PHED Item 6
September 9, 2013
Worksession
MEMORANDUM
September 5, 2013
TO:
FROM:
SUBJECT:
Planning, Housing
&
Economic
De~elopment
Co~e
Robert H. Drummer, Senior Legislative Attorney
~
Worksession: Bill 19-13, Common Ownership Communities - Administrative
Hearing - Attorney's Fees
Expected Attendees: Peter Drymalski, Office of Consumer Protection
CCOC Representative
Bill 19-13, Common Ownership Communities - Administrative Hearing Attorney's
Fees, sponsored by Councilmember Leventhal, was introduced on June 18. A public hearing was
held on July 9, 2013.
Background
The Commission on Common Ownership Communities (CCOC) was established by
Chapter lOB of the County Code, effective on January 1, 1991. The CCOC is comprised of 15
voting members appointed by the Executive and confirmed by the Council. Eight of the voting
members must be residents of common ownership communities and 7 must be professionals
associated with common ownership communities. The CCOC was created to advise the County
Executive and the County Council on ways to handle common ownership of property in
communities; promote public awareness of the rights and obligations of living in common
ownership communities; resolve disputes between community associations and their members
and residents; and maintain property values and quality of life in community associations.
The CCOC has jurisdiction to resolve a complaint filed by a community association
against a member or filed by a member against a community association or another member to
enforce the association documents or a State or County law regulating common ownership
communities. The CCOC's jurisdiction to hear these disputes is non-exclusive; a party may file
a civil action in Court to resolve the dispute
de novo
at any "time before a CCOC decision is
issued. Once a CCOC decision is issued, the Court's jurisdiction is limited to judicial review of
the agency's decision. The Office of Consumer Protection provides staff support for the CCOc.
A comprehensive guide to the CCOC dispute resolution process can be reviewed on the internet
at http://www6.montgomerycountymd.gov/content/ocp/ccoc/pdtlstatTsguidenovember20 12.pdf .
The dispute resolution process includes voluntary mediation, and if necessary, an adjudicatory
hearing before a 3-member panel comprised of 2 voting members of the CCOC and a volunteer
.attorney knowledgeable about community association law. A panel decision is binding on the
parties, subject to judicial review.
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Bill 19-13 would expand the authority of the Commission on Common Ownership
Communities to award attorney's fees to a prevailing party in certain disputes. Under current
law, the Commission can award attorney's fees to any party if the opposing party acts in bad
faith or if the association documents permit the award of attorney's fees. Since the association
documents normally only permit an award of attorney's fees to the association if it prevails in a
case enforcing the association documents, a unit owner or occupant who prevails in a case
against the association is rarely eligible for an award of attorney's fees. Bill 19-13 would permit
the Commission to award attorney's fees to a unit owner or occupant who prevails in a dispute to
enforce the association documents or a State or County law regulating common ownership
communities.
The Bill would expire on September 1, 2016 in order to permit the Council to evaluate
the Commission's new authority.
Public Hearing
Two residents of Leisure World, Paul Bessel (©4-6) and Jordan Harding (©7) testified in
favor of the Bill at the July 9 public hearing. Both Mr. Bessel and Mr. Harding testified that the
Bill would level the playing field for unit owners and residents in disputes against a community
association. Ronald Bolt, Co-Chair of the Maryland Legislative Committee of the Washington
Metropolitan Chapter Community Associations Institute, (©8-9) opposed the Bill and challenged
the assertion that most association documents provide for attorney's fees to be awarded to the
association for enforcing the documents. Mr. Bolt suggested that the Bill be amended to permit
an award of attorney's fees to either party without regard to the association documents.
Issues
1.
What has been the recent experience of the
eeoc
in resolving disputes?
Maryland follows the "American Rule" with regard to awarding attorney's fees to a
prevailing party in litigation. Absent an agreement or a statute authorizing the award of
attorney's fees, the costs and expenses of litigation, other than the usual and ordinary Court
costs, are not recoverable in an action for compensatory damages. See,
Hess Constr. Co.
v.
Board of Educ.,
341 Md. 155 (1996). County Code §IOB-13(d) is a statute that authorizes the
award of attorney's fees to a prevailing party under certain circumstances. Bill 19-13 would
expand the circumstances the CCOC could award attorney's fees. A prior agreement by the
parties, such as the association documents, can also authorize the award of attorney's fees to a
prevailing party in a dispute.
The Office of Consumer Protection reviewed the 325 cases that have been closed since
2010. See the June 19,2013 staff memo from Peter Drymalski at ©1O-12 and the 2010 to 2012
Closed Case Stats at ©13. Since 2010, 73% of the cases were filed by a unit owner and 27%
were filed by an association. 72 or 22% of these cases were resolved by the CCOC after a
formal hearing. An association prevailed on 68% of the cases and a unit owner prevailed on
32%. The staff noted that associations settle 70% of the cases they file, but unit owners only
settle 54% of the cases they file. The CCOC staff noted that the panel awarded attorney's fees to
a prevailing association in 4 of the most recent 37 decisions for a total award of $20,612. The
CCOC did not award attorney's fees to any of the prevailing unit owners. The lack of fee awards
2
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to prevailing unit owners is likely a result of current law, which only authorizes the award of
attorney's fees if the association documents so provide unless one of the parties has acted in bad
faith. Although fee awards to a prevailing association occur, they are rare.
