Unequal treatment

My Association BOD here in VA (not professionally managed) has decided to waive the coming fiscal year's assessments on all additional lots owned by multi-lot owners. They are doing so in the name of "bringing the community" together so that each owner pays the same dues. There is no criteria such as being in good standing or if the owner has legally consolidated their lots.

Though the governing documents are clear that the budget is assessed by lot, the Board is taking advantage of a poorly written By-Law which states that, in effect, no assessment, dues, fee,etc. owed the Association may be waived without Board approval. They claim the Association attorney has stated that they are doing nothing wrong. So far, despite my requests they have not provided this opinion in writing and question whether the attorney actually gave the opinion in writing. I honestly believe the Attorney, who is a general practitioner and not a CIC specialist, may not have been given the full information.

They did the same last year in order to get a significant budget increase passed. Essentially they proposed a 100% increase but promised to waived the dues if it passed. Of course the multi-lot owners who had aggressively come out against such increases in the past remained silent and by a fairly narrow margin the budget passed. The presentation of the budget was so poor that it actually showed the total planned revenue. Only a column header that says "$600 per owner". Yet the expense budget total was reflected and if divided by lot as directed in the Covenants and By-Laws the annual assessment would be $496 per lot.

While I have repeatedly raised the issue in the general meeting, I look like the bad guy because I am portrayed as trying to stop the "improvements" that come with the increase. That is not my intent. The Board effectively set an artificial revenue target to offset the impact of the waiver. If you multiplied the single lot owner's invoiced dues by the total lots you would arrive at a revenue budget about $70,000 higher than the ratified expense budget.

Regrettably I've had limited time to pursue this further until recently and the Board is promising the same this year. I'm particularly frustrated because the membership is clearly voting with their checkbooks rather than their ballots. According to the President's report at our General Membership meeting only about 2/3 of the 565 owners are in good standing. This is down from 85% a year ago before the higher budget went into place. At the same meeting though, they put forward the fact that they still intend to wave the dues on 115 lots. If I raise any criticism (clearly I'm doing it wrong) of this decision, the Board's small but very vocal group of supporters give responses such as... "if you don't like it... move".

Oh... and because the Article of Incorporation designates that each lot represents a vote, the multi-lot owners not only are getting a waiver but also retain the number of votes represented by lot.

One of the real challenges is that the Board, a year and a half ago did succeed in doing some good things and they are riding on their success in the past because in the last year maintenance has dropped off, newsletters have stopped, the website is poorly maintained and they've stopped community events.

And before someone jumps on me to tell me to join the Board, I served for 3 years, revamped and maintained the website during that time, produced or assisted with seven of the last eight newsletters, was secretary for 2.5 years and treasurer for half a year and I think my wife and children would shoot me if I joined the Board considering the current condition the accounting and communications are in.

The State of VA CIC Board Ombudsman has been less than helpful.

Would such a waiver constitute unequal treatment of one group of owners?

Has anyone run into this before?

Any suggestions on rallying fellow homeowners in a community marked by apathy and composed primarily of people who commute an hour each way everyday?

Thanks Tim for the quick reply.

The governing documents except for the Articles of Incorporation are posted to the Association's website. We did have Reserve Policy but it was suspended by the current Board last year and never posted.

http://www.applemountainlake.org/bylaws.htm

Paragraph 12 of the Covenants speaks to the Assessment:

12. Each owner shall pay the Corporation an annual assessment fee, per lot, which
for computation purposes is the 2002 assessment fee of one hundred-fifteen
dollars ($115.00), due each December beginning in 2001. Said fee shall be
used by the Corporation for road and common facilities maintenance, and
necessary general expenditures of the Corporation, as approved by the Board
of Directors of the Corporation, in accordance with the general budget
approved by the general membership of the Corporation at the Annual
Meeting. The amount of said assessment shall not be increased by more than
five percent (5%) per year without the specific approval of the general
membership.

