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Tips to Avoid a Contractor Dispute

LS Carlson Law May 10th, 2023

Yes. In California, a party to a lawsuit may only recover their attorneys’ fees if the recovery of attorneys’ fees is provided by contract or statute. This is called the “American Rule.” Fortunately for California homeowners in homeowners associations (“HOA”), the Davis-Stirling Act, the statutory framework that governs California HOAs, allows the prevailing party in litigation to recover their reasonable attorneys’ fees and costs.

Civil Code section 5975 provides, “In an action to enforce the governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” (Civil Code § 5975(c).) If a homeowner sues their HOA (or the HOA sues a homeowner) to enforce the governing documents of the association, either party has a right to seek the recovery of their attorneys’ fees and costs if they prevail at trial. Attorneys’ fees and costs are awarded after the trial is complete and judgment has been entered.

In analyzing Civil Code section 5975, there are three important phrases to keep in mind: (i) “prevailing party”; (ii) “shall be awarded reasonable attorneys’ fees and costs”; and (iii) “an action to enforce the governing documents.”

Prevailing Party: Under Civil Code section 5975, the “prevailing party” is the party who prevailed “on a practical level” by achieving their “main litigation objectives.” (See, e.g., Rancho Mirage Country Club Homeowners Ass’n v Hazelbaker (2016) 2 Cal.App.5th 252, 260; Heather Farms Assn. v. Robinson (1994) 21 Cal.App.4th 1568, 1574.) The Court must therefore determine what the parties’ litigation goals were and how successful the parties were at obtaining those goals. But in determining a party’s litigation success, “courts should respect substance rather than form, and to this extent should be guided by ‘equitable considerations.’” (Hsu v. Abbara (1995) 9 Cal.4th 863, 876-77.)

Reasonable Attorneys’ Fees and Costs: If the trial judge determines there is a prevailing party, the judge “shall [award] reasonable attorneys’ fees and costs.” While the award of attorneys’ fees and costs to the prevailing party is not discretionary, what constitutes “reasonable attorneys’ fees and costs” is discretionary. In Chapala Mgmt. Corp. v. Stanton, the appellate court held that a judge must award fees to prevailing party as a matter of right, and that the judge has no discretion in granting or denying fees, other than as to their reasonableness and amount (Chapala Mgmt. Corp. v. Stanton (2010) 186 Cal.App.4th 1532, 1546.) In other words, the judge will consider all the fees and costs incurred by the prevailing party and use their discretion to determine how much of the actual fees and costs incurred by the prevailing party should be awarded. It is rare for the judge to award every penny incurred by the prevailing party, but the prevailing party must be awarded their reasonable attorneys’ fees and costs.

An Action to Enforce Governing Documents: The term “governing documents” is defined by Civil Code section 4150 of the Davis-Stirling Act. “‘Governing documents’ means the declaration [i.e., CC&Rs] and any other documents, such as bylaws, operating rules, articles of incorporation, or articles of association, which govern the operation of the common interest development or association.” (Civil Code § 4150.) Civil Code section 5975, therefore, only allows a homeowner that sues their HOA to recover their legal fees if the lawsuit is based on an act or omission by the HOA that is contrary to the governing documents.

Sometimes, a homeowner may have a claim against their HOA that does not arise out of the enforcement of the governing documents. That doesn’t mean a homeowner can’t still recover their legal fees. There are other statutes that provide for the recovery of legal fees for HOA-related disputes and some governing documents also have provisions that provide for the recovery of legal costs. Talk to one of our HOA specialists to learn more.

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