Although there are numerous factors a board of directors of a community association should consider before filing a lawsuit, one of the biggest factors is whether or not the association can recover its attorneys’ fees and costs. The standard rule is that absent a statutory or contractual provision providing for otherwise, the “American Rule” is that each side covers its own fees and costs.

Participating in a lawsuit, regardless of whether you are the plaintiff or defendant, can quickly become costly. Court motions, hearings, and discovery, can be very time intensive and your attorneys’ fees bill may quickly add up. Can a community association ever recover the attorneys’ fees and costs incurred in filing or defending a lawsuit to enforce its governing documents?

The short answer is: yes, a community association can recover attorneys’ fees and costs when enforcing its governing documents or the Davis-Stirling Common Interest Development Act (the “Davis-Stirling Act”). When a party enforces the governing documents or the Davis-Stirling Act against a member, the prevailing party is statutorily entitled to an award of attorneys’ fees and costs. (See California Civil Code section 5975(c)).

In addition to certain statutory rights for a prevailing party to recover attorneys’ fees and costs, most governing documents will include language stating that a prevailing party in a lawsuit to enforce the governing documents is entitled to recover the attorneys’ fees and costs incurred in doing so. However, be aware that both statutory and contracted recovery of attorneys’ fees and costs are reciprocal—meaning if the other party is determined by the court to be the prevailing party, the community association will have to pay the other side’s attorneys’ fees and costs.

In California, a “prevailing party” is defined as “the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be as determined by the court…” (California Code of Civil Procedure section 1032). Importantly, the prevailing party is entitled to reasonable attorneys’ fees and costs calculated from the prelitigation Alternative Dispute Resolution. (Grossman v. Park Fort Washington Assn. (2012) 212 Cal.App.4th 1128). Ultimately, while a “prevailing party” is entitled to its reasonable attorneys’ fees and costs, the Court retains the ultimate discretion in the amount to award the prevailing party.

Although a community association’s right to recover attorneys’ fees and costs as a prevailing party in an enforcement action may be statutorily or contractually protected, there are several other actions a community association can take to ensure it is protected in recovering attorneys’ fees and costs. For example, if your governing documents have not been restated in several years and do not include an attorneys’ fees provision, we recommend you consult with an attorney at Epsten, APC who can assist you in restating your governing documents. Additionally, having your attorney draft an attorneys’ fees provision in any contracts you may use.