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CCOC Decision Summary

#720/33-06, Potowmack Preserve Inc. v. Ball, Ball v. Potomack Preserve Inc. (June 13, 2008) (Panel: McCabe, Huggins, Negro)

The Commission consolidated two separate disputes between the same parties for a single hearing in front of a Hearing Panel.

In the first case, the homeowner association (HOA) filed a dispute against the homeowner (HO) for constructing an unapproved addition to his home.In the second case, the homeowner filed his own dispute against the HOA for raising the annual assessment above the amount allowed in the HOA governing documents.

In the architectural dispute, the facts at the hearing showed that in 2003 the HO applied for permission to construct a covered deck on the rear of his home, with the lower part of the deck as a solid wall.However, when he built the deck, he closed it in entirely, so that it was a closed room.Under the HOA's architectural rules, an approved project must be completed within 24 months after the permission is issued, or the permission expires.In 2004, the HO requested permission to convert 2 side decks into enclosed rooms.The HOA denied permission for the second application and filed a complaint with the CCOC on the unapproved closed deck, but in spite of that, the HO had already completed most of the work he applied for in the second application.In 2008, while the consolidated disputes were still pending, the HO filed a request to construct another addition to his home, which the HOA denied.The HOA's witnesses testified that the unapproved closed rooms did not meet community design standards, were not "decks" because, among other things, they were not constructed of weatherproof materials.

In the assessment dispute, the HO argued that the Declaration of Covenants allowed the board of directors of the HOA to increase the annual assessments by no more than the increase in the annual Cost of Living Index, which for 2005 was 3.7%.Since the annual assessment at that time was $70, under the HO's interpretation of the Covenant, the board could only raise the assessments by $2.60; but in fact the board raised them by $19.00.In its defense the board argued that it had not raised the assessments since 2000, and that it had the right to raise the assessments by the total increase in the Index since 2000.

The Hearing Panel found that the closed room addition constructed by the HO was a violation of the HOA rules.The Panel further found that the HO's conduct in building a closed room he did not apply for and then later making more changes without approva, showed bad faith on his part..Finally, the Panel found that the HO's permission to construct a roofed deck expired in 2005 because he did not complete construction of the deck as approved within the 24 months allowed by the HOA rules.Therefore, he had no permission for any changes he had made since 2003.

On the assessment issue, the Hearing Panel ruled that the precise wording of the Covenant involved required the board of directors to increase the maximum assessment by the amount of the Cost of Living Index, although the board had the discretion to make the actual annual assessment less than the maximum.The Panel drew a distinction between the mandatory maximum assessment required by the Covenant, and the discretionary actual assessment, which could be less than the maximum (but could not be more).The Panel noted that a former board member called by the HO as a witness, who had served on the board before 2000, testified that while he was on the board it was the board's practice first to set the annual maximum assessment, and then to set the actual assessment needed for that year.The Panel held that the failure of the board to vote upon the maximum assessment levels for the years 2001-2004 was harmless because the Covenant required the board to take the maximum level anyway.Therefore, the increase of the assessments taken in 2005 was valid.

The Panel dismissed with prejudice the HO's complaint about the assessments.The Panel ordered the HO either to remove all changes to his home that he had constructed since 2003, or to file a proper application for a partially-enclosed deck with a roof within 30 days and to comply with the HOA's decision on that application.The Panel further ordered that the HO could not apply for permission to make any other changes to his home until he either removed all changes or complied with the HOA's decision on the deck application.

Finally, the Panel awarded the HOA's request for attorney's fees in the amount of $3200.The Panel did so under Section 10B-13(d) of the Montgomery County Code, noting that the HOA Bylaws specifically state that if the HOA successfully takes legal action against any member for violation of the HOA rules, the member must pay "all reasonable litigation expenses incurred by the Association . . . .including attorney fees."The panel awarded fees at the rate of $150 per hour but denied any fees related to the assessment dispute (on the grounds that the board was partially at fault by failing to state expressly that it was taking the maximum assessment allowed for each year) and for litigation in the Circuit Court between the parties.

The Panel retained jurisdiction over the architectural dispute in order to monitor any complaints over the HO's application or the HOA's response to the application.

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