From: Andrew G. Elmore [mailto:[email protected]]
Sent: Wednesday, February 01, 2017 4:57 PM
To: Greg Pearson
Cc: 'Charles Davis'
Subject: RE: How about this?
Good evening:
Following my discussion with you yesterday, I wanted to follow up with a few
comments and suggestions related to this matter.
1. My prior communications on the matter lends itself to further
amplification. The key to organizing the approach to the issue is to remember
that Article V, Section 3 of the Declaration contemplates two aspects of the
assessment, as follows: a) the Maximum Annual Assessment; and b) the
assessment that is actually levied by the Board against the Lot Owners, which
does not have to be the Maximum Annual Assessment because it expressly
may be a lesser amount.
2. We believe that because the determination of the Maximum Annual
Assessment is a mandatory obligation of the Board under Article V, Section 3
of the Declaration, it is something that requires Board action. In other words,
it is not automatically increased, but rather something that is mandated for
the Board to increase annually. If the Board takes no action to increase the
Maximum Annual Assessment (i.e. the meeting minutes from the Board
meeting in which the assessment rate was determined for the next fiscal year
do not reflect an increase in the Maximum Annual Assessment), then we
believe that the increase is not automatic. Under this scenario, a Lot Owner
would have legal standing to compel the Board, via litigation, to increase the
Maximum Annual Assessment, but it would not be increased until such time
as the Board actually voted to approve the increase.
3. As previously mentioned, pursuant to subsection (g) the Board is empowered
with the authority to increase the Maximum Annual Assessment up to the
larger of 5% or the CPI calculation or determine that the Maximum Annual
Assessment is to be lower than either of those figures. Thus, with respect to
the annual determination of the Maximum Annual Assessment, the Board has
three choices: a) increase by 5%; b) increase by the CPI if that is higher than
5%; or c) determine it to be a lesser amount than either. We believe that if the
Board formally selected none of these choices, then the Maximum Annual
Assessment would remain what it was the previous year. [We note that an
argument could be made that if the Board elected not to formally change the
Maximum Annual Assessment, but increased the amount levied in a manner
that is within the limitations permitted by the Maximum Annual Assessment
in Article V, Section 3 of the Declaration, that this new amount levied could be
the default new Maximum Annual Assessment.]
4. As we discussed, if the Board always annually levied assessments in a manner
identical to the Maximum Annual Assessment, then there would never be an
issue of accrued assessments being added up to the Maximum Annual
Assessment for that possibility would be moot. Remember that pursuant to
Article V, Section 3 of the Declaration “[t]he levy of an assessment less than
the Maximum Annual Assessment in one (1) year shall not effect the Board’s
right to levy an Annual Assessment equal to the Maximum Annual
Assessment in subsequent years.” As a result, it is possible for unused
portions of the Maximum Annual Assessment to accrue. This is best
illustrated by an example, as follows:
*Year One – Maximum Annual Assessment is $100 and the Board
levies $100
*Year Two – Board increases the Maxim Annual Assessment by 5%
so that it is now $105, but the Board only levies an assessment of
$103.
*Year Three – Board increases the Maximum Annual Assessment
by 5% so that it is now $110.25, but the Board only levies an
assessment of $105
*Year Four – Board increase the Maximum Annual Assessment by
5% so that it is now $115.76, and the Board levies an
assessment of $115.76.
This represents an increase in the amount of the
assessment levied in Year Four of 10.24% above the
assessment levied in Year Three. This would be harmonious
with Article V, Section 3 of the Declaration because in my example
the Board annually increased the Maximum Annual Assessment
and applied the accrued Maximum available to the assessment
actually levied in Year Four.
5. As a consequence of revisiting this issue, and based on my analysis above, I
am compelled to confirm a correction or clarification of two omissions from
my previous emails on the matter, 1/24/17 to Al Raimo and 1/29/17, as
follows:
First, the increase of the Maximum Annual Assessment is not
automatic, but rather something that requires affirmative Board
action.
Second, my email of 1/29/17 does not mention the possibility that if
there is an accrued Maximum Annual Assessment that has not been
implemented with respect to the actual assessments levied, this
accrued Maximum Annual Assessment may be utilized in
subsequent years (resulting in the possibility that the actual
assessment levied could increase assessments levied from the
preceding year in excess of 5% or the CPI, if higher).
6. In contrast to the suggestion of Mr. Livingstone, from a statute of limitations
perspective and from the concepts of accord and satisfaction (meaning that
Lot Owners who paid, without objection or litigation, assessment amounts
that have subsequently been deemed to have levied incorrectly) we believe
that there is no obligation for the BCA Board to attempt to alter or correct any
previously levied assessment amounts that may be been levied incorrectly.
7. Thus, in evaluating your proposed statement, we would conclude that it may
not be accurate because the 5% or CPI calculation is not the basis of
determining the actual assessment levied, but it is the basis of determining
the Maximum Annual Assessment. In other words, if there was accrued room
to increase the assessments levied due to assessments levied over the years
being less than the Maximum Annual Assessment, then it would be possible
for the 2017 assessment levied to have been more than 5% increase above the
2016 assessment levied. I cannot glean from the spread sheet
provided the actual Maximum Annual Assessment for each year so
I cannot conclude whether the suggested statement is accurate.
8. Consequently, a more accurate statement would be: “The BCA Board of
Directors determined that the increase in assessments for 2017 over 2016
would be 5%.”
(Related to this issue is the fact that the 2017 assessment amount has already been
determined and we do not believe there is a procedural mechanism whereby the Board
could properly revisit the 2017 levy of the annual assessments and make it higher.)
If the BCA can confirm that the amount levied was equal to the Maximum Annual
Assessment, then it could accurately change the statement to read: “The BCA Board of
Directors increased the Maximum Annual Assessment by 5%, which is the maximum
because the applicable CPI formula permitted was only 2.1%, and this increase was
what was levied. The Board could not levy a higher amount without a vote of the
membership.”
If the Board can confirm that there is some accrued Maximum Annual
Assessment room that could have been added based on my analysis above, then the first
suggested statement should be used.
I acknowledge that this issue is somewhat complicated and I regret contributing, in part,
to the complication with my lack of clarity in earlier communications.
I’m here the rest of the week if you have any questions.
Andrew G. Elmore, Esquire | Fellow, College of Community Association Lawyers
Chadwick, Washington, Moriarty, Elmore & Bunn, P.C.
201 Concourse Blvd., Suite 101
Glen Allen, Va 23059
P 804-346-5400 | F 804-965-9919 | E .com agelmore@chadwickwashington