HOA ENFORCEMENT ACTION AGAINST OWNER BACKFIRES WHEN OWNER GETS $500,000 JUDGMENT AGAINST HOA AND DRIVES IT INTO BANKRUPTCY

This case involved a long-standing dispute between a homeowner (“Owner”) and her homeowners association (“Association”) in Florida. Association first sued Owner in state court after she allegedly failed to maintain her yard in accordance with the standards set forth in Association’s governing documents. In response, Owner countersued Association, asserting several state-law claims including abuse of process, violations of Florida’s RICO statute, and intentional infliction of emotional distress.

The trial court ruled that Association had waived its claims against Owner by filing the lawsuit rather than complying with an arbitration requirement contained in the governing documents. The trial court also awarded Owner attorney’s fees and costs, though the amount had not been finalized.

Owner claimed over $500,000 in legal fees and additional damages. Faced with Owner’s claims and other unpaid liabilities, Association filed a Chapter 11 bankruptcy asserting that the escalating legal costs and potential liability from Owner’s countersuit were a primary reason for its insolvency.

In Association’s bankruptcy proceedings, Owner filed two major claims: