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Fairfax HOA bankrupted by lawsuit

It’s a case of an HOA overstepping its bounds, and trampling on the toes of the wrong homeowners. Or it’s the case of petty homeowners taking a minor squabble a bit too far. Either way, the end result is bankruptcy for a Fairfax HOA.

The Washington Post has the full story, “Fairfax homeowners group humbled by court battle with residents,” but here’s the gist:

A couple in Fairfax’s Olde Belhaven neighborhood — Sam and Maria Farran — put up a yard sign advertising the candidate of their choice during the 2008 election season. The sign was four inches wider than allowed by HOA rules.

Naturally, other residents responded maturely and rationally. Ha ha — no they didn’t. “Need I say more!,” wrote one resident, “This would lead to chaos.” (Remember, we’re not talking about a 20-foot sign here. This is one that’s a few inches too big.)

But the Farrans had run afoul of the HOA before. Their previous crime? Refusing to install window-pane dividers. That transgression had one HOA board member compare them to Saddam Hussein. (Seriously.)

The HOA sent letters demanding that the sign be removed. One board member wanted to put a lien on the house as a “teaching moment.” So the Farrans cut the sign in half, and put the two halves up. Ta-da: No longer too wide.

The HOA board was not amused, and passed a resolution allowing it to fine residents who did not comply with rules. Then, at an unannounced meeting, they rejected the Farrans’ roof and deck projects.

The Farrans sued, saying the HOA couldn’t vote itself the power to levy fines, and it couldn’t arbitrarily deny them the roof and deck projects.

Both sides made offers to settle. Both sides rejected the other’s offer.

In 2010, the Farrans won the case against the HOAs fines. A judge ruled that no, HOAs can’t suddenly grant itself new powers. In 2011, another judge ruled that the HOA couldn’t block the Farrans’ projects, because the decision was arbitrary and not based on clear standards.

Now the HOA found itself not only having to pay its own legal bills, but those of the Farrans as well — totaling close to $400,000. HOA dues went from $650 a year to $3,500 to cover those costs, but that wasn’t enough. The HOA had to declare bankruptcy. Now it’s trying to sell its common area to pay some of its debts.

And all this, you’ll remember, over a sign that was four inches too wide.

Click here to enjoy the full article, with lots of juicy details.