Just Say NO to Increased Monthly Assessments

Dear Charing Cross Neighbor,

We’ve recently received the Association’s 2010 Budget proposal in the mail. In these uncertain economic times, the Board proposes to raise your monthly assessment from $113 to $122. That’s a $9/month increase, which multiplied by122 homeowners, equals $13,176 yearly. As the proposed budget states, this increase in your assessment is to pay for the Board’s $10,000 in projected legal fees and $3,000 in landscaping project above and beyond the unprecedented $40,000 for grounds maintenance.

I hope you will demand our Board NOT raise your assessment and set a realistic budget for 2010. Please write or call Comanco (410-721-7171), or attend the 7pm Board meeting this Thursday, October 29, or November 24.

Annual Assessment

As a former director and vice president, I have always believed our annual assessment can and should go down, not up. This is not the time to place a greater burden on homeowners when so many families are struggling in this down-turned economy. The budget has room for the following savings, explained in detail further below.

Expense Type	Board’s Proposed Budget	Suggested Budget
Grounds Maintenance	$40,000 (21.9% increase)	$34,859 (3.8% increase)
Landscaping	$3,000 (no description or explanation given)	$0.00 (deferred)
Snow Pushing	$10,000	$5,000
Capital Reserves	$28,327 (~20.66% of proposed annual expenses of $150,281)	$14,163 (~11.14% of suggested annual expenses of $127,140)
Legal Fees	$10,000	$10,000 (offset this amount with funds drawn from savings or CDs for a $0 net impact on the budget)
Board’s Budget for the above 5 line items:	$91,327
Suggested Budget for the above 5 line items:		$54,022
SUGGESTED SAVINGS:		$37,305 (21% savings)
Total Proposed Budget:	$178,608 (includes $28,327 reserve)	$141,303 (includes $14,163 reserve)
Proposed Mthly Assess:	$122	$95.52

Grounds Maintenance and Landscaping

The proposed budget is $43,000 for 2010. That is a whopping 21.90% increase over 2009. This budget item was $33,780 in 2007, $31,386 in 2008, and $33,538 in 2009. Why is this budget item almost $10,000 more in 2010 than 2009? Eliminate just this increase and no monthly assessment increase is even necessary.

Compare this huge increase with the rate of inflation: 2.8% in 2007, 3.8% in 2008 and 0.3% thru Sept. 2009. The average since 2000 is 2.9%.[i] The changes in grounds maintenance costs 2007-2009 is certainly more in line with the rate of inflation than the nearly 22% increase for 2010.

The budget also fails to show any funds budgeted from reserves to replace our playground, an important part of the community.

Conclusion: A $10,000 increase is absurd. If our current reserves and monthly revenues cannot cover this increase then grounds maintenance should certainly not increase nearly 22%. An increase commensurate with the 2008 rate of inflation of 3.8% is more reasonable. Since the Board can move money in and out of any budget line item at will and spend it on anything, this whopping, unprecedented increase could be construed as a surreptitious means of raising money to pay for Board members’ personal priorities not detailed in this budget or revealed in open meetings with homeowners.

Snow Pushing

This item is budgeted for $10,000; in 2007 and 2008 it was also $10,000, and $9650 in 2009. Yet, we only spent $4,955 in 2007, $375 thru June 2008 and probably less than $1,000 total in each of 2008 and 2009. In any case, less than half the budgeted amount was ever spent during 2007-2009.

Conclusion: The historical precedent from 2007-2009 indicates snow pushing rarely if ever exceeds $5,000 and the budget should not exceed that. That frees up $5,000 for elsewhere (like a playground). If 2010 is an unusually snowy winter, we have sufficient savings for it (see below).

Capital Reserves (improvements) and Savings

By law, reserves can only be used for capital improvements or repairs. Our by-laws Article IX Section 3 mandates repair and replacement reserves no less than 5% of the “aggregate monthly installments levied pursuant to the provisions of this Article IX.” Md. law mandates no dollar amount or percentage of revenues, and it is unclear if the Board has or is following any recommendations from a reserve study. Since at least 2007, the Board has budgeted an arbitrary fixed dollar amount of $28,327. That works out to 20.66% of expenses for each of 2007, 2008 and 2009, and 18.85% for 2010. The proposed budget shows our current reserves are $93,055.54.

