#51-11, Brown v. Americana Finnmark Condominium Association (July 26, 2013) (Panel: Stevens, Brandes, Fonoroff; Hearing Officer: Lynn Robeson)

The CCOC referred this dispute to the Montgomery County Office of Zoning and Administrative Hearings (OZAH) for a hearing due to scheduling conflicts which prevented the CCOC from hearing the dispute in a timely manner. OZAH assigned a hearing officer to the dispute, who conducted the hearing and issued a recommended decision to the CCOC.  The CCOC hearing panel reviewed the recommended decision and issued the final Decision and Order.  Since the Decision and Order held in favor of the unit owner on one issue, and in favor of the Condominium on the other two issues, both parties filed appeals to the Circuit Court to contest the rulings unfavorable to them, and on March 4, 2014, the Circuit Court upheld the Decision and Order on all issues.

The homeowner made three complaints to the CCOC: 1. that the condominium’s use of the “historical method” to estimate its future expenses was improper and it should use a different method; 2. that the condominium should produce for his inspection a year-to-date ledger which includes details of each budget expense; and 3. that the condominium should make available for his inspection the complete records of its delinquent accounts, including the names of the members who were delinquent.

On the first issue, the unit owner argued that the condominium’s budget preparation method was inadequate because the board of directors did not analyze each of the last year’s expenses to determine whether the expense was likely to repeat.  The unit owner’s proposed method is similar to the concept of “zero-based” budgeting, in which each expense item is reviewed in detail to determine whether it is necessary and reasonable in all its components.  The board of directors uses the “historical” method, under which it reviews its actual expenses for the last three years, and uses the average of those expenses to plan its proposed budget for the next year.  The condominium argued that the historical method is widely used and widely accepted and that the detailed analysis demanded by the unit owner is so time-consuming as to be impractical for a board composed of volunteers.

On the second issue, the unit owner requested to inspect the year to date accounts of the condominium which included the identification of all vendors and the separate payments made to them.  The condominium had, in the past, created such records but had ceased doing so because they were not useful.  The condominium kept the data in separate files but did not cross-reference or correlate the different data sets due to the expense and time required and because they were not necessary.  The unit owner insisted that since the condominium had the data, and the ability to create the sort of detailed year-to-date report he wanted, it should do so.

Finally, as noted, the unit owner requested that he be allowed to inspect the complete delinquency records.  The condominium was willing to make the records available but it censored them to conceal the identities of the delinquent owners involved for the purpose of protection of privacy.

The hearing officer recommended that the condominium’s decision concerning the budget planning method should be upheld under the business judgment rule. The governing documents delegated to the board of directors the duty to prepare a budget and did not specify what method the board should use.  The board’s choice did not violate any law or association document, and it was both efficient and widely accepted.  The hearing panel accepted this recommendation.

The hearing officer also concluded that the condominium did not have to produce a year-to-date general ledger containing detailed descriptions of all expenses.  The unit owner had the right to inspect such records as the condominium possessed, and he was given that right; the problem was that he found it difficult to navigate his way through all the detail without assistance.  Nonetheless, the law does not require an association to create documents that do not exist.  As the hearing officer wrote, and the panel agreed, “the [laws] require the Condominium to permit owners to review their existing records; they do not require the Condominium to produce or create a report in the format that is most desirable to a unit owner.”  The hearing panel also accepted this recommendation.

Finally the hearing officer concluded that the condominium had the right to refuse to provide documents showing the names of the other members who were not paying their assessments.  She noted that the Condominium Act allowed associations to withhold personal information on the unit owners’ liabilities and creditworthiness.  On this point, the CCOC hearing panel did not agree.  The hearing panel ruled that Section 11-116 of the Condominium Act did not prevent disclosure of the names, and that “[r]edaction of names also conflicts with the Complainant’s rights under the Association’s governing documents to sue the Association and any of its members to enforce those documents.”  The panel ordered the condominium to make uncensored delinquency records available to the unit owner.