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.”

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.

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.

Elections 101 – It’s all about seats

Our Board is composed of five seats. Not individuals. Each seat has a 3-yr term. Individuals are elected to seats, not to a given term. At each annual election, we elect an individual to sit in that seat, and assume the powers and responsibilities that come with it. Our By Laws stagger terms such that all seats on the Board are never up for election at the same time. At least one, and no more than 2, seats come up for election annually. If someone resigns or otherwise vacates their seat, another individual is appointed by the Board to sit in that seat until the next annual election, at which point either the same or another individual is elected by the members to sit in that seat for the remainder of that seat’s term.

When someone vacates a seat, or is removed from their seat, the person then appointed or elected to fill that seat does not get a brand new term…that’d be like creating a new seat on the Board. Well, that’s exactly what the lawsuit alleges this Board and COMANCO are doing…arbitrarily and capriciously creating and eliminating seats on the Board without regard to our governing laws. Because of this, there are now at least 8 individuals with claims to a Board seat when there are only 5 seats available!. How did we get into this mess?

By Laws Article V Section 5 establishes each seat is elected to a 3-yr term. It establishes that the seats on our 5-seat Board come up for staggered election in a rotating cycle every 3 years: 1st year-2 seats; 2nd year-2 seats; 3rd year-1 seat. Then the first 2 seats come up for election again at the completion of their 3-yr term. And so on.

Why is this a difficult concept to apply? At the 9/23/08 meeting, Ruth Angell of COMANCO said she and the Board were going to be following the election By Laws from that very night. Then, that very night, they approved our attorney Michael S. Neall’s letter that violates these very By Laws, and then they approved terms of office for the current Board that also not only violates these very By Laws, but conflicts with the now-approved attorney’s letter, too.

Are they crazy, is that their problem?

President Joe DeSantis asserted at the 9/23/08 Board meeting that the Board is legal until a judge says otherwise. It could cost thousands of dollars to await a judge’s decision. Why don’t we all consult the By Laws ourselves for free, see if we can’t put our heads together and figure this out so our elections are consistently carried out in compliance with our governing laws? Don’t we have a right to expect that?

The Impediment of the By Laws

At the 9/23/08 meeting, the Board voted to adopt a letter (see below) by our Association attorney Michael S. Neall. The lawsuit alleges that the information used to write the letter–aside from any due diligence by the attorney–was provided by the Board and is inaccurate. The recommendations in this letter the Board adopted violate our governing laws, as they were already made aware at the February 26, 2008 Board meeting and again in May, 2008.

So, what kind of legal advice recommends we violate our governing laws? I wonder what the Board paid the attorney for this letter? I know…you’re thinking, ‘Chris was a director, he oughta know!’ You’d think…but according to the lawsuit, whoever solicited this letter from the attorney never openly identified himself, told the Board about it, or asked for a vote to spend the money. It seems it’s the By Laws that are the real impediment to this Board…but the lawsuit indicates they appear to rely on attorneys to help them overcome such obstacles to business as usual.

Click on the images below to read Mr. Neall’s 2-page letter. Read my Elections Letter Response. These are both included as exhibits with the Ex Parte Motion for Temporary Restraining Order and are thus public documents.

Elections Letter (p. 1)

Elections Letter (p. 2)

Petition to Audit…Redux

Back in May, 2008 7% of you signed my petition to compel the Board to audit our non-financial records. That was because it appears records are missing. Yet, according to the lawsuit, a lack of documentation didn’t seem to stop these folks from coming after homeowners for alleged violations they couldn’t document. For 7 months the Board told me to fuhgedaboutit…hence, the petition.

Well, it appears for the last 4 months that piece of paper has disappeared, too. But, where are our records? The lawsuit alleges Comanco’s been responsible for archiving and keeping safe our records for nearly 30 years. So who’s the one that needs to pay for this? The courts will have to unravel that one since the Board won’t. You can read the facts in the Ex Parte Motion for Temporary Restraining Order and Amended Complaint for Injunctive Relief.

In the meantime, 11% of you signed a second petition to audit our non-financial records and I submitted it Thursday, Sept. 25 through Comanco. Altogether, 13% of our homeowners have now asked the Board to account for our missing records. But that document might go missing, too…so cross your fingers.

Has anyone asked the Board why they insist our lost records don’t need finding, or the discrepancies with Comanco’s architectural database don’t need resolving? It just seems kinda wierd to me that the Board, when informed of all this, just couldn’t be bothered and chalked it up as just another one of my impediments to their doing (or giving us) the business.

******************

Here’s the 2nd petition’s text:

PETITION TO AUDIT THE RECORDS OF THE CHARING CROSS TOWNHOUSE ASSOCIATION, INC. 

 

In order to facilitate a legal annual election for 2008, protect homeowners from improper violations and to establish a complete inventory of all Association records from 1979 to present, the members of the Association whose signatures appear below, pursuant to By Laws Article XIV Section 3 and Maryland Real Property Act 11-116(b), hereby request that all non-financial books and records of the Association, including but not limited to, all Board and annual meeting minutes, election records, election data and architectural archives, written, electronic or otherwise, be audited by an independent auditor for the purpose of establishing an inventory of the records in existence; an inventory of all missing records; and the facts regarding the Association’s election of members to the Board of Directors and the adjudication of all architectural/landscaping change requests, with cross-referencing between the Board’s minutes and the extant architectural request forms. Because Comanco has full possession and control of all Association records, and are solely responsible for their creation, maintenance and safekeeping, the Association should pursue Comanco for the cost. The audit shall begin no later than 30 days from the date this petition is presented to the Association via Comanco.