If the assessment lien process does not result in payment of the delinquent assessments and it does not make sense for the association to foreclose the assessment lien (when, for instance, the homeowner has abandoned the property or lost it to bank foreclosure), then an association must consider filing a lawsuit. A court action may be commenced in the Superior Court, or in the Small Claims Court under limited circumstances. There are a number of factors to consider when choosing between filing a court action in the Superior Court or in the Small Claims Court.
The main factor is the amount at stake. An action may be commenced in Superior Court for any amount. The filing fees vary depending upon the amount at stake. There are significant advantages to filing in Superior Court. The greatest advantage is that the association is represented by a lawyer in Superior Court. Another is that the homeowner is more likely to default in Superior Court, because it is expensive to file a response to the lawsuit. An additional advantage is that the judges in Superior Court are knowledgeable and understand homeowners association law as well as bankruptcy and lender foreclosure issues. A third advantage to filing in Superior Court is that making a claim for attorney’s fees for the costs associated with the lawsuit is easier in Small Claims Court, the process is supposed to be conducted without attorneys, so making a claim for attorney’s fees is difficult. Also in Superior Court, service of process may be obtained by publication if necessary.
In Small Claims Court, an association is limited to two actions of between $2,500 and $5,000 in damages per calendar year. There is no limit to the number of actions that can be filed for $2,500 or less. The filing fee is less than in Superior Court, but so too is the filing fee of answering the Small Claims Court complaint. Attorneys are not allowed in Small Claims Court, so if the judge does not understand the issues, the association has to try to explain the situation without the benefit of speaking the judge’s language.
There are appeals in Small Claims Court, but only the defendant can appeal. And while attorneys are required to be used by the association in the appeal (held in the Superior Court), the attorney’s fees that can be recovered are limited by statute to $150 (yes, that is not a typographical error).
Click here for a Court Actions Flow Chart showing the processes of court actions in the two different courts.