This case involves a dispute over parking in a wholly commercial condominium and the proper allocation of assessments. Defendant and Appellant is Telegraph Square II, a Condominium Unit Owners Association, Inc. Plaintiff is the owner of three units in the condominium, 7205 Telegraph Square, LLC. William Akers owns 7205 Telegraph Square LLC. With a complex set of facts in this matter, we find it important to explain the importance of the impact of this case at the onset of this memorandum. Because of the breadth of the judge's opinion, there are both Virginia and national issues raised by this case. The judge's opinion in this matter ignored and rewrote condominium documents and then refused to apply the business judgment rule. The ability of a condominium to designate a Reserved Common Element (essentially a license) when the Condominium Act expressly allows the executive board of an association to grant an easement (a greater right than a license) is a national issue because the Uniform Condominium Act and Uniform Common Interest Ownership Act both empower a condominium association to do so and many condominium documents provide the executive board with that power. Finally, in almost all jurisdictions the law requires a unit owner to pay any disputed assessment and then to challenge the validity of the assessment. Judge Bellows' opinion reversed that rule and allowed the Plaintiff to refuse to pay assessments for four years while it disputed the amount of the assessment. That result would severely impact many associations which could not pay their essential expenses and would require the other unit owners to pay additional assessments to cover expenses while the disputing owner refused to pay.
The amicus requestor and review panel would like to utilize this amicus brief to clarify several issues, negatively impacting condominium law in Virginia, presented by the judge's opinion including, but not limited to,
(1) the proper use and assignment of reserve common elements versus limited common elements of a condominium association;
(2) that it is not permissible to withhold payment of condominium assessments while disputing the amount or validity of an assessment (rather, similar to the procedure for contesting real estate taxes, condominium owners must first pay the assessments and then contest the amount due;
(3) courts have no authority to amend (rather than interpret) the condominium documents absent the procedure set forth in the condominium act where a judge can reform the documents at the request of the unit owners association;
(4) The business judgment rule applies to Board action when the actions are based on the advice of counsel and are consistent with the law and the documents.
The fact pattern in this case is as follows:
The Condominium now has five phases, but when it was originally developed in 1990, it only had one phase (“Phase I"). Several developers experienced financial difficulties and the other phases were developed by different entities over the next few years. As a condition of not opposing the development of additional phases, the unit owners in Phase I insisted on two conditions: (1) that all future phases be self-contained and required to maintain their own phases and (2) that the future phases continue to contribute to the cost of maintaining Phase 1. Although this might seem unfair, that was the bargained-for amendment to the condominium documents.
The Condominium's Board of Directors agreed that the arrangement under the Condominium documents was unfair, and it decided to change the method of allocating expenses. In 1997, the Board, although it did not have the legal authority to do so, re-allocated the maintenance costs in a more equitable manner so that the association maintained the asphalt in all phases as a common expense. The Board did not amend the condominium documents when it made these changes.
In 2015, however, the Board engaged an attorney who advised them that they were in violation of the condominium documents and recommended three things: (1) that the condominium documents be amended to conform to a fair allocation of maintenance responsibilities and assessments, (2) that in the meantime the assessments be allocated as required by the condominium documents and (3) that the common element parking spaces in Phase I be allocated as Reserved Common Elements to the units in Phase I since each other phase had the exclusive right to park in its own phase. On October 8, 2015, the Board passed a resolution assigning the parking spaces in Phase I for the exclusive use of the unit owners in Phase I. Although the resolution did not use the term, the Board acted pursuant to an express power to assign “Reserved Common Elements" given to the Board in both the Declaration and Bylaws. The reasoning was that all other phases had the exclusive use of limited common element parking spaces within the phase so that it was fair that unit owners in Phase I had similar rights—but as Reserved Common Elements not as limited common elements, as permitted by the condominium documents. For the next several years, including a period when Akers was President of the unit owners association, the budget was based on the condominium documents and several attorneys were engaged to revise the condominium documents. Unfortunately, the requisite unanimous vote of the unit owners was not obtained.
On August 29, 2019, Plaintiff filed suit against the Condominium. Plaintiff made three assertions to justify its request for an injunction and damages. First, Plaintiff argued that the assignment of parking spaces in Phase I as Reserved Common Elements to the units in Phase I was improper because (1) it “impermissibly diminished 7205 Telegraph's undivided interest in the common elements of the Condominium"; (2) it was discriminatory because any such assignment of parking spaces must be allocated equally to all units; and (3) it caused its phase to violate the parking requirements of the Fairfax County zoning ordinance. Second, Plaintiff argued that it was improperly assessed for common expenses related to Phase I. Third, Plaintiff argued that it was improperly assessed for legal expenses arising out of the parties' dispute.
In separate litigation, the Association sued 7205 Telegraph, LLC for almost $100,000 in assessments which had not been paid in over four years. The Association also filed liens against the delinquent's units.
On January 14, 2022, Judge Randy I. Bellows issued a Final Order attaching a transcript of his opinion read from the bench; there is no formal written opinion in the case. Judge Bellows held for Akers on all claims and awarded (1) damages of $481,434.84; (2) reduced Akers' outstanding assessments by $51,074.18 and credited him $6,296.70 in over-assessments; and (3) awarded attorneys' fees and costs of $324,977.60. See Exhibit A. The Judge also held that the parking scheme violated the Condominium Instruments and Fairfax County zoning ordinance and ordered that parking restrictions on the common element parking in Phase I be lifted. Id. The judge's detailed findings are outlined in the transcript of his ruling.
Court: Virginia Court of Appeals
Topic: Declaration amendments
Brief Author: Chadwick, Washington, Moriarty, Elmore & Bunn, P.C.
Filed: June 3, 2022
CAI Amicus Review Panel: Stephen Marcus, Esq., CCAL, Co-Chair of Amicus Committee, Steven Sugarman, Esq., CCAL (PA), Anthony Rafel, Esq., CCAL (WA), Edmund Allcock, Esq., CCAL (MA), Russell Robbins, Esq. (FL), and Elia Ellis, Esq. (MO)