But the budget does not account for the balances of our 5 savings and CD accounts, which are there to offset unexpected and unbudgeted expenses, just like your family’s savings. As of April 2008, those balances totaled $115,648, and will have only grown in the 18 months since then.

Conclusion: Assessments for capital improvements should be reduced until Board members’ legal expenses end. Meanwhile, with such a large asset base in savings and CDs, why isn’t the Board utilizing this money to offset the unexpected legal or other expenses? Why raise your annual assessment during these uncertain economic times with these assets available?

Insurance and Litigation

As you may know, the Board and Comanco are in litigation now because, it is alleged, they routinely violated the Maryland Condominium Act and our by-laws, which caused harm to homeowners. The budget proposes $10,000 in legal fees, which encompasses not just the current litigation, but the everyday legal expenses normal to operating the condominium. The Board has already spent an estimated $10,000-15,000 on the lawsuit. As the lawsuit progresses $10,000 won’t be enough; if it reaches judgment unfavorable to Defendants, savings may not be enough.

The Board stated through their attorney’s June 10, 2009 letter that you must pay these legal expenses and potential judgment because our current insurance won’t cover this litigation.[ii] But the Charing Cross By-laws Article XII Section (d), (e) and (f) absolutely require insurance for “defending any suit or settling any claim, judgment or cause of action to which any such officer or director shall have been a party…” and “to protect against dishonest acts on the part of officers and directors.” Md. Condo Act §11-114(b) mandates adherence to this by-law.[iii] Yet the Board admitted in the June 10 letter that they have no such insurance. Instead, they will draw the financial consequences of their failure to obey this by-law from your bank account.

The June 10 letter implies we are properly insured, but that “defamation” is simply not a covered defense. It appears to me that in fact we are not insured in accordance with our by-laws, as below:

(1)    Board members and Comanco were sued in 21 counts for violating a whole host of Md. laws and by-laws, “defamation” being only one of them. These 20 non-“defamation” counts are aimed solely at compelling the Defendants to obey the Md. Condominium Act and our by-laws, and chronicle the fraud and deception they allegedly engaged in during these violations. If the Board in fact purchased the insurance required in our by-laws, then it would cover their defense against these 20 counts that are not alleging “defamation.”

(2)    As noted above, our by-laws explicitly require the Association to carry insurance that covers any litigation. Our by-laws do not exclude “defamation,” so any policy we buy must include it. “Defamation,” after all, is the result of engaging in lying and deception against another person, which is exactly the sort of potentially ruinous litigation and judgments our by-laws aim to protect against.

Conclusion: All 21 counts are exactly the kind of allegations condominiums get embroiled in every day across the nation because their boards of directors fail to obey laws and by-laws and harm homeowners. For the Board to claim we’re properly insured, yet have no coverage to defend any of the 21 counts, is patently bizarre. Can the Board show proof of coverage for “defending any suit or settling any claim?” You should not accept liability for what seems like the Board’s negligent failure to purchase the insurance to defend against any litigation as mandated by our by-laws. The question to ask is: why is the Board forcing you to pay for them to obstinately defend this lawsuit when a free settlement can be had simply by their addressing the lawsuit’s allegations before homeowners and rectifying the harm done by their violations?

Wrap-up: The proposed budget is uselessly vague and out of line with the realistic needs and expectations of our community. Except for legal fees, the Board gives no explanation or justification whatsoever for their dramatically increased expenses. They’ve simply stated the numbers they want and expect you to pay up. Instead of paying more money to them each month for unspecified uses, I encourage you to demand the Board scale back this proposed budget and actually reduce our assessment, as suggested above. Call or write Comanco (410-721-7171), or attend the Board meetings at 7pm on October 29 and/or November 24. Otherwise, expect the Board to continue using your wallet as a blank check.

[i] Rate of inflation source: InflationData.com (http://inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp)

[ii] “This case has been reported to the Condominium’s insurance company, Millers Mutual Group. Millers denied coverage based upon the exclusion of “defamation” as a covered loss. This means that Miller Mutual Group will not pay any judgment, in the event a judgment is entered against any of the Defendants, and will not pay for the cost of attorney’s fees to defend this case. Without insurance coverage, the Condominium must pay for the cost of its own defense.” June 10, 2009 letter, Niles, Barton & Wilmer, p.2.