2. What is the purpose of a statute authorizing an award of attorney's fees to a prevailing
party?
The most commonly used statute authorizing an award of attorney's fees is 42
U.S.C.§ 1988, which was enacted by Congress to permit a court to award attorney's fees to a
prevailing plaintiff in an action enforcing a Federal civil rights law. The purpose of this fee
shifting law was to encourage private parties to enforce civil rights laws as a "private attorney
general." A statutory right to be reimbursed for the cost of hiring an attorney, if successful,
makes it easier for a plaintiff to retain an attorney. A potential award of attorney's fees against a
defendant also raises the stakes in the case and can encourage settlement by the defendant.
However, the same statute can discourage a plaintiff from settling a case since the plaintiff may
have less to lose if the attorney only expects to be paid by the client if the plaintiff wins.
An
association document that was agreed to by a unit owner when purchasing the unit
can be the basis for an award of attorney's fees. The current County law authorizing a fee award
under these circumstances recognizes this. If the County Code did not authorize the CCOC to
make a fee award when the association documents authorize it, an association may be less likely
to opt into the CCOC dispute resolution system for a simple fee collection case. The association
may choose to bypass the CCOC and file suit in court where the fee award could be obtained.
3. How would Bill 19-13 affect the current dispute resolution process?
The Legislative Committee of the CCOC analyzed the Bill in a memorandum dated July
8,2013 (©14-16). The Legislative Committee discussed several theories on how the Bill could
affect the current dispute resolution process. Authorizing the CCOC to award attorney's fees to
a prevailing unit owner would increase the likelihood that an owner retains counseL Professional
evaluations of a case by an attorney for the owner may facilitate early settlement by making a
client better understand the strengths and weaknesses of the case. However, more attorneys
involved in a dispute can also increase the costs for both parties by increasing pre-hearing
discovery and lengthening hearings.
The Bill would level the playing field for disputes arising under association documents
that permit the association to receive attorney's fees, but would create an unlevel field for those
disputes arising under association documents that do not. The CCOC staff believes that most
association documents provide for attorney's fees for the association, but the Washington
Metropolitan Chapter Community Associations Institute challenged this assumption at the public
hearing.) An award of attorney's fees to an association is rare. The CCOC has only awarded
attorney's fees to an association in 4 of the last 37 decisions in the last 3 years. The CCOC has
not awarded fees to an owner in the last 37 decisions.
CCOC staff estimates that there are 1024 community associations registered in the County, but has not done a
review of the association documents to determine the percentage that provide for an award of attorney's fees.
I
3
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4. What are the reasonable alternatives for fee shifting by the
eeOC?
A.
Make no change to the current law.
The burden should always fall on the party
that wants to amend the current law to show a problem. Although there is an
inequity in the current law,
it
is not clear that this has caused a significant
problem. There have only been 4 awards of attorney's fees to an association in
the last 37 decisions for a total award of $20,612. Since 2010, 73% of the cases
were filed by a unit o\\-ner and 27% were filed by an association. The eeoe's
lack of authority to award attorney's fees to a unit owner does not appear to have
discouraged unit owners from using this dispute resolution process.
Enact the Bill as introduced
The Bill would level the playing field for disputes
arising under association documents that permit the association to receive
attorney's fees, but would create an unlevel field for those disputes arising under
association documents that do not. The Bill would increase the likelihood that a
unit o\\-ner hires an attorney in a dispute.
­
B.
C.
Amend the Bill to authorize fees for any prevailing plaintiff in a dispute to enforce
the association documents.
The eeoe supported this alternative.
2
See the
September 3, 2013 eeoe staff memo at ©17-1S. The eeoe supports an
amendment that would level the playing field by authorizing an award of
attorney's fees to any prevailing party who files a dispute to enforce the
association documents without regard to the language of the association
documents. The eeoe also supports retaining its authority to award fees against
any party, even a prevailing party, who unreasonably refuses to mediate or
unreasonably delays the case. Finally, the eeoe asked for authoritr to award
only partial fees to a prevailing party based upon the degree of success.
The
(d)
eeoc
position could be accomplished by amending lines
4-19
asfollows:
The hearing panel may award costs, including [a] reasonable attorney's
[fee] fees, to any Hprevailing]] party if.;.
ill
[another] the [[losing]] other party:
[(1)]
.cAl
[[filed or maintained a frivolous dispute, or filed or
maintained a dispute in [other than good] bad faith;
[(2)]
.all]]
unreasonably refused to [accept] participate m
mediation of a dispute, or unreasonably withdrew from
ongoing mediation; or
We did not receive a position statement from the Executive at the time this packet went to publication. However,
we will issue an addendum with the Executive's position if we receive it before the worksession.
3
Council staff believes the CCOC already has the authority to award a partial fee based upon its authority to award
"reasonable attorney's fees."
2
4
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[(3)] [[(Q]]
all
substantially delayed or hindered the dispute
resolution process without good
cause[.]~
ill
ill
[The hearing panel may also award costs or attorney's fees if] [[an
association document so requires and the award is reasonable under the
circumstances~
or
Q).1]
the prevailing
I2ill!Y
[[is an owner or occupant of
f!
dwelling unit who]]
filed the dispute to enforce the association documents or
f!
