#04-07, Kauffman v. The Kenwood Condominium (October 4, 2007) (Panel: Stevens, Gramzinski)

The condominium owner (CO) filed a complaint alleging that a recent special assessment of $610,000 [CU1]billed against all unit owners was a violation of the condominium association's (CA's) rules which stated that special assessments could only be imposed for net shortages.Since the CA's reserve fund had a balance of approximately $900,000, the CO argued that there was no net shortage and the special assessment was unnecessary.The CO asked the Commission to declare the special assessment invalid and uncollectible.

The facts at the hearing showed that due to improper audits, the CA had been spending more money for several years than it was earning under its existing assessment schedule, and the management firm had been covering the deficit by using funds from the reserves to pay current operating expenses.Furthermore, 6 years earlier, the CA had performed a reserve study which called for regular annual contributions to the reserve fund so that it would be at a much higher level than it currently was.The purpose of the special assessment was to bring the reserve fund back to the level recommended in the study.

The hearing panel held that the CA had the discretion to treat the shortfall in the reserve fund as a "net shortage" within the meaning of the governing documents, and that the existence of the reserve study gave the board a reasonable basis for its decision.The panel therefore denied the relief requested in the complaint.