Articles VIII and IX speak to the budget and assessment, albeit not as explicitely as I might like.

ARTICLE VIII
RULES OF EXPENDITURE
SECTION 1: BUDGETED EXPENSES
The Board of Directors shall adopt an annual budget—subject to ratification by the
October semi-annual members’ meeting, which shall be the guideline under which all
sources of funds are to be received by the Association and expenditures made thereby.
All expenditures that exceed the adopted budget shall be fully explained at the next
members’ meeting.

SECTION 1: ANNUAL CHARGES
The following annual charges shall be applicable to each lot in the subdivision and shall
be paid by the owner of record, or beneficial owner if different:
(a) ANNUAL ASSESSMENT FEE
The annual charges as authorized by the latest recorded Covenants and approved by the
members shall be paid by each lot owner for each lot. This fee shall be due and payable
on a schedule to be determined by the Board. If this fee or any portion thereof is not paid
within 30 day(s) of the date determined by the Board, there shall be added thereto a late
charge of twenty percent (20%) of the fee, plus all additional billing costs, court costs,
lawyers’ fees, etc. to offset the additional administration costs of special handling of such
delinquent accounts. Additionally, if any portion of the fee is not paid according to the
schedule determined by the Board the remainder of the fee may be due immediately as
determined by the Board. Late charges shall be cumulatively assessed against total
delinquent charges due.

Article VIII Sec 3 speaks to waivers: SECTION 3: WAIVERS
There shall be no waiver nor reduction of any amounts owed the Association, be they
dues, assessments, fees, penalties, late charges, fines, bills for services or any other sums
owed for another reason, without the approval of the Board of Directors.

Here is was our docs say about interpretations resulting in conflict. I've used this in my appeals to the Board but again, because the Attorney has told them they've done nothing wrong, they stand by their decision.

Articl X

SECTION 5: CONFLICTS AND CONTRADICTIONS
Any conflict that may arise from interpretation of these Bylaws with respect to the
Articles of Incorporation and/or the Protective Deed Covenants shall be resolved in favor of the two latter documents, which shall control, but in any case, state law shall override
provisions of any of these documents.

Daniel,

The info you posted states the assessments are to be paid ". . .by each lot owner for each lot". Re: para 12 of the covenants and Article VIII, Section 1(a). IMO, there is your proof that the BOD is violating the gov. docs. by waiving the assessments for each member who owns more than one lot. Also you stated that the Articles of Inc also state that the assessments must be paid for each lot. Even if the bylaws state otherwise, the Articles take precedence if there is a conflict between the two -- Re: Article X section 5.

I cannot understand why the members cannot understand that they are paying a higher assessment because the assessment is being waived on additional lots owned by certain members. Doesn't anyone in your community understand simple math? Frankly that boggles my mind!

IMO, all you can do is try to make the members understand that they are paying a higher assessment because assessments are not being charged on all the lots and also that the BOD is violating the gov docs by granting these waivers. If you have to, put up a big chart showing the assessment income stated on the budget divided by the number of lots in the assn and then divided by the number of lots being charged the assessment and also show what the difference is. Also write up the CCR provisions that outline who must pay assessments highlighting the phrase ". ..by each lot owner for each lot. . ." -- perhaps even put "for each lot" in red, and hand it out to all the members. Bottom line: if the majority of the members don't care that they are paying a higher assessment and also don't care that the BOD is violating the gov docs then I don't know what else you -- as one person -- can do. If you can get a group of like-minded members to stand up with you that would be great.

Daniel,

I took a look at your bylaws and Section 2 states that each member is required to pay assesments for each lot owned. Am I missing something?

Tim, Mary, Susan: thank you for your replies.

Mary, I understand your question and have been of the same mind but as Tim points out, they aren't actually going against the covenant's though they are going against the intent of the covenants thanks to a poorly worded by-law.