State or County
law regulating common ownership communities.
D.
Amend the Bill to repeal the
eeoc
authority to award attorney's fees unless a
party has acted in bad faith.
This alternative would level the playing field
between unit owners and associations by repealing the CCOC's authority to
award fees to an association based upon the association documents. This
alternative would probably decrease the use of attorneys by both sides in a
dispute. An association that plans to seek attorney's fees based upon the
association documents would have to bypass the CCOC and go straight to Court.
Since only 22% of the cases are resolved by a formal hearing, the CCOC dispute
resolution process would continue to be useful for its mediation and its right to an
adjudicatory hearing on small claims.
Since the CCOC has only awarded attorney's fees to an association in 4 of the
most recent 37 decisions in the last 3 years, repealing the authority to do so would
eliminate the perception of unequal treatment while not significantly affecting the
dispute resolution process.
This alternative could be accomplished by amending lines
4-19
asfollows:
(d)
The hearing panel may award costs, including [a] reasonable attorney's
[fee] fees, to any [[prevailing]] party if the other party:
ill
[another] [[the losing party:
[(1)]
(A}]]
filed or maintained a frivolous dispute, or filed or
maintained a dispute in [other than good] bad faith;
[(2)]
[[tID]]
ill
unreasonably refused to
ill
[accept] participate in mediation
of a dispute, or unreasonably withdrew from ongoing mediation; or
[(3)] [[(Q]]
substantially delayed or hindered the dispute resolution
[~
process without good cause[.]
5
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ill
[The hearing panel may also award costs or attorney's fees if] an
association document so requires and the award is reasonable
under the circumstances; or
ill
the prevailing
lli!!1Y
is an owner or occupant of
~
dwelling unit who
filed the dispute to enforce the association documents or
~
State or
County law regulating common ownership communities]].
5. What is the fiscal and economic impact of the Bill?
OMB estimates that the Bill would have no fiscal impact. Finance estimates that the Bill
would have a minimal economic impact due to the small amount of homeowners and
associations that would be involved in these cases. The Fiscal and Economic Impact Statement
is at ©19-23. Council staff agrees with this analysis.
This packet contains:
Bill 19-13
Legislative Request Report
Public Hearing Testimony
Paul Bessel
Jordan Harding
Ronald Bolt
CCOC Staff memo - June 19,2013
CCOC Closed Case Statistics
CCOC Legislative Committee Memo
CCOC Position Memo - September 3,2013
Fiscal and Economic Impact Statement
Circle #
1
3
4
7
8
10
13
14
17
19
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eeoe -
Award Of Attorney's Fees\PHED Merno.Doc
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Bill No.
19-13
Conceming: Common
Ownership
Communities
Administrative
Hearing - Attomey's Fees
Revised: June 6,2013 Draft No.
..L
Introduced:
June 18, 2013
Expires:
December 18,2014
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: _ _ _ _ _ _ _ __
Ch. _ _, Laws of Mont Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Councilmember Leventhal
AN
ACT to:
(1)
(2)
expand the authority of the Commission on Common Ownership Communities to
award attorney's fees to a prevailing party in certain disputes; and
generally amend the law governing common ownership communities.
By amending
Montgomery County Code
Chapter 1DB, Common Ownership Communities
Section lOB-13
Boldface
Underlining
[Single
boldface brackets]
Double underlining
[[Double boldface brackets]]
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected by bill
The County Council for Montgomery County, Maryland approves the following Act:
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BILL
No.
19-13
1
Sec.
1.
Section lOB-13 is amended as follows:
lOB-13.
Administrative hearing.
2
3
4
5
6
*
(d)
*
*
The hearing panel may award costs, including [a] reasonable attorney's
[fee] fees, to any prevailing party
if~
ill
[another] the losing party:
[(1)]
7
®
all
filed or maintained a frivolous dispute, or filed or
8
9
maintained a dispute in [other than good] bad faith;
[(2)]
unreasonably refused to [accept] participate
III
10
mediation of a dispute, or unreasonably withdrew from
ongoing mediation; or
[(3)]
(g
substantially delayed or hindered the dispute resolution
process without good cause[.];
11
12
13
14
15
16
17
18
19
ill
[The hearing panel may also award costs or attorney's fees
if]
an
association document so requires and the award is reasonable
under the circumstances; or
ill
the prevailing
Pill1Y
is an owner or occupant of
~
dwelling unit
who filed the dispute to enforce the association documents or
~
State or County law regulating common ownership communities.
The hearing panel may also require the losing party in a dispute to pay
all or part of the filing fee.
20
21
22
23
24
*
*
*
Sec. 2. The Amendments to Section IOB-I3 contained in Section 1 of this Act
apply to any dispute filed with the Commission after the date this Act takes effect.
Sec. 3. The Amendments to Section IOB-I3 contained in Section I of this Act
expire on September 1,2016.
25
26
<y
t\law\bills\1319 eeoc - award
of
attorney's fees\bill 2.doc
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LEGISLATIVE REQUEST REPORT
Bill 19-13
Common Ownership Communities
-
Administrative Hearing
-
Attorney's Fees
DESCRIPTION:
Bill 19-13 would expand the authority of the Commission on
Common Ownership Communities to award attorney's fees to a
prevailing party in certain disputes.
