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New laws needed

By James P. Lingl
Published Sunday August 15, 1999


The situation that currently exists at the Simi Valley Le Parc condominium complex represents a frightening threat to the financial health of the more than 30,000 community associations in the state of California and the more than 3 million families who live in common-interest developments.

The ongoing Le Parc disaster could happen to any of your readers who live in a common-interest development.

Since the passage of Proposition 13, homeowner and condominium associations have become an ever-more important planning tool for local governments as they struggle to provide enough moderate-income housing for the growing population. As cities require the creation of a "common-interest development" as a part of the permit process, every time a new housing tract is proposed, these community associations have come to provide many of the services government is no longer able to afford.

In many instances, such as in the Le Parc development, the community association pays for all water, sewer, trash and landscaping services, while also maintaining the roads, pools, exterior lighting and other quasi-public amenities that used to be provided by local government.

Common-interest development homeowners pay assessments to their community association instead of paying taxes to their cities or counties to cover the cost of these services.

The owners of homes in the Le Parc condominium complex have become mere pawns in a complex game of legal chess. Through the tortured use of legal procedures, which were never intended to be used as they are, all of the owners' assessment payments are being scooped up to pay off a judgment instead of being used for their real purpose -- paying for the costs of maintaining the development.

This brutal use of the legal system has caused even more hardship than is expressed in the accompanying commentary.

The individual owners were never parties to the litigation that led to the judgment and never had any opportunity to be represented in that suit. Despite the fact that the law says that members of a corporation are not liable for its debts, and despite the fact that everyone has conceded that the owners of homes at Le Parc have no legal, moral or ethical responsibility for the judgment against the community association, the effect of the creditor's legal maneuvers in this case is to force those owners to pay off the judgment or lose their homes.

During the past months, the receiver who is seizing all of the assessment payments has failed to pay any of the expenses of the development. Basic utility services such as water, gas, electricity and even the fire insurance are threatened with immediate termination.

This is occurring because, in my opinion, the creditor and his attorneys have elevated personal interests above any consideration for the effect their activities are having on the innocent victims, the owners, who are helplessly caught in this nightmare.

Although our firm was not involved in the litigation that has led to this situation, we are in the midst of preparing an appeal of the court orders that have permitted this disaster to occur. So far, we have provided more than 600 hours of pro bono time -- basically free legal services -- to the association and its owners to try to prevent further destruction of the development and the members.

We are confident that the Court of Appeal will reverse this horrible legal situation. However, we are urgently concerned about how much will be left of the Le Parc development when the justices finally get to make their decision on the appeal.

Ultimately, though, the Legislature will need to pass new laws to prevent this type of slow destruction of community associations from happening again anywhere else in the state.

-- James P. Lingl is an attorney with Knopfler &Robertson in Camarillo.

 

 

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