Be Proactive: Include a Fee Shifting Provision in Your Associations Governing Documents

Imagine going through the effort of winning a lawsuit and receiving an award of attorney fees and costs, enduring the appeal process where the court of appeals affirms the win, but only to have the money award reversed.

This week, the Minnesota Court of Appeals used a community association’s bylaws to reverse the district court’s award to the association in the amount of $32,874 for attorney fees and costs. In the case of Svard v. Camelot Nine Encore Association, a homeowner unsuccessfully sued the association for denying the homeowner’s request to install solar panels on his home. The district court and the court of appeals upheld the association’s decision of denying the solar panel request because it would alter the aesthetics and architectural style of the community. The district court awarded the association $32,874 in attorney fees and costs. However, the court of appeals reversed the award, holding that the association’s bylaws do not allow recovery of attorney fees and costs through the association’s counterclaim—recovery of such costs could only be done via assessment.

The courts upheld the association’s actions, which is a win. However, instead of recovering the association’s costs as an award of $32,874 that could easily be judicially enforced, the association is required to assess that sum back to the homeowner and utilize the assessment mechanisms found in the governing documents.

There are two important takeaways from this case: First, community associations can prohibit solar panel install requests for aesthetic reasons. Second, and more importantly, every community association’s governing documents should include a fee shifting provision—language that allows a court to award attorney fees and litigation costs—rather than requiring the recovery of such costs via assessment only.

The attorneys at Smith Jadin Johnson, PLLC have extensive experience working with homeowners’ associations and common interest communities to ensure their governing documents are understandable, clear, and up to date with the current best practices. If you or your association have any questions about the provisions in your governing documents, please contact our office today.