Under current law, an association is often eligible for an award of
attorney's fees if it prevails, but a unit owner or occupant is not.
Level the playing field between the association and a unit owner or
occupant in a dispute before the Commission.
Office of Consumer Protection and the Commission on Common
Ownership Communities.
To be requested.
To be requested.
To be requested.
To be researched.
Robert H. Drummer, 240-777-7895
To be researched.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Not applicable
F:\LAW\BILLS\1319
eeoe -
Award
Of
Attorney's Fees\LEGISLATlVE REQUEST REPORT.Doc
f:\law\bills\1319 eeoc· award of attorney's fees\legislative request report.de
(J)
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Montgomery County Council
Bill 19-13, Common Ownership Communities - Administrative Hearing - Attorney's Fees
Public Hearing on July 9, 2013
Testimony of Paul M. Bessel, individual
My name is Paul M. Bessel. I live in Leisure World in Silver Spring, Maryland and I am
testifying as an individual, not representing any organization or anyone other than myself.
I am testifying in support of Bill 19-13, a bill that would provide citizens with the same ability
to obtain attorney's fees in CCOC cases that is now available to opposing parties in such
cases.
In October 2009, a resident of Leisure World filed a complaint with the CCOC, alleging that
the Board of Directors of the Leisure World Community Corporation had violated the law by
improperly closing some of its meetings. The CCOC issued a decision on that complaint in
January 2011. The CCOC concluded that the complainant was correct in
~Iis
allegations that
the Leisure World Board had violated the Maryland Homeowners' Association provisions
governing when and how a meeting of the Board may be closed.
Despite the fact that the Leisure World Board was found to have violated the law, and the fact
that the CCOC found further sanctions were not needed because the Leisure World Board
had changed its procedures during the course of this case - because of the filing on the
CCOC complaint, the Leisure World Board still asked the CCOC to impose on the LW
resident all the attorney's fees that had been paid by the Leisure World Board in its opposition
to the Leisure World resident. Fortunately, the CCOC did not agree to this demand of the
Leisure World Board.
However, this is a clear demonstration of how a homeowners association uses the current law
concerning CCOC attorney fee issues to, in effect, threaten a citizen. Some people already
find it difficult to pay the $50 filing fee the CCOC charges, as well as paying a lawyer to
support them in what may well be valid and helpful challenges to their homeowners
association. To have the additional "sword of Damocles" hanging over them of having to pay
the other party's attorney as well as their own attorney, can and very likely has caused
citizens to forego their rights and not file perfectly appropriate CCOC cases.
I, myself filed a complaint with the CCOC against the Leisure World Board of Directors in
December 2010, and a fellow resident of Leisure World filed a supporting CCOC complaint
against the Leisure World Board.
As soon as I filed my complaint, the Vice Chairman of the Leisure World Community
Corporation Board of Directors threatened me with severe financial consequences if I did not
withdraw my CCOC complaint. I did not give in to that pressure, and when that individual ran
for reelection I ran against him and defeated him by a very large margin. As a lawyer, I knew
immediately that this threat was based on ignorance and misinterpretation of the law.
(continued on next page)
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,
(
Montgomery County Council
Bill 19-13, Common Ownership Communities - Administrative Hearing - Attorney's Fees
Public Hearing on July 9,2013
Testimony of Paul M. Bessel, individual
Page 2 of3
However, this points out how homeowners associations and their leadership can and do
attempt to intimidate individual residents who assert their rights.
By the way, our complaints were resolved through negotiations, which resulted in many
improvements in the procedures used in our community, as described in a memo that
concluded the case:
(1) allowing residents to speak to the Board before the Board votes on agenda items (rather
than expressing views on an item only after the Board had voted on it)
(2) including residents' written comments in agenda packets rather than leaving decisions on
individual letters up to one person
(3) allowing private clubs to decide their membership policies rather than having the LW
Board decide them
(4) videotaping Board meetings so residents who were not present could view them
(5) having a residents' committee supervise the Leisure World newspaper and eliminating
censorship of articles that disagreed with management policies
(6) clarifying the budget so it is more transparent and understandable by residents
(7) no longer asking Board members to vote on issues that were just presented to them
minutes before a vote
(8) requiring the leaders of Leisure World to obtain training in how to properly run meetings
(9) most relevant here - an agreement by the then-leaders of Leisure World that they would
no longer attempt to intimidate residents who avail themselves of the right to file
eeoe
complaints by attempting to impose the opposing party's legal costs on the resident..
As noted above, a friend and fellow Leisure World resident filed a
eeoe
complaint about the
same time as mine. He and I were (he has since passed away) both lawyers (retired) so we
were willing and able to handle our own cases without undue financial difficulty in presenting
our cases. However, the mere threat that we might have to pay the lawyers of the party
opposing us - the party that we were absolutely convinced was wrong - was a very serious
consideration. There are probably many residents of condominiums and other common
ownership communities, who have very legitimate claims but who do not file them with the
(continued on next page)
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Montgomery County Council
Bill 19-13, Common Ownership Communities - Administrative Hearing - Attorney's Fees
Public Hearing on July 9,2013
Testimony of Paul M. Bessel, individual
Page 30f3
CCOC because of the costs involved, as well as the potential additional costs of having to pay
for the opposing party's attorney fees.
