Circumventing Covenants in Virginia

Our association passed a significant increase this past year. Any increases greater than 5% required membership approval. This was achieved by the BOD promising to waive the annual dues on all additional lots owned by multi lot owners (regardless if rental units, in good standing, contiguous, etc). This effectively silenced the group of owners that most typically came out against significant increases in the past.

The budget was ratified and assessed by lot. If you add up the total assesments, they would be significantly higher than the approved budget, however,as promised, the BOD waived the dues on those additional lots owned by multilot owners. The Covenants and By-Laws are explicit in terms of the annual dues being assessed by lot. The By-Laws contain a paragraph which allows the BOD to give discounts and waive fees. The association attorney indicates that this is an acceptable application of the By-Law. It appears to me that the Board has circumvented the Covenants.

The single lot owners are now, effectively, subsidizing the multi-lot owners. The multi-lot owners continue to have a vote for each lot they own and the single lot owners are stuck making up the shortfall the discounts result in.

Has anyone dealt with anything similar? Any suggestions? I have neither the time, nor the desire, nor the extra monies to involve an attorney but when I purchase my home and accepted the covenant responsibilities, nothing I read suggested I'd be subsidizing multi-lot owners.

Thanks for the response. The association is over 30 years old. 683 lots and 578 owners (at the time of my resignation from the BOD a year and a half ago). It is an all volunteer organization. I myself served on the BOD for three years. I've served as Secretary as well as Treasurer during that time and participated in other efforts including revamping the website, produce four of the last six newsletter, etc, etc.

The Membership meets twice annually and the BOD monthly. I,as well as other past BOD members, have offered up advice or assistance only to be either ignored or completely rebuffed because we represent "the past Board". Yes there is some "bad blood" but I have honestly attempted to make amends with little or no success.

Any how, below is part of a letter I wrote to the BOD on the matter AFTER a Board meeting and in private with individual BOD members. It includes direct excerpts from our Covenants as well as the By-Laws paragraph which I believe has been used to circumvent the Covenants requirements. I have yet to receive a response but have found out indirectly that the association attorney has told the BOD not to worry about it. Actually, I take that back, one of the officers wrote back stating that I had some nerve to write this and I lack community spirit while the president likened the success of budget's passing to President Obama's election and that I need to get over it.

I have reviewed the State's law and statutes but have yet to that sufficiently addresses the matter (one way or the other). I am really looking at the forum to get smarter (and not being rebuffed for not taking an active role in my community).

Anyway, here what I wrote (remember writing from the perspective of a past officer).

To: The President and Board of Directors of the xxxxxxxxxxxxxx Property Owners Association

I, xxxxx, the owner of lot xxx, being in good standing,

1) believe the ratification of the 2009 to 2010 budget and the assessment of dues in support of the budget to be out of order and invalid. See below for justification.

2) Furthermore, until such time as a new budget is ratified in accordance with the Association’s governing documents and assessed appropriately, the Board must revert to a budget equivalent to the prior year’s budget (excluding special assessment).

3) All dues collected for the 2009-2010 budget year in excess of the amount equivalent to the prior year’s maintenance assessment (this excludes the amount for the prior year's special assessment) should be refunded.

4) Request that a new budget (if greater than 5% of the prior year’s excluding special assessments) be put forward on the agenda for the general membership to ratify at the Spring General Membership which is to take place on the third Sunday of April.

Whereas the xxxxxxxx Property Owners Association Board of Directors voted to assess the annual maintenance fee by owner rather than by lot,

From the September 2009 Board Minutes:
“President [xxxxxxx] makes the motion for board waiver of dues for all members to pay same amount of dues for 4 years upon approval of the $50.00 a month budget by the membership, xxxxxxx seconds. 6 yes, 0 no, 1 abstain (xxxxxxx]).”

I believe the above motion (and the resulting budget) to be out of order and not binding in as much as it represents a direct conflict with the xxxxxxxxxxxx Property Owners Association Covenants Paragraph 12, as well as, the xxxxxxx Property Owners Association ByLaws which read as follows:

xxxxxxxx PROTECTIVE DEED COVENANTS AND BENEFICIAL PROPERTY RESTRICTIONS

[Paragraph] 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.

