Homeowner Liability

Some terms to know:

Indemnification: A valid HOA board is, by both state law and governing documents, “indemnified” by homeowners. That means we are collectively liable for our HOA’s actions: If anyone has reason to sue – e.g., the board wrongfully delays projects, inequitably levies fees, wrongfully files liens, or fails to keep and disclose the records required by law – WE ALL PAY FOR THEIR WRONGDOING.

Tacit Ratification: Even in the case of a clearly invalid board, Utah courts have set a precedent of considering tacit ratification, a standard based on the principle that it's unfair for any party to accept the benefits of a contract and at the same time refuse its obligations. (See case law, Hi-Country Estates [2023] and Swan Creek Village [2006].) If owners, through apathy or inaction, fail to challenge an invalid claim to "HOA" authority, their behavior may over time be construed as acquiescence. Critically, this: Homeowners must resist any invalid claim of “HOA” power. DO NOT ATTEND. DO NOT VOTE. DO NOT PROXY. DO NOT PAY.

Perpetual Power: The primary purpose of most HOAs is to protect the investments individual owners hold in shared real property (e.g., shared swimming pools, roofs and walls, landscaping, etc.). As such, foundational to most HOA governance is the presumption that its board must exist forever. Under such contracts, owners agree to terms of subjugation unheard of in other contexts. This is key:
- State law is written to support this perpetual power – chock-full of leniencies and privileges for HOAs and their boards, entitlements that make sense when individual owners rely on those mechanisms to protect their investments in shared real property.
- In Thaynes, we hold no investment in shared real property. And there is currently no HOA. We get to choose our future: Why subject ourselves to such perpetual power, liability, and risk?

Cost/Benefit Analysis: In the case of a proposed HOA, homeowners should weigh carefully any prospective benefit (above in-place protections) against prospective costs. HOA costs are fourfold:

Dues: The simple monetary value of annual fees to cover operational costs, ongoing legal fees, insurance, reserves, etc.
Special Assessments: The not-so-simple monetary value of discretionary expenses the board chooses to undertake and invoice. Includes whatever "comes up", whatever the board decides we "should do", unlimited fees for attorneys/arborists/architects in review of whichever building projects the board deems "important"; and the expense of potential lawsuits, either brought or in defense, and whatever damages ensue. All this at the board's discretion, homeowners involuntarily embroiled.
Energy: The copious time/effort/vigilance required to maintain compliance, communication, transparency, and the long-term participation of a majority of homeowners.
Liability: The risk homeowners by law bear to indemnify their elected board for whatever actions that board chooses to take. (See Indemnification and Perpetual Power, above.)

When considering activating an HOA,

any added benefit must be worth all of that.