Bill 19-13 would fix this problem. It would balance the issue of attorney's fees so the standard
would be the same for both complainants and respondents. This is fair and it is good policy.
Often individual residents of homeowners and condominium and cooperative associations will
become aware of problems in their communities, including clear violations of law.
For example, just a couple of weeks ago I was present at a Leisure World committee meeting
where the chairman of that committee stated publicly that the committee would go into secret
session to vote on an issue. It was only when I pointed out that would be a violation of the law
that the committee instead voted in open session. This was precisely the issue on which the
CCOC ruled against Leisure World in the case I mentioned earlier, in 2011.
I was also told by one of the Leisure World board leaders that there was a closed meeting of
a Leisure World committee in 2012, based on a unilateral decision that it would be better to
discuss the way the committee was operating in secret, even though, again, that was a
violation of state law.
These types of violations of law appear to take place in Leisure World, and probably other
common ownership communities, all too often. Those of us who live in them need to be able
to file complaints with the CCOC to correct these problems without having to fear that we will
be hit with huge costs simply for trying to help our communities.
The law that established the CCOC, Montgomery County Code, Section 10B, in its very first
sentences reads:
"The Council finds that there is often unequal bargaining power between governing bodies,
owners, and residents of homeowners' associations, residential condominiums, and
cooperative housing projects, "and the CCOC was created to, "promote an equitable balance
between the powers of governing bodies, owners, and residents."
Adoption of Bill 19-13 will further these goals of promoting an equitable balance between the
powers of residents of common ownership communities and the governing bodies of those
communities, and their often high-priced lawyers.
Thank you for your consideration of my comments.
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STATEMENT OF FORMER MAYOR JORDAN HARDING
ON MONTGOMERY COUNTY COUNCIL BILL 19-13
COUNCILMAN GEORGE LEVENTHAL SPONSOR
I am Jordan Harding, a resident of Leisure World of Maryland, an
active adult community of over 8,000 located in Silver Spring. The
community is governed by a Home Owners Association and is in effect a
quasi-governmental organization. In recent years, three complex,
protracted and important complaints have been filed against the
Leisure World association with the Commission on Common
Ownership Communities dealing with a wide-range of serious issues.
One case went to hearing with attorneys and two cases wer¢ settled by
mediation without attorneys, however both complainants were in fact
attorneys. The CCOC does not require the parties to have attorneys.
In the case at hearing the association spent some $20,000 and
complainant spent $3,000 in legal fees. Complainant essentially
prevailed but the association was not liable for attorney or filing fees.
This bill will level the playing field for unit owners in cases where both
parties retain attorneys. The Circuit Court has ruled that under
present Code language, the CCOC cannot award attorney fees to
prevailing association members if the association's documents/by-laws
do not hold the association liable. Chapter 10B-13(d) needs amendment
to cure this fault.
It
is extremely difficult to change association by-laws
because of formidable voting requirements under State law and status
quo association boards of directors that resist both change and reform.
BOAs have used their considerable financial resources to intimidate
and discourage unit owners from fIling disputes with the CCOC.
Associations can draw on their large budgets to pay for their legal
expenses at the CCOC or in the courts. The very unfair result is that an
association member pays his share of association legal fees to defend
against his own case.
The bill retains CCOC discretionary authority to award attorney fees in
cases that warrant application and the sunset provisions of the bill give
ample time for the County Council to evaluate the success of the
amendments.
(.
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~~~
~s~ffi!H~B~!Y
WASKINGTON METROPOLITAN
CHAPTER
3
July 8, 2013
Montgomery County Council
c/o Ms. Nancy Navarro, President
100 Maryland Avenue
Rockville, Maryland 20850
Re: Bill 19-13, Common Ownership Communities - Administrative Hearing­
Attorney's Fees
Dear Council members:
I serve as co-chair of
t~e
Maryland Legislative Committee of the Washington
Metropolitan Chapter Community Associations Institute ("WMCCAI"). WMCCAI is a
501(c)(6) organization that serves the educational, business, and networking needs of the
community association industry in Maryland, Virginia, and the District of Columbia. Members
include professional managers and community association volunteer leaders from condominium,
cooperative and homeowners associations as well as those who provide products and services to
associations. I am writing to provide the Chapter's comments on the referenced BilL
Bill 19-13 would expand the authority of the Commission on Common Ownership
Communities (CCOC) to award attorneys' fees to homeowners who are a "prevailing party"
in certain community association disputes decided by the CCOC. Per County Code Section 10B­
13(d), the CCOC currently can award fees if a party files a frivolous dispute or proceeds in bad
faith, unreasonably refuses to participate in mediation, delays or hinders the process, or
the association governing documents require an award of attorneys' fees.
l
Section
lOB~
l3(d)
provides as follows:
"The hearing panel may award costs, including a reasonable attorney's fee, to any party if another party:
(1)
(2)
(3)
filed or maintained a frivolous dispute, or filed or maintained a dispute in other than good faith;
unreasonably refused to accept mediation of a dispute, or unreasonably withdrew from ongoing mediation; or
substantially delayed or hindered the dispute resolution process without good cause.
