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.