have under current laws. However, I believe that these proposed bills do not go far enough in protecting the rights of homeowners.
For example, it is my belief that many homeowners lose their homes to foreclosures not because they were unwilling to pay the assessment fees, but, rather, because many association attorneys are unwilling to allow homeowners the opportunity to pay the fees over a reasonable time period. I can not begin to tell you to how many times I have encountered homeowners who owe approximately $2,000 in fees (only a small portion of which is the actual assessment) and are told that unless they can pay the $2,000 in full within 20 or 30 days, their homes will be sold at foreclosure. When I call the association’s attorney to make an attempt at some type of reasonable payment plan, I am usually told that the association does not allow payment plans and the entire amount must be paid in full.
This refusal to accept reasonable payment plans is, in my opinion, one of major reasons why homeowners have become so frustrated with the current system. Homeowners believe that they simply are not allowed a fair opportunity to save their homes in the face of a pending foreclosure. Again, I realize that both SB 954 and SB 699 provide redemption provisions designed to help homeowners save their homes, and I am very much in favor of such provisions.
However, even if homeowners are allowed to redeem their homes after a foreclosure sale takes place, the majority of homeowners may ultimately not be able to redeem their homes, due to the difficulty in paying such large fees in such a short time period. My prediction is that, without some type of provision requiring associations to show that they have offered some type of reasonable payment plan before foreclosure actually occurs, association attorneys will continue to foreclose with very little redemptions actually occurring.
Furthermore, under the current system, there exists no "checks and balances" to monitor attorneys who are charging excessive attorney’s fees, nor is there any incentive for homeowners associations to seek out attorneys whose fees are reasonable. To the contrary, I believe that many attorney client fee agreements actually encourage associations to disregard fees charged by the attorney, because the association is expressly told in the fee agreement that the association is not responsible for any attorney’s fees incurred, since the attorney will seek payment exclusively from the homeowner.
As a case in point, please refer to the attached "Exhibit A", a fee agreement between Northwest Park Homeowners Association and Gammon & Associates ("Gammon Agreement") which states,
Contingency Fee Collection Program. Except as provided below, Gammon & Associates will perform Client’s maintenance fee collection work on a contingency fee basis. "Contingency fee" means that the Firm will collect its legal fees from the delinquent homeowner....Except as provided below, Gammon & Associates will initiate and pursue the collection process at no legal fee cost to Client, regardless of the amount of time necessary to collect the outstanding sums.
Billing Arrangement for Contingency Fee Program. Client will not pay any retainers to Gammon & Associates for any individual matter or case for which Gammon & Associates agrees to represent Client under the Contingency Fee Program....Under the above fee format, Gammon & Associates will maintain records of all services provided with regard to a particular delinquent account as if we were billing you on an hourly basis.
Under this scenario, the association has absolutely no incentive to notice or care how much the attorney is charging, whether the charges are reasonable, etc., since the association is under no obligation to pay the legal bill. It’s almost like a parent telling a child that he can go into a toy store and pick out any and all toys he wants, no matter what the cost, and no matter how many he chooses, because Mommy and Daddy will pay the bill. Of course, one laughs at the absurdity of this, but isn’t this exactly what is happening with homeowners associations and their attorneys? If an association can call on an attorney to collect an assessment fee without concern for cost, no matter how small the fee, no matter how delinquent the fee, and no matter how unfortunate the homeowner’s financial circumstances, then there exists a high likelihood for abusive collection activities on the part of both homeowners associations and their attorneys.
Many association attorneys would respond by saying that courts can provide protection against excessive or abusive attorney’s fees, and so legislative intervention is unnecessary to stop such practices. However, from a practical standpoint, this is simply not the case. For a homeowner to contest the attorney’s fees of the association as excessive or unreasonable, he would have to hire his own attorney to effectively do so. The end result is that it would cost the homeowner at least as much, if not more, to hire his own attorney to challenge the fees, and thus such challenges are rarely ever seen.