The hearing panel may also award costs or attorney's fees if an association document so requires and the award is reasonable
under the circumstances. The hearing panel may also require the losing party in a dispute to pay all or part of the filing fee."
7600 Leesburg Pike
Suite 100 West
Falls Church, VA 22043
703.750.3644 MAIN
703.941.1740 FAX
www.caidc.org
Building Better Communities
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According to the Bill's accompanying memorandum, "association documents normally
only permit the award of attorney's fees to the association." Thus, the Bill is aimed at "leveling
the playing field."
However, the Bill could actually create an unequal balance in favor of owners.
It
should
be noted that many association documents do not contain a provision for the recovery of
attorneys' fees in an enforcement action. As a result, the proposed Bill would place owners in a
better position than their associations. Under the proposed Bill, a prevailing owner in a dispute
to enforce the association documents, or State or County law, would be entitled to attorneys' fees
even if the governing documents are silent on the issue. A prevailing association, on the other
hand, would not have the same right of recovery. An association which seeks to enforce the
association documents or law against an owner would be entitled to recover attorneys' fees only
if the governing documents expressly require it. Thus, the owner is not put in an equal position;
the owner is put in a better position.
Even where there is an attorneys' fees provision in the documents, the prOVlSlon is
subject to interpretation by the CCOC, in a CCOC proceeding. To award fees to an association,
the CCOC must interpret such provisions to require attorneys' fees in administrative
proceedings, such as a CCOC case.
2
Accordingly, if the County Council decides to amend the Code to "level the playing
field," the Code should be amended to allow either side to recover attorneys' fees, without regard
to the party's status as the association or the owner. Thank you for your consideration.
cc:
Matt Rankin, Executive Director,
Washington Metropolitan Chapter Community Associations Institute
Ruth Katz, Esq., Co-Chair, Maryland Legislative Committee
See,
e.g., Guide to the Procedures and Decisions ofthe Montgomery County Commission on Common Ownership
Communities,
November, 2012, p. 24 ("Ifthere is no 'misconduct' the
eeoc
can only award attorney's fees if the
association's own documents clearly require them in the type of case before the
eeoc.").
2
(j)
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June 19,2013
TO: eeoe Legislative eommittee
FROM:
Peter Drymalski, eeoe Staff
RE: Attorneys and Attorney Fees
In order to assist the eeoe with evaluating the need for changes to ehapter
10B regarding the eeoe's authority to award attorney fees, the staff has
reviewed both eeoe general complaint statistics and eeoe formal
decisions.
A. Disputes Resolved through Public Hearings
We reviewed 37 of the eeoe's most recent Decisions and Orders,
going back for the last 3 years.
26 of the cases were filed by homeowners and 11 by associations.
In 4 of the cases (10%), the homeowners were represented by
attorneys; and in 14 of the cases (38%), the associations were represented by
attorneys.
Associations won 27 (73%) of the decisions; homeowners won 7
(19%) of the decisions, and the remaining 3 were settlements or split
decisions.
In 4 of the 37 decisions, the eeoe awarded attorney fees to the
association for a total of $20, 612. The eeoe did not award any attorney
fees to homeowners.
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B. Review of Recent Closed Cases
We also reviewed 84 cases closed in the last two years, 14 of which
were resolved by the eeoe in public hearings and the remainder of which
were resolved by settlements and mediations.
In 12 of the cases (14%), the homeowners were represented by
attorneys; associations were represented by attorneys in 31 cases (37%).
C. 3-Year Cumulative Case Reviews
We have also reviewed 325 cases closed since 2010. 236 (73%) of
these were filed by homeowners and 89 (27%) by associations.
72 (22%) of these cases were resolved by the eeoe through formal
hearings. Associations won 49 of those decisions (68%) and homeowners
won 23 (32%). Most of the remaining cases were settled.
It
should be noted that associations settle 70% of the complaints they
file, but homeowners agree to settlement in only 54% of the complaints they
file.
If settlements and favorable eeoe Decisions are counted together as
"favorable results", then associations receive favorable results in 91
%
of all
cases they file but homeowners receive favorable results in only 60% of the
cases they file.
D. Staff Opinions
The staff believes there are several reasons for the disparities between
the results obtained by homeowners compared to those obtained by
associations.
1. eurrent law allows the eeoe to award attorney fees to a prevailing
party only if the association documents require an award of fees. Most
associations' documents state that if the association must take legal action to
enforce the documents then the losing member must reimburse it for such
costs, but few, if any, association documents state that if the member
@
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successfully sues to enforce the documents, then the losing association must
reimburse the member for his fees and costs.
2. Association complaints tend to be much simpler and easier to
prove. Usually they involve architectural or maintenance violations, and can
be shown with photographs and copies of rules. Member complaints tend to
involve multiple issues, such as elections, conflicts of interest, budgets,
inconsistent rule enforcement, etc., and they cannot be proven through
photographs but require multiple documents and extensive witness
testimony.
3. Associations tend to have the assistance of professional property
managers and lawyers, who are more familiar with the contents of the
governing documents, applicable laws, and prevailing best practices. Many
of them have experience in the court or the
eeoc
systems. Members tend
to be novices with no prior experience proving a case and without expert
assistance and relevant training.