Tim, you math is right but the issue I have is that the Revenue budget is artificially inflated but that isn't reflected in the budget that has been approved. The "revenue budget" doesn't match the expense budget. Either way it reflects something rotten in Denmark... so to speak.

I very much appreciate your advice and I think we are on the same page. Although I hadn't gone through with actually asking for a waiver on my own lot that would help make the case of unequal treatment which is one of the lines of thinking that prompted me to submit the issue here on this board.

I have sent a certified letter to the Board, using the language of the Virginia Non-Stock Corp and Property Owners Act, requesting access to the minutes, financials and a host of other documents. This was prompted initially because the Treasurer was unable to give a financial report at the last General Meeting and neither the President nor the Treasurer was able to explain how we could spend 100% of the budget but collect only 65% of the dues. It turns out that the "Actuals" reflected in the Call to Meeting were over stated by $38,000 and thankfully they has spent only 100% of what was collected and not 100% of budgeted. Why they couldn't report that is beyond me. Of course between that and the fact that neither the Treasurer or the President could state if there were any major outstanding bills (October is the end of the fiscal year) I really could not come away with a good sense of where the Association stood financially. Add to that none of the Board could advise as to the status of the major paving/re-paving project and they had not requested a report from the Roads Chair who was absent. Either way I requested access to a whole laundry list of items that I knew to not be outside my right as a property owner to request.

Again, I do believe the members of the Board have the best intentions but they are creating precedent that will be very difficult to recover from in the future.

While I hate to see it, I just learned today that the President has resigned for personal reasons and ultimately there are a significant number of openings on the Board. I have "negotiated" with my loving spouse to, if the Board will have me, try to get back on the Board to try to apply the lessons from my own failures the last time I served and get back on the Board at least until the next election cycle.

I'll try to keep everyone posted as to how this turns out.

Best Regards,
Daniel

Daniel, In our ccr's each lot owner is required to pay x dollars period for each lot he owns. If an owner has additional lots he is required to pay additional dollars for each lot that he owns. For voting rights he gets one vote per lot owned. We have one person who does own 2 lots therefor he gets two votes for his additional lots owned. We still have two vacant lots in our development. The builders who owns these lots are also required to pay the standard dues. Turnover from the declarant was two years ago. FYI JerrellC Florida

Thanks Jerrell. That is essentially what our CCRs and By-Laws read as well. Where the story gets a bit ... creative... is that the Board, in it's want for everyone to pay the same fee (and not have the multi-lot owners reject their budget) promised in the Call To Meeting and presentation of the "budged" to waive the assessments on additional lots. They made that promise as part of promoting the significantly higher assessment. Anyway.. mathematically it results in something similar to:

Assessment based on ratified budget of $100 in a 5 lot association (example only):

$20 per lot

Owner #1 with 3 lots should be assessed $60.
Owner #2 with 1 lot assessed $20.
Owner #3 with 1 lot assessed $20.

Standing purely on the the right to waive what is owned in the By-Laws the result should be... (for better or worse)..

Owner #1 $20
Owner #2 $20
Owner #3 $20

Instead, what was done to offset the waiver (which had to take place after budget ratification as waiver are applied to what is owed)...

Owner #1 $ 33.33
Owner #2 $ 33.33
Owner #3 $ 33.33.

Daniel,

In looking at the membership figures you just posted I am absolutely appalled to see that your board wants to waive the assessments for 17% of the membership. 565 members representing 680 lots means 115 lots, or 17% of the membership, will not pay assessments. IMO,you need a whole new board because the current one is definitely not doing what is in the best interests of the assn, but rather what is in the best interests of only 17% of the membership. Perhaps you should try to get that point across to the members.

Apparently the board feels that a drop of 17% in revenue is acceptable for this year.

Better back it up with hard numbers.

Again - the question is: Is this a one time thing or is it going to be the standard rate? (one member = one dues assessment)

Apparently the board feels that a drop of 17% in revenue is acceptable for this year.

Better back it up with hard numbers.