Furthermore, courts are already overloaded with other issues that they must address, and I believe that they simply can not take on the role of watch dog to constantly monitor the fees of association attorneys. Without legislative safeguards to assist in such monitoring, I believe that homeowners will continue to perceive that they are being treated unfairly in cases where, for example, the assessment fees are $200 and the attorney’s fees are $2,000. Again, this is compounded by the fact that homeowners are very often denied the opportunity to pay these fees (whether excessive or not) in some type of reasonable payment plan.
The denial of a reasonable payment plan is also many times attributable not to the association itself, but, rather, to the attorney who represents the association. I can think of an instance just two weeks ago where the homeowner owed approximately $900 in fees, and I asked the attorney’s office if the homeowner could enter into an agreement to pay this amount in monthly installments of $100 until the fee was paid in full. Rather than inform me that they would check with the association and get back to me, the attorney’s office immediately refused the offer.
The Gammon Agreement is another example of a seeming unwillingness to accept payment plans. Under the section entitled "Client Responsibilities", associations who actually try to work out reasonable payment plans with homeowners actually appear to be penalized for doing so in the form of a withdrawal of the "free" contingency fee program. The Gammon Agreement provides:
Client agrees that Client shall be responsible to the Firm for any and all attorney’s fees otherwise owed by the delinquent homeowner under the "Contingency Fee Collection Program" under the following circumstances:
a.) Client’s receipt of deposit of funds or checks constituting payment by a homeowner on a delinquent account assigned by Client to Gammon & Associates for collection, without first notifying Attorney and receiving confirmation of authority from Attorney to deposit such funds:
*b.) Client’s entering into any agreement with a delinquent homeowner concerning the payment of any and all charges without first obtaining the written consent of Attorney.
When I first read the above provisions, they struck me as highly unusual. I always thought that the association was supposed to be the one that informed its attorney what payment arrangements it was, or was not, willing to accept. However, in this case it actually seems to be the other way around. It seems that the attorney is actually telling the client what payment arrangements are acceptable.
Before I continue, let me mention that the use of the Gammon Agreement as an example is in no way a personal attack against Bill Gammon or his law firm. It is, in fact, ironic that another debtor’s attorney I know called several association attorneys to ask for a copy of their fee agreement, but was consistently rejected with comments like, "We don’t have a fee agreement", or "That’s confidential information". After dealing with association attorneys in bankruptcy and related matters, I have often believed that many, if not most, association attorneys bill their clients in this contingency fee manner. However, it wasn’t until Bill Gammon’s office was nice enough to fax a copy of their fee agreement, that I was actually able to verify this type of fee arrangement does exist.
Again, if you, as legislators, were to mandate that associations provide homeowners with reasonable payment plans prior to foreclosure, this would provide an even greater benefit to homeowners than the redemption provisions currently under consideration.
A second recommendation is to replace the word "incurred" for the word "paid" in several provisions of the proposed legislation. For example, Section 207.061 (24)(f) of SB 699 states that, "A property owners’ association may collect reimbursement of reasonable attorney’s fees and other reasonable costs incurred by the association..." Sections 207.093, 207.129(c)(3), 20179(d)(1)(C), and Section 51.008(c)(3) of SB 954 also use the word "incurred".
Although at first glance the difference between the word "incurred" vs. "paid" might appear to be insignificant, the current wording of "incurred" makes it much easier for association attorneys to continue the use of contingency fee agreements. Changing all references to "paid" would, hopefully, create greater accountability on the part of associations for the monitoring of their own legal fees, and would also hopefully protect against excessive fees charged to the homeowner.
In closing, I would like to mention that I do realize that attorneys who represent associations perform a vital function in helping their clients collect necessary fees and enforce reasonable rules. I also hope that I do not come across as trying to pick apart legal fees charged by association attorneys, or claim that they should not have the right to collect fees rightfully earned. Of course, an attorney is a business person like any other, and must be able to collect his or her fees in order to survive financially. My only concern is that, under current laws, there may not be sufficient safeguards to protect against stringent or abusive collection practices by association attorneys. I hope that you might explore this issue in your ongoing discussions of the legislation currently under consideration.
Sincerely,
Sharon Tucker
Millions of these types of human rights violations happen to homeowners across the United States.
The politicians are busy taking money from the prople who commit these crimes .
Law enforment and judges are violating public trust not investigating and prosecuting the crimminals.
SM
JD
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