4. Associations benefit from a rule of law known as the "Business
Judgment Rule," which, generally speaking, declares that the decisions of
boards of directors are
presumed to be valid,
and the legal burden of proving
them to be otherwise is on the person suing. This is a challenge that the
average association member has trouble meeting.
F or general information on attorney fee awards by the
eeoc
through
2008, see attached article from the
eeoc
newsletter.
@
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CUMULATIVE CLOSED CASE REVIEW
2010-2012
Total
2012
2011
2010
CASES FILED
BY:
89 (27%)
27 (20%)
28 (31%)
34 (33%)
HOA
105 (80%)
70 (67%)
236 (73%)
Members
61 (69%)
Total
132
104
325
89
72 (22%)
32 (24%)
25 (28%)
15 (14%)
CCOC
DECISIONS
49 (68%)
InHOA favor
21 (66%)
18 (72%)
10 (67%)
23 (320/0)
5 (33%)
In Member favor
11 (34%)
7 (28%)
71 (68%)
189 (580/0)
71 (54%)
47 (53%)
DISPUTES
SETTLED
62 (70%)
26 (75%)
Filed by HOA
21 (780/0)
15 (540/0)
45 (64%)
Filed by Member
50 (48%)
32 (52%)
127 (540/01
46 (14%)
23 (17%)
12 (13%)
11(11%)
NO
JURISDICTION
3 (70/0)
0(0%)
Filed by HOA
1 (4%)
2 (17%)
43 (93%)
11 (100%)
Filed by Member
22 (96%)
10 (83%)
33 (97%)
81
22 (79%)
FILED BYHOA
26 (96%)
(910/0)
AND
FAVORABLE
OUTCOME
FILED BY
61 (58%)
38 (62%)
49 (70%)
148
(63%
)
MEMBER AND
FAVORABLE
OUTCOME
POST-AMENDMENT (July,
2010)
RESULTS
TOTAL CASES FILED: 27
By HOA: 9 (33%)
By Member: 18 (67%)
FAVORABLE OUTCOMES FOR HOAs : 5 settled, 3 favorable decisions
=
89%
FAVORABLE OUTCOMES FOR MEMBERS: 11 settled, 1 favorable decision
=
67%
(No jurisdiction
=
3, all filed by members
=
17% of all member complaints)
DECISIONS: 6 total, 4 in favor of associations, 2 in favor of members.
(22% of all cases filed were resolved by CCOC panels.)
@)
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MEMORANDUM
TO: Peter Drymalski
FROM: Legislative Committee of the CCOC
July 8, 2013
Re: Bill 19-13
The Legislative Committee of the CCOC {"THE Committee"} has been asked to consider the above noted
proposed legislation. We have done so and have also considered feedback from certain volunteer panel
chairs.
I.
RECOMMENDATION
The Committee recommends that the Council table further consideration of Bill 19-13 until all interested
parties have had an opportunity to address the possible unintended consequences of the legislation and
whether they can be avoid through a refinement of the present language. The Committee believes it
would be beneficial if the sponsors of the bill work with the CCOC to craft a bill that reflects the CCOC's
experience in addressing issues of equity and fairness between associations and property owners.
II.
BACKGROUND
Bill 19-13 {"the Bill"} would provide a CCOC Panel with the right to award an owner or occupant
{"Owners"} attorneys' fees where they prevail in their efforts to enforce an association's governing
documents. The Bill attempts to level the playing field between common ownership associations
("Associations") and Owners. Associations are represented by counsel far more often than Owners and
the governing documents of most Associations provide for a mandatory award of attorneys' fees when
the Association enforces those governing documents. It often is the case that Associations have "deeper
pockets" than their individual members, which gives them a greater ability to pursue a case through the
court system. Lastly, Associations often have a professional understanding of the merits of a particular
case, enabling them to avoid unfavorable litigation and successfully prosecute other cases.
Chapter lOB of the Montgomery County Code ("Chapter lOB") presently allows for an award of
attorneys' fees to an Owner in the event of the Association's frivolous defense or filing, bad faith,
unreasonable refusal to accept mediation of a dispute or hindering of the dispute resolution process
without good cause. The basis of an attorneys' fees award thus hinges upon some form of wrongful
conduct on the part of the Association. The Bill will allow for an award of attorneys' fees to an Owner,
without a finding of wrongful conduct on the part of the Association; all that is required is a finding in
favor of the Owner on the merits of his enforcement action.
III.
ANALYSIS and DISCUSSION
1
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The Committee is divided in its support for the Bill. Some members suggest that increasing the
likelihood of an award of attorneys' fees to an Owner will encourage Owners to secure counsel. This will
allow Owners to secure a professional evaluation of the strengths and weaknesses of their case, which
may in turn avoid merit less filings and in other cases facilitate early settlements. Other Committee
members suggest that providing for attorney's fees may create false hope for claimants and encourage
litigation. Since the award of attorney's fees is only if the Owner "filed the dispute" then the Bill might
encourage "a race to the Courthouse" thus causing rather than avoiding_CCOC filings. The Committee
suggested that a pro bono or discounted legal fee program could be established that would enable
Owners to secure attorney consultations prior to filing; such a program might be coordinated with the
County's Bar Association.