[iii] “The declaration or bylaws may require the council of unit owners to carry any other insurance…”

Special Assessment? JUST VOTE NO!

Last Fall, in the hope that the Courts would step in and protect the Association, I alleged the following in my Motion for Receiver (pg 7/ # 10) :

“The facts enumerated in the Amended Complaint demonstrate Defendants failed and refused to insure the Association with the coverages required in the Charing Cross By-laws Article XII Sections 1 and 2. While the 2008 budget shows $595.00 for fidelity insurance, at the 9/4/08 and 9/23/08 meetings Defendant Board Members stated they did not have fidelity insurance, nor would their Directors & Officers insurance cover a non-monetary litigation, hence the need to defend against the lawsuit out of pocket. Defendants have failed and refused to explain on what the $595 was spent. Defendants thereby misrepresented the Association’s financial statements and affairs to Plaintiff and Members in violation of Md. Code Criminal Law § 8-402.” [emphasis added]

The 2009 budget, distributed by Comanco to all members, also set aside money to purchase fidelity insurance. Today’s mail delivered a letter dated June 10, 2009 from Attorney Curley in which we are finally informed that the Association is indeed “without insurance coverage” required by our Bylaws and Maryland State Law (see Update – Case Stayed Pending Appeal below). This letter assures us that the case has been reported to the Condominium’s insurance company, Millers Mutual Group, while omitting the fact that the fidelity insurance in our budget is a separate line item, easily distinguished from the far more costly premium paid to Millers Mutual Group for our Master Policy.

Your Board of Directors apparently just spent your money to have their lawyer explain that you and I MUST pay all their legal expenses and Comanco’s as well since it appears they somehow neglected to spend the money budgeted for fidelity insurance to actually purchase fidelity insurance. OOops! Am I the only one worried there may be other important things they’ve neglected? Do you uncritically accept advice written by Trusted Legal Advisors and pull out your checkbook to cover their legal bills while at the same time explaining to your children or grandchildren that it was financially necessary to bulldoze our community playground?  Or would you prefer a second, more objective opinion? Be sure to attend our Annual Meeting on Tuesday, 23 June 2009, 7 P.M. at Comanco, 2139 Defense Highway, Crofton MD.

Please help elect at least two new disinterested directors to Your Board and JUST VOTE NO to any special assessments for the purpose of covering expenses associated with this lawsuit.

Update – Case Stayed Pending Appeal

Sometimes it seems as though our Courts exist in geologic time. It’s unlikely I’ll have anything definitive to report about the ongoing and active lawsuit for another year or two, so here is some helpful information to consider prior to our Annual Meeting on Tuesday, 23 June 2009, 7 P.M. at Comanco, 2139 Defense Highway, Crofton MD.

Congratulations to MHA for their efforts to protect homeowners and ensure good association governance; here is an abbreviated list of Maryland state legislation they successfully shepherded through to passage:

HB687/SB541: Fidelity Insurance. This requires an Association to purchase fidelity insurance to provide for the indemnification of the community against loss resulting from fraud or criminal acts by any officer, managing agent or employee. Our budget allocates approximately $560.00 annually for fidelity insurance. It would be prudent to ask for a copy of this policy just to be certain Charing Cross Townhouse Association has purchased it and we’re all safely covered.

HB137: Association Books and Records. Your Association and Comanco must provide homeowners copies of books and records, board minutes, financial statements and employee salaries within 21 days of receiving a written request. The charge for copying books and records may not exceed the amount charged by MD courts (50 cents per page).

HB552/SB171: Closed Meetings of Board of Directors. Meetings can only be closed for consultation and discussion of legal matters, such as my ongoing and active lawsuit, and for discussions of delinquencies. MD law requires that “a statement of the time, place and purpose of any closed meeting, the record of the vote of each board member by which the meeting was closed, and the authority under this section for closing any meeting shall be included in the minutes of the next meeting of the board of directors.”

The Maryland Homeowners’ Association published the preceding Summary of Maryland Condo/HOA Legislation which supersedes anything in our Bylaws, Charter and other existing documents in their quarterly newsletter. They recommend that homeowners be wary of any attempts by a board to amend governing documents. Homeowners should make a thorough review of any new wording, comparing it to the existing wording and be sure the board clearly and unambiguously writes any amendments after a thorough, public explanation as to the reason for any amendments. Further, MHA cautions homeowners to be especially wary of any language that says homeowners should pay “all attorney fees actually incurred by the Board of Directors.”

