#55-09, O'Connell v. Greencastle Lakes Community Association, #55-09 (October 7, 2010) (Panel: McCabe, Farrar, Whelan)

The homeowner complained that the HOA was improperly charging the owners of single-family detached homes (like his) for the maintenance of reserved parking spaces, visitor and general parking spaces and associated roads, and snow removal from the same, that served the duplexes and townhomes.  He argued that such amenities and services benefited only the owners of those homes, and that therefore they should pay the entire costs of them.  In response, the HOA argued that all members had the right to use the roads and parking and that it had the right under the business judgment rule to decide that all members should share in the costs.  The HOA also claimed that it did charge the owners of townhomes and duplexes additional fees for snow removal in their neighborhoods and that it charged duplex owners an additional fee for the HOA's maintenance of their yards.

The hearing panel disagreed with both parties.  The panel began by noting that for the "business judgment rule" to apply, the board had to be acting within the scope of its legal authority.  Although the HOA contained a variety of different types of homes, its declaration of covenants created only one class of membership, which was "Class A."  The covenants then stated that all "Class A" members "shall pay the Association . . . . a monthly sum equal to 1/12th of the member's proportionate share of the sum required by the Association. . . . to meet its annual expenses. . . .".  Although the covenants contemplated the creation of "neighborhoods" with their own common areas and their own "neighborhood assessments," the developer had never actually created any legally-distinct organizations with their own common areas.

The hearing panel then held that the HOA's board did not have the legal authority to charge different assessments to the owners of different types of housing.  Therefore, the "business judgment rule" did not apply.  The HOA was required to charge all homeowners the same assessments.  In addition, the panel held that the HOA's funds could not be used to maintain privately-owned property, but only for the commonly-owned areas.  Therefore, the HOA was required to stop snow removal and yard maintenance on any property belonging to the owners of the duplexes.

The panel ordered the HOA to prepare its next annual budget in compliance with the panel's rulings in this case.