News & Events
Locke Lord Team Trial Win Valued at more than $95 Million in Homeowners Association Lawsuit Against Condominium Developer
11/30/2011
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(LONG BEACH, Calif.) November 30, 2011 – Homeowners in a waterfront community here were spared some $92 million in future fees, and approximately $7 million in past fees and interest, following a month-long trial before Superior Court Judge Patrick T. Madden. Considered one of the largest cases ever tried in the Long Beach branch of the Los Angeles Superior Court, the case was the first to test a statute recently enacted by the California Legislature that imposes a statutory notice requirement on collectors of transfer or “assignment” fees charged to homeowners.
The case pitted the Marina Pacifica Homeowners Association, consisting of approximately 570 member homeowners, against defendants William M. Lansdale and the Lansdale-controlled Southern California Financial Corp. Lansdale, one of Marina Pacifica’s original developers, owned a nearly 44 percent interest in so-called “assignment fees” assessed against homeowners since sales began in the early 1970s. Two other founding developers sold their interests in the fee to the Association at a deep discount, prior to a 2006 fee “escalator” clause in the homeowners’ contract taking effect.
The HOA filed suit in March 2009 after defendants sent individual homeowners bills reflecting drastic fee increases under the guise of the 2006 escalator clause. Formerly nominal fees (usually around $35 per month) increased to several hundreds of dollars monthly. Homeowners received no goods, services or other benefit for these payments.
Plaintiffs, who were represented by Locke Lord attorneys Christopher J. Bakes and Shauna N. Correia, argued that these fees were subject to California Civil Code sections 1098 and 1098.5. Enacted in 2008, the statutes require that owners of the right to collect recurring property fees had to record notice of their right and intent to do so. Defendants did not record any notices.
Plaintiffs also argued that, even if sections 1098 and 1098.5 did not apply, defendants used the 2006 escalator clause to charge assessments that were more than double those authorized by relevant contracts.
In a Statement of Decision issued on November 14, 2011, Judge Madden agreed with plaintiffs. He found that sections 1098 and 1098.5 applied and further found that defendants had not complied with the statutes. For fees due prior to the effective date of the statutes, he also declared that defendants’ assessments were too high and that defendants had misinterpreted relevant contract documents.
When the final phase of trial is conducted in early 2012, the Court will determine the exact dollar amounts that were overbilled, but the total is expected to be approximately $7 million in additional fees and interest saved for the homeowners.
Lead trial attorney Bakes, a former naval officer, observed in argument that “these fees are like barnacles on the hull of a ship — once they attach, they are almost impossible to scrape off, and are just as useless.” After the Court’s Statement of Decision was issued, Bakes, a partner in Locke Lord’s Sacramento and San Francisco offices, stated that “the assignment fee was being paid in exchange for no benefit or service whatsoever.” According to Bakes, “This is the first time that Civil Code 1098 has been tested and applied to these equity-draining fees, and we are gratified that the Court agreed with us that these homeowners should be relieved of fees calculated at some $92 million. We wonder how many other unsuspecting homeowners up and down the state may also be paying fees like this one.”
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Plaintiffs were represented by Christopher J. Bakes and Shauna N. Correia, of Locke Lord LLP. Bakes can be reached in the Firm’s Sacramento Office at 916-930-2540 or the San Francisco Office at 415-318-8810. He also can be reached via email at cbakes@lockelord.com.