Update – Motion for Sanctions and to Compel Discovery

On Friday, October 31, 2008 I filed my Request for Default Judgement on Motion for Sanctions and to Compel Discovery. The purpose is to gain the Court’s assistance in prying our Association records and other documents out of Comanco’s hands and into the light of day.  The request is only 2 pages long…shattering the myth that I can’t write anything under 10 or 20 pages. 8)

The request alleges that, so far, Defendants Comanco and Ruth Angell have failed and refused to respond in any way whatsoever to my request for discovery (that is, a request to see and/or get copies of documents and answers to interrogatories). They haven’t even responded with an objection. Just silence. The lawsuit alleges this is business as usual for these folks…ignore until problem disappears. Hmm.

Asking for a receiver

On Friday, October 31 (yep…Halloween), I filed my Motion for Receiver. It asks the Court to appoint a receiver to manage the Association during the lawsuit or until the members elect a legal board of directors that can comply with our governing laws. You can read it and make your own decision about it.

The motion alleges the current directors and Comanco have and are spending money (into the red) without legal votes, conducting private meetings, private votes, created a shadow 4-member board over the summer where they spent our money and took official actions without ever meeting openly or informing anyone (including your humble ex-director) of their activities…all of which has placed our Association at great risk of harm.

The facts presented are documented. Members should carefully review them and stand up for your rights and protect your property and Association from further risk and harm.

View the By-laws, Rules, Charter and Declaration Exhibits

Filed with my Ex Parte Motion June 17, 2008 are the Association’s By-laws, Rules of Charing Cross (1988, updated 1996, 1997), the Articles of Incorporation (Charter) and Declaration.

You can read the By-laws, Rules and whatnot cited in my Amended Complaint for yourself.

Filed: Motion for Sanctions and to Compel Discovery

I filed a Motion for Sanctions and to Compel Discovery on 10/10/08. This is because defendants have failed to disclose and inform of material facts and information as requested by my discovery requests dating from 8/28/08. This motion asks the court to sanction defendants for failing to respond to my discovery requests, and to compel them to respond.

For those of you who don’t know, discovery is a process by which the parties in litigation exchange and share all information pertinent to the case, or as requested. This is designed to openly provide the information necessary to prove allegations to both sides.

For example, much of the material facts and information related to the acts and behavior of the defendants resides in the Association’s records held by Comanco. My discovery requests directed defendants to answer a number of specific questions and to provide specified documents for review.

Well, if you’ve ever had any trouble getting straight answers out of this Board or Comanco, you are by no means alone. The lawsuit does allege that it takes patience and perseverance, stamina and endurance to wrest information all members are entitled to from this bunch.

Filed: Amended Complaint for Injunctive Relief

On Friday, 10/10/08, I filed my Amended Complaint for Injunctive Relief with the court. The Amended Complaint recombines my original complaint with the Ex Parte Motion (which were both filed and served the same day, 6/17/08). The facts underlying the complaint were in the Ex Parte Motion, while the charges were in the complaint itself.

The Amended Complaint updates the facts through Oct. 10th to account for the acts and behavior of the Board and Comanco. It also adds a number of charges based on allegations of financial improprieties, raising the total number of charges to 21.

These additional charges include: 1) Breach of fiduciary duty, 2) Fraud in the concealment and/or omission, 3) constructive fraud, 4) Civil conspiracy, 5) aiding and abetting, 6) Theft by unauthorized control over property and by deception, 7) Embezzlement – Fraudulent misappropriation by fiduciaries, 8.) Fraudulent misrepresentation by corporate officer or agent, 9) Defamation by libel and slander.

By-laws reform committee’s first task

A good starting point for our president Joe DeSantis’ new By-laws and Architectural Rules Reform Committee is to amend our By-laws to allow only member homeowners to be president or treasurer of the Association, and that the president may only vote in meetings to break a tie. Many of you already know our current Board president Joe is not a member homeowner. What’s he got on the line to lose? I don’t know about you, but I’m not comfortable with that…it’s like an important check-and-balance is missing.