Again - the question is: Is this a one time thing or is it going to be the standard rate? (one member = one dues assessment)

DanielG4, A few thoughts:

Has your Board considered the words from one of your top documents, in the “Protective Deed Covenants and Beneficial Property Restrictions” Paragraph 2. (I do not believe you posted that paragraph):

2. Not more than one residence shall be constructed on any lot. No lots shall be consolidated without prior approval of the Board of Directors. If lots are consolidated, owners shall be required to pay fees for each of the original lots.

Then, of course, as posted, and others have picked up on, under ARTICLE IX, CHARGES, and repeated in your “RULES AND REGULATIONS”, are the important words: “shall be applicable to each lot” and “shall be paid by each lot owner for each lot”.

Now the paragraph in your Bylaws that seems to be causing a problem with interpretation, SECTION 3: WAVERS. That paragraph needs to be read carefully and in context. Specifically the meaning of the words “dues”, “assessments” and “fees” need to determined so as to answer the question, can the Board waive or reduce any part of the Annual Maintenance Fee.

SECTION 3: WAIVERS
There shall be no waiver nor reduction of any amounts owed the Association, be they dues, assessments, fees, penalties, late charges, fines, bills for services or any other sums owed for another reason, without the approval of the Board of Directors

Dues: What are “dues”? The only mention of “dues” I could find in any of the posted documents, is right here in the waver sentence - so probably not referring to the “Annual Maintenance Fee”.

Assessments: What does “assessments” refer to in that sentence? Looking through your documents there are references to “Special Assessments” and “Special Emergency Assessment”. That is all I could find.

Fees: Scanning your Documents there are many different “fees” listed: “delinquent fees”, “special fees”, “land clearing fee”, “impact fee”, “application fee”, “user fees”, “other fees”, “construction fees”, along with the “fee” being discussed, the “Annual Maintenance Fee”.

To continue with waiver sentence, read it again to find what else is listed. Keep in mind that usually in a list of things and items, all the words which reference things and items, are assumed to be “of the like” or “similar in nature”, or of “equal weight”.

Which means it is necessary to figure out which, of the various dues, fees, assessments, if any, referenced in your documents, might be of about the same level as “penalties”, “late charges”, “fines”, “bills for services”?

For “fee” to mean something of the same nature, or refer to something of the same level, one would think it could mean any of the fees, such as “delinquent fees”, “user fees”, “application fees”, or some other “one time fee”, but not the “Annual Maintenance Fee”.

The “Annual Maintenance Fee” is not “of the like” or “similar to” those type of fees. Nor is the “Annual Maintenance Fee” of the same level as the other items mentioned, when compared to penalties, late charges, fines.

IMO none of the words “dues”, “assessments”, “fees”, when written un-modified as in the Waiver Sentence, are meant to be synonymous with, or to mean the "Annual Maintenance Fee”.

And, do not forget the words in your “Protective Deed Covenants”: “If lots are consolidated, owners shall be required to pay fees for each of the original lots.” which preclude any modification or waiver of the “Annual Maintenance Fee” based on consolidating lots.

The concept of “the maintenance fee” in a HOA or Condominium Association is the very basis, or backbone, for providing the funds needed. How it is apportioned among the owners starts with, and is defined in the “top Documents”. IMO how the “maintenance fee” is apportioned is “set in stone” and can only be changed by restating those “top documents”.

There is nothing “equal” in what is being proposed. But, rather (and as others have also pointed out), it results in just the opposite - an un-equal, un-fair, payment structure, not per your documents.

Just my opinion, not legal advice, and I am not an attorney.

That said, and based on your postings, the real problem appears to be “the Budget” and “selling” the Budget.

If you do not get back on the Board, maybe you could find a couple of other owners, who know how to read and interpret documents, and who know how to prepare Budgets including Reserve Funding, who would be willing to help, and then offer as a group “to advise the Board” as a Budget Committee.