#30-12, Bruno v. Potowmack Preserve Inc. (November 6, 2013) ( Panel: Burgess, Dubin, Kabakoff)

The member of the HOA complained that his association’s annual assessments were arbitrary and unreasonable, because the amounts being collected were far in excess of the amounts expended.  He also complained that the HOA failed to adopt its budgets properly, failed to give proper notice of its meetings, failed to conduct audits, and failed to conduct open meetings. 

The evidence showed that the current budgets did not itemize all the items required by Section 11B-112.2 of the HOA Act ( including Income, administration, maintenance, utilities, general expenses, reserves and capital expenses).  The HOA’s reserves were calculated by different formulas over the years, with some boards setting them at the level of one year’s worth of capital expenditures and others at three years worth.  The capital expenses from year to year ranged from $900 to $9000, mostly depending on tree care needs.

Although the HOA did put meeting notices of annual meetings in all the members’ mailboxes, it did not have a time frame for doing it and the HOA’s witness testified that he did not know of any deadlines set by the HOA’s documents or by the law for giving advance notice of membership meetings and budgets, and he conceded that the association had not given the minimum of 30 days’ notice as required by the County and State codes.

The complainant testified that notice of board meetings was not seldom given, that several meetings were announced on the HOA’s listserve but that he was not notified of them; the only reason he knew of them was because his wife was on the board of directors.  The HOA testified that it gave notice of board meetings only by email, so that if it did not have a member’s email address, it would not give notice to that member.  The association’s representative conceded that the HOA’s own listserve listed one board meeting although he had testified that the board had held 4 or 5 times per year during the two years in question.

The homeowner also provided evidence that the HOA board was conducting meetings by email without collecting written consents to such meetings from all the board members.

 Finally, the association conceded it was not conducing annual audits, although its Bylaws required it to do so; he stated that the board had made a ‘business judgment” not to do so.

The hearing panel found that “the association has engaged in long-standing behavior showing a complete lack of interest or understanding of the governing documents or Maryland law.”  However, it did found that the HOA’s assessments were not arbitrary or unreasonable, the high assessments were the result of the board’s conservatism in setting aside sufficient reserve funds to cover occasional high expenditures.

The hearing panel ordered the HOA to prepare an amended proposed budget for the next fiscal year, to mail it by first class mail to all owners, and to notify the members by mail at least 30 days in advance of the board meeting to discuss the proposed budget.  Furthermore, all board decisions made at any meeting that had not been properly announced but be confirmed at an open meeting of the board, properly called for that purpose, with at least 10 days advance notice to the membership, sent by mail to all owners except those who had agreed to accept email.  Finally the panel ordered the association to require at least 4 members of its board of directors to take at least 4 hours of training in association management, such as the seminars offered by the Community Associations Institute (CAI).  The HOA was also ordered to reimburse the complainant for his $50 filing fee in this dispute.