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CCOC Decision Summary

#03-12, Saunders v. Greencastle Manor Two Condominium Association (August 12, 2013) (Panel: Browder, Caudle, Farrar)

The unit owner filed several complaints against her condominium  association.   They included:

            1. the association violated its bylaws by increasing its annual assessments by more than 15%       

            without a vote of the membership;

            2. the association failed to have the proper number of election inspectors;

            3. the association failed to give advance notice of new rules and other actions;

            4. the association refused to allow members to speak at board meetings;

            5. the association charged excessive fees for document inspections; and,

            6. the association improperly conducted meetings by intimidating members from

            commenting on proposed budgets.

The association denied all the complaints and asked that the case be dismissed as to the directors and manager.

The unit owner filed these complaints against the association, the members of its board of directors, and its manager.  The CCOC, however, never treated this as anything other than a complaint against the association (the CCOC not having jurisdiction over managers or individual members of the board of directors), and the Summons was directed only to the association.

The hearing panel conducted a 5-hour hearing, and made the following rulings.

1. The CCOC has no jurisdiction over individual members of the board of directors, and has no jurisdiction over managers.  The proper party to a CCOC dispute is the association as a legal entity, formally known as the Council Of Unit Owners.  Under the Condominium Act, and the association bylaws, the association’s board of directors, as a body,  represents the Council of Unit Owners.  In addition, Section 2-405.1(a) of the Corporations and Associations Article of the Code of Maryland states that individual directors of an association are immune from personal liability so long as they comply with the standards set by law.

2. As to the assessment increase, the panel found that the board of directors increased the annual assessments by 20% in order to avoid deficits which prevented the association from receiving certification from the Federal Housing Administration.  The general membership did not vote on this increase.  The association’s bylaws did not set any limit on the board’s ability to adopt assessment increases.  Section 11-109.2 of the Condominium Act does impose limitations:

Any expenditure made....that would result in an increase in an amount of assessments for the current fiscal year of the condominium in excess of 15percent of the budgeted amount previously adopted shall be approved by an amendment to the budget adopted at a special meeting, upon not less than10 days written notice to the council of unit owners.

The panel held that this law applied only to amendments to the budget of the current fiscal year, and not to the adoption of a new budget for the fiscal year.  The law referred to an increase in assessments “for the current fiscal year” over the “previously adopted” budget.  Thus, if the association adopted a budget for the new fiscal year and then wanted to amend it later in the fiscal year, this law would apply; but it did not affect new fiscal year budgets that replaced budgets of the prior fiscal year.

2. As to the election disputes, the panel found that the association complied with its bylaws by having the proper number of election inspectors (three), because the two members acting in that capacity were assisted by the manager.  However, the association failed to comply with the bylaw requirement that the inspectors be sworn in.  In addition, the association violated State and County codes by failing to list the candidates in alphabetical order on the ballots. 

While the board president did not count the ballots as required by the bylaws, the reason is that she was herself a candidate for election, and therefore properly disqualified herself from this duty and left it to the election inspectors, which also had the right to count the ballots.

Although the panel found several instances in which the association violated its bylaws, it found no evidence that the violations affected the results of the election.

3. The unit owner also complained that the association failed to give proper notice of board meetings.  The association testified that the board’s meeting schedule was listed on its webpage, and printed on the assessment increases as well.  The unit owner disputed the claim that the invoices contained information on board meetings.  Unfortunately, neither party provided copies of the invoices, and the panel did not have sufficient evidence to make a finding on that point.  However, the panel stated that merely posting notices on its website did not constitute notice to all members.

4. The panel found that the unit owner did not prove her claim that the association refused to let her speak.  The minutes of the meeting showed that she and other members did speak at the meeting in question, and also that she was allowed to respond to comments made later in the meeting by the board president.

5. The unit owner also claimed that the association’s fees for the inspection of its books and records were excessive.  Her inspection requests were extensive: for example, she demanded detailed accounts in chronological order of all association receipts and expenses for a 3-year period, and this was just one of several requests.  However, she never exercised her right to make an appointment to actually see any documents.  The association agreed to make the documents available at the cost of $100 per hour and 12 cents per page.  Under Maryland law the inspection fees must be “reasonable” but the law does not define what that means.  However, the law says that the copying fee cannot exceed 50 cents per page, and the association’s copying fee is well below that.  The evidence also showed that the association made no profit on the inspection fee, but merely charged to the unit owner the same amount that the manager billed to the association for that service.  However, the panel was troubled by the fact that the association had never adopted any rule setting fees, which could lead to arbitrary fees imposed on certain members.  While a manager’s fee is relevant to whether a document inspection fee is reasonable, the contract between the manager and the association does not automatically become a rule that is enforceable against the members, and an association could set the fee above or below that figure.  The pane found that the fee was not excessive under the circumstances, but strongly encouraged the association to adopt an inspection fee schedule.

6. The association demanded an award of attorney fees against the unit owner for having filed and pursued a frivolous complaint.  The panel denied the request.  It noted that although the unit owner failed to prove most of her claims, some of the evidence used in the hearing was not provided to her before the hearing so that she could not know that some of the claims were unfounded; the law on assessment increases is not clearly written and could be interpreted in different ways; and finally the unit owner did show that the association was not fully complying with its bylaws and the relevant laws, and she raised an important issue about how the association was setting its document inspection fees.

The panel ordered the association to use ballots that listed all candidates in alphabetical order, and to give at least 10 days notice of all regular board meetings to the membership whether or not they used the Internet.  The panel dismissed the other claims and denied the request for attorney fees.

 

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