As Disputes Escalate, So Can the Legal Bills

Article Courtesy of The Washington Post
By Elizabeth Razzi
Originally published June 1, 2008

Beware the homeowners association squabble that escalates. Back-fence grousing over parking restrictions, architectural rules or allegations of cronyism can grow into civil war, and homeowners -- the source of all money in the association -- can end up paying big legal bills, no matter which side wins.

One long-running fight in Montgomery County shows why homeowners who serve as directors of their association had better pay strict attention to the details of good governance. People can be surprisingly dogged about how their dues are spent, how elections are held (even for thankless board-of-director jobs), and about how the rules are made, changed and enforced.

For Jo-Ann Fiscina, a decade-long resident of the Devonshire East Homeowners Association in Rockville, the battle with the board started back in 2005.

She, along with some neighbors, believed that just a few elected board members were inappropriately controlling the entire association, making changes as they pleased, preserving their power by allowing other seats on the board to go unfilled and inappropriately encouraging the reelection of incumbents.

Fiscina said these board members were not allowing community input before making rule changes, such as allowing new windows that were less Colonial-looking than the ones originally installed by the builder.

If the community wants to do that, that's fine," Fiscina said. "But a board member doing it without notifying the community was against the regulations."

In October 2006, she filed a complaint with Montgomery County's Commission on Common Ownership Communities, which has authority to resolve disputes involving homeowners associations, condominiums and cooperatives. Montgomery County is rare in offering this kind of redress; in other places, such disputes can end up in civil court.

Fiscina had an unusually long list of complaints. She charged that board members were not holding regularly scheduled open meetings. She claimed they approved architectural changes (such as the window styles) by voting on the changes only after the work had been done.

She also challenged the way proxy votes were handled in a 2006 board election that resulted in the reelection of an incumbent instead of his lone challenger. The proxies transferred a member's right to vote but didn't say for whom they wished to vote.

"The board members would go and collect proxies, and they would vote for who they wanted," she said in an interview.

Fiscina stressed that she's not opposed to change per se. "My main objection was how they went about doing it."

Hers was a particularly complicated case, said Peter Drymalski, a commission staff member. Most complaints aren't involved enough to warrant a lawyer, as Fiscina's did, he said. The commission held 11 hearings on this one complaint, including two all-day Saturday sessions.

On May 21, the commission ruled in Fiscina's favor, saying the association's board should maintain a full complement of seven members, unless it votes to change its bylaws. The challenger in the 2006 election, Frances Mielach, who lost because of all those proxy votes, is now entitled to take her spot on the board.

The commission said the board frequently violated Maryland law and the association's bylaws by doing business at closed meetings. And financial records weren't made available to community members as they should have been.

It was a big win for Fiscina. The crowning touch: The commission ordered the association to pay Fiscina's legal expenses, which she said exceed $20,000. It's the first time the commission has awarded legal fees to a homeowner, Drymalski said. It was done this time because the association's own bylaws call for it, he said.

Jeffrey VanGrack, the lawyer representing the association's board, said in an e-mail: "The association is disappointed with the panel's decision. The association believes that the award of attorneys' fees is unsupported by law or the association's governing documents." The board is considering an appeal.

It's rarely pleasant to challenge the way things are done in a homeowners association. After all, these are your neighbors. At best, you risk being labeled a crank. At worst, you can be ostracized.

"They said I was frivolous, that I had a bone to pick and that I just wanted to get my way," Fiscina said. But she said that she's delighted with the outcome and that she was willing to invest the time and money because she wanted the association's business to be handled in a fair and open way.

After she filed the complaint, board President Stephen C. Shaffer sent a letter to all residents alerting them to the complaint and warning of its potential to affect their pocketbooks.

"In recent weeks, we have also [obtained] costly legal opinions to Ms. Fiscina's grievance in an effort to satisfy her requests," Shaffer wrote. "Needless to say, I am very concerned about the financial impact our legal fees will have [on] the community." He warned of the risk of a special assessment. "Unfortunately, to pay these expected legal fees and unbudgeted amounts, the [homeowners association] may be forced to seek funding from each and every homeowner."

At least, thanks to the commission's ruling, decisions on any such assessments will be held at open meetings.

Montgomery County is one of the few jurisdictions in the area that has had a mechanism in place to intervene in these disputes. You can find the commission at 

http:/ / ccoc .

A new Virginia law will create a Common Interest Community Board, which will have an ombudsman to field complaints from homeowners. It will take months to get the new board up and running. Eventually, there will be links to it from the Department of Professional and Occupational Regulation's Web site, http:/ /