BYLAWS OF THE xxxxxxxxx PROPERTY OWNERS ASSOCIATION, INC.
ARTICLE IX
CHARGES
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,…

Furthermore, and to address the specific justification put forward in the Call to Meeting for the October 2009 General Membership Meeting, the Board has misinterpreted Article VIII Section 3 to mean that it may pro-actively waive the fees on those additional lots for all owners of multiple lots thereby, in effect, assessing the annual fee by owner rather than lot.

Article VIII Section 3 reads as follows:

ARTICLE VIII
RULES OF EXPENDITURE

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 any other reason, without the approval of the Board of Directors. [Please note the passive voice of the paragraph. Intent of the paragraph is to allow the Board to waive fees on a case by case basis and allow for the relief of fees and penalties as Board may do to assist bringing a specific account into good standing or to write-off bad accounts.]

I believe the Board’s interpretation of Article VIII Section results in a conflict between the Association’s Covenants and the Association’s ByLaws.

The xxxxxxx Property Owners Association ByLaws specifically addresses those situations where a conflict may arise as a result of an interpretation of the ByLaws coming into conflict with the Association Covenants:

ARTICLE X
ADMINISTRATION
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.

Regards,
xxxxxxxx

Daniel,
So, you understand of lot of what is going on here between the old and the new is not something unique. This kind of difficulty requires one side to give a lot more that the other side to get back on track. When you sat on the Board did you not evaluate the concerns of the members and try to acertain something about them and didn't this influence you in how you reacted to the member. That is what I am doing.
In view of this post and not be able to grasp on the implications raised here, I would suggest if you are trying to establish why what happened and how the decisions were made, you might consider a request to review your documents held by the Board. It makes no difference who is right or wrong as to the documents, they are just there and they tell a story. It seems you elect or are being forced to be at opposite ends of the table with this board. To me that is healthy, as long as all is above board. I suggest you build up support and get out of the spot light as a target and let your support group be the lightening rod. You, can be as active as you want, just put your group out there as the force to be reconded with. Getting a look at the relevant documents that are available is a good way to see the ebb and flow of the boards action.
This will not be changed in one grand sweep of the broom, so settle in for the long haul. Get the records of the Boards actions and see where that takes you.
Your letter, no matter how well put together is a letter from a homeowner to the Board, there is no mandate there. You would hope it would serve to a platform for you and the Board to settle your differences. How do you think if you sat on the board today, your board would have received a letter like this? Incidentally, I see nothing wrong with you submitting this to the board and it should be given full consideration and it should end up on the table and resolved. It will eventually end up on the table anyway if the process continuies and maybe the resolution will be a court order that no one likes.

Susan,
Not sure but I think the two issues are:
1: How did the board get this power, if they have it.
2: Is this power (real or unreal) legal? I don't believe the Board can do anything that picks and chooses who pays assessments. In an HOA each lot should pay the same, apparently that is what has happened in the past. Now the Board wants to change the rules? Can they, under what authority and under what action by the board. I would believe a change of this magnitude would require 100% vote of the owners or close to it.
The Board seems to be under the gun and should respond to these inquiries, and they should respond publicly and openly. IMHO

Tim,
Give us a little run down on the above Ombudsman. Is this something like the the Florida HOA Ombudsman? I take it this is for Virginia only. Any other neighboring states involved? Apparently Florida Ombudsman is not a screaming success, how about Virginia?

I can tell you from direct experience that the Virginia ombudsman and the Common Interest Community Board (CICB) of which it is a part will not be of any help to the OP. The board is dominated by reps of the developers, management companies and CAI. Although the board was established by legislation in 2008, the implementing regulations for the ombudsman still do not exist. Furthermore, the ombudsman can only get involved if there is a violation of state law, not of the association governing documents.

I submitted a formal complaint to the ombudsman about the policy implemented by our HOA board which limits member's access to association records by imposing excessive requirements for payment in advance (e.g. minimum charge of $30 even if only a single page is requested - just to examine even if no copy is requested - check must clear before records provided). The steps required by the policy make it impossible for the records to be provided within the 5 days required by the Va. Property Owners Association Act.

I received a polite letter from the ombudsman that says, in effect, sorry we can't help you.

The CICB turns out to be merely political cover for the management companies who can say "see we are being regulated by the state to protect homeowner interests". What a crock!

Robert,

I was going to tell you that the office is relatively new and looks promising but that I had no first hand experience. David apparently has first hand experience and it failed. Hopefully David followed up by writing the State legislature about his experience as I don't believe that this was the intent of setting up the office.

Tim