Legal Update – Nov. 6, 2020

November 6, 2020

By: Matthew Davis

We are now far enough into the case that we should start to see regular developments, and we want to keep everyone updated with weekly updates. In these updates, we will let you know of any events in the case and will also share some of our thinking. If you have any thoughts, comments, or questions, let us know. (Email: inquiries@homestead-hoa.org)

Discovery
We sent requests for information and documents to 18 Paradise, and MJ Management, and we have received some answers. At this point, we are focused on the Sixth and Seventh Amendments to the covenants (CC&Rs/Amendments), and we asked about MJ’s authority to sign and record the amendments. MJ claims that it was authorized to make the amendment and said that “18 Paradise LLP delegated authority to act as Declarant to ensure proper maintenance of the Homestead.” However, 18 Paradise refused to answer the question because it said the word “authorized” is vague. We have filed a motion to compel 18 Paradise to answer the question, and that hearing will be heard on November 13. 18 Paradise also gave evasive answers to our other questions and MJ has not answered them. We are pressing them for answers and will likely bring another motion to compel answers on Monday.

Class Action Certification
The judge denied our motion for class action certification because Mick and Josh submitted 29 declarations from other owners saying they did not want one. We gave the judge evidence that 230 people have approved it at the website, but he either did not understand or care. We sent requests for supporting declarations to every Homestead owner, and we have received an overwhelming response. We filed a motion for reconsideration with over 300 declarations in support of the class action. Your support in signing and returning those declarations will make a big impact on the judge, and we are optimistic about the motion. It will be heard on November 13. Look for an update that day.

Homeowners Association 
There still seems to be some confusion about what we are trying accomplish with respect to an HOA. Mick and Josh have said that we are asking a judge to decide whether you should have an HOA, but that is not something that a judge could do. The question is not whether you should have an HOA, but whether you already have one. Your properties are subject to the Declaration of Restrictive covenants, and it establishes an HOA. You can see the document at https://homestead-hoa.org/ccrs/ and paragraph 4.1 states “There is hereby established an Owners Association to be known as the Homestead Owners Association.” However, the covenants also state that the HOA has no power and is advisory only and has no power until the declarant transfers to common space to it. That has not happened, so the HOA still has no power.

This is an important point because your covenants contain a number of restrictions on use. For example, no tents, trailers, commercial vans, or accessory buildings. No boats or RVs, no antennas, and no basketball hoops. No signs and all pets must be on leash. Windows must be wood or vinyl trimmed with wood and fences must be wood or masonry. When covenants impose restrictions on use, an HOA is necessary to enforce them. An HOA can enforce restrictions or it can modify them as times change.

Right now, 18 Paradise has control over your HOA. It has the power to decide whether to enforce the restrictions or waive them, and it even has the right to amend the covenants. We already know of instances where 18 Paradise has waived some of the restrictions over the objection of another homeowner. It is very important for everyone to understand that this lawsuit is about who will control your HOA, not whether to have one in the first place.

Declarations
If you received a declaration and did not return it, there is still time. The sentiments of Homestead owners is an important part of this case, and we will continue to try to monitor it. The declarations are indexed by area so we can look for trends and know where to follow up.

Most of you received a simple declaration stating support for the class action. You should know that if the judge does not reconsider his decision, then parts of this case will still affect you and other parts will not. If the judge decides to order 18 Paradise to transfer the common areas to the HOA, that decision will affect everyone whether it is a class action or not.

However, the court can only award refunds or monetary relief to people who are parties or class members. So if the judge does not change his mind, everyone who is not a party would not be eligible for a monetary award. If that happens, an alternative would be for interested homeowners to join the lawsuit as a plaintiff. We would open the case to anyone who wanted to participate. People who choose to participate would not owe any fees or costs.

Trust Fund
Lawyers and law suits are expensive. In an effort to make this lawsuit possible, the attorneys have agreed to a greatly reduced hourly fee and a small contingent award based on the result. The plaintiffs have established a trust fund to pay the expenses of the lawsuit. The trust fund is managed by an outside attorney and the accounting is freely available to everyone. If you support this action, please consider donating to the trust fund. If we succeed and recover attorney fees, all contributions will be reimbursed pro rata.

Looking Ahead
Over the next month or so, we expect to obtain the rest of the documents and information we have requested, which will help bring things into sharper focus. We also expect to bring several motions to expedite the case. Those motions might be focused on parts of the case that can be decided now. By the end of the year, we expect to have made significant progress in achieving our aims.