Many of you who attended the 9/4/08 and 9/23/08 meetings heard Board members say the Board did nothing for 3 months. Yet President Joe stated that during those 3 months he authorized the payment of more than $5,000 with no notice, meeting or vote. He certainly appears to feel free to secretly spend our money (and into the red!) defending, among other things, his policies as president at our expense. Then, after appearing to surprise Treasurer Kathy Marek at the 9/23/08 meeting with the new-to-her information our Association is also paying Comanco’s legal fees (?!!?!?!?), she blithely goes on to state that there will be a special assessment. But President Joe can’t be assessed; he’s not a member. Riiiiiiiight.

Reading the lawsuit’s allegations about the Board president’s abuse of power, one is amazed at the authority automatically assumed by that office to bulldoze almost anything over one or more other directors and member homeowners under color of law. Especially (as the lawsuit alleges) when the Board president has been on the Board for 8 straight years, “educating” novice Board members who don’t know the ropes and are thus easily led astray or cowed into silent acquiescence. That’s quite an opportunity for mischief! In fact, the lawsuit alleges only those directors who cooperate with President Joe or Manager Ruth get to serve out their elected terms; the rest get the boot one way or another. (see Elections 101)

Our By-laws mandate a majority of the Board must be member homeowners, but not its officers. Many associations require their presidents to be members only. Many others mandate their presidents may not vote in meetings at all except to break a tie. This helps establish an impartiality in the Board’s presiding officer and encourages the president’s role as sergeant-at-arms to properly moderate meetings according to the rules. This helps ensure the Association’s business gets done openly and legally.

Personally, I see no good reason to exclude renters from our Board or committees; they’re expected to abide by our community standards and should be allowed to participate in our Association’s governance. But the position of president and treasurer are important enough that only someone with a financial stake in the community should hold these two positions.

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PROPOSED AMENDMENT to By Laws Article VI Section 1

Existing text: “The principal officers of the Council of Unit Owners and/or the Corporation shall be a President, a Vice President, a Secretary and a Treasurer, all of whom shall be elected by the Board of Directors. The officers of the Corporation need not be members of the Corporation. The Directors may appoint an assistant secreatry and an assistant treasurer and such other officers as in their judgment may be necessary. The offices of Secretary and Treasurer may be filled by the same person.”

Proposed text 1: “The officers of the Corporation need not be members of the Corporation, except the President and Treasurer shall be members of the Corporation.”

Proposed text 2: “The offices of Secretary and Treasurer may be filled by the same person, so long as that person is a member of the Corporation.“

Recall election?

A “recall election” is an actual election; candidates campaign and the person with the most votes wins the remainder of the unexpired term. Even the California Governator only got to fill out the unexpired portion of Gray Davis’ term…and that WAS a legitimate recall election. But here in our Association, the 9/4/08 meeting was not a “recall election.” Jim Morrow was elected by members at the disputed 9/4/08 meeting to fill out the unexpired term of a removed director. See the Amended Complaint for Injunctive Relief.

At the 9/23/08 Board meeting, President Joe DeSantis kept calling the 9/4/08 special meeting to remove me a “recall election.” But our By Laws have no mechanism for a “recall election.” Show me where it is written. You can’t, because they’re making this stuff up. The 9/4/08 meeting was a special meeting of the Members for the purpose of removing me as a director. Then, if desired, the Members could elect someone to fill the unexpired portion of my term according to our governing laws. But the Board just blew by this little detail, awarding Jim Morrow a brand-new 3-yr term in the “recall election,” arbitrarily creating yet another seat on the Board. Remember when I asked in Elections 101 how the Board and Comanco got us into this election mess regarding directors’ election stagger and terms? You do? Well, this is how.

In the midst of a lawsuit, when self preservation would demand a careful adherence to the governing laws, the Board continues to blissfully violate them and dissembles their way through opposition like a bulldozer. It appears this Board has convinced themselves against all reason the lawsuit is frivolous, easily dismissed, and business-as-usual will be restored before the end of the year. This seems to be an example of what psychologists refer to as engaging in magical thinking. It appears this Board cannot or will not distinguish between their invented reality and that of our governing laws. This pathology creates chaos and confusion for any homeowner trying to interact with the Board, has already brought us into the red, and will cost our Association a whole lot of money before a judge inevitably reacquaints this Board with reality.

A benevolent intervention seems in order.