Concern was raised that the increased prospect of attorneys' fee awards against Associations might
draw the ire of mortgagors and insurers. The thought is that an award of attorneys' fees against an
Association could result in a special assessment being levied by the Association, and precarious Owners
presented with their share of this assessment pushed into default. Additionally, to the extent that any
award against an Association might be covered by insurance, then an insurer might want to spread this
risk by increasing premiums, resulting in an increased cost for all Owners.
The mechanics of the Bill were also discussed. Since the proposed new language is not mandatory, as
most statutory and contractual attorneys' fee provisions are, the Panel has the authority to award
attorney fees to a prevailing party seeking to enforce association documents but is not required to do
so. Accordingly, a Panel is left without any guidance as to when, if at all, to exercise its authority. If
wrongful conduct on the part of the Association is going to be the trigger for the exercise of this
authority, then what have we truly added to Chapter lOB? Adding a discretionary attorney fee
provision without providing the criteria under which the Panel is to exercise that authority does a
disservice to the Panel. One Committee member suggested that the award of attorneys' fees should be
mandatory and the sole criteria that of "prevailing party", which is a term that has been interpreted by
Courts. If the intent of the Bill is to make an award of attorneys' fees mutual and mandatory then the
proposed revision of the law should state as much.
Another Committee member was concerned that the Bill is a subversion of the American Rule of
attorneys' fees. The member opined that if the Council is subverting the American Rule in the context of
Chapter lOB, perhaps the Council should also provide for an award of attorneys' fees to prevailing party
in a myriad of other ways and contexts in which disputes are heard. The Committee discussed whether
there exists a specific public policy rationale in favor of awarding attorneys' fees with respect to Chapter
lOB (j.e.- in essence a private attorney general rationale) and whether such a rationale would exist if
association documents were not, in fact, being enforced.
Any underlying problem of unequal awards of attorneys' fees may stem from the fact that Associations
have been able to alter the American Rule by the drafting of their governing documents. Since it is the
governing documents that result in many awards, perhaps a grass roots process should be engaged,
association by association, to change those documents? If the majority of the Association members do
not want to effectuate such a change then Associations will argue that the Council should not foist such
a change upon them. While we may believe these governing documents are contracts of adhesion and
purchasers have no choice but to accept and comply with them, this should not affect the right and
ability of those who are already members to change those documents. However, this argument ignores
2
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the reality that many Owners are not actively involved in their association's governance and it is
exceedingly difficult to drum up sufficient membership interest to modify governing documents.
Certain Committee members suggested the Council pursue a statute that would provide that an
attorneys' fees language in governing documents be read as mutual beneficial to Owners and
Associations. Thus, if a Declaration provided for an award to an association if it was enforcing governing
documents, or rules passed by the Board of Directors pursuant there, then the statue would be read as
providing an award to Owners if they were seeking such enforcement. Such a statute would go much
further than the Bill, and would, of course, be subject to many of the same concerns raised in this
Memorandum.
The apparent disparity between Associations and Owners with respect to awards of attorneys' fees can
also be addressed by Panels on a case by case basis. Even if the Association has the right to attorney fees
by virtue of its governing documents, that award must be reasonable in the discretion of the Panel.
IV.
CONCLUSION
The Committee appreciates the concerns that prompted the Bill. The Committee believes that the
policy issues presented and the ramifications of the Bill merit further consideration and debate.
Additionally, the mechanics of the Bill require further work. The Bill in its present state may cause more
issues and problems than it resolves. If any Bill is presented it should contain a sunset provision so that
the effect of the Bill during its pendency can be studied.
3
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COMMISSION ON COMMON OWNERSIDP COMMUNITIES
100 Maryland Avenue, Room 330, Rockville, Maryland 20850
240-777-3636/240-777-3768 Fax
September 3, 2013
TO: Bob Drummer, Esq., County Council Staff
FROM: Peter Drymalski, CCOC Staff
<?
It
V
RE: Council Bill 19-13
The Commission on Common Ownership Communities supports Council Bi1119-13 if it
is amended so that it applies to all parties equally and allows a degree of flexibility to the
Commission's hearing panels in awarding fees.
The Commission believes that Bill 19-13 provides a measure of equality. Under the
existing law and many association documents, the Commission has been able to award
legal fees only to prevailing associations and never to prevailing owners. Such a result
creates the impression that the County cannot be fair to both parties.
However, the Commission recommends that the bill be amended so that all parties­
whether owners, occupants or governing bodies-who file complaints to enforce the
association's documents or relevant laws, be eligible for awards of attorney fees. This
will help to ensure all parties are treated the same way.
Secondly, the Commission recommends that the bill be amended so that its hearing
panels have the discretion to allow a partial award of attorney fees in certain situations.
For example, if the complaining party raises several issues but prevails on only one or
two of them, the hearing panel can award attorney fees proportionately. Similarly, if the
complainant ultimately prevails on the issues raised, but has unjustifiably delayed the
proceedings or unreasonably rejected mediation, the panel can take that into account as
well in setting the fee. (Under the current draft, the right to award fees against a
party
who commits "misconduct" in the course of the CCOC proceeding is limited to fees
assessed against a
losing
party, not against a prevailing party who might be guilty of the
same type of misconduct.)
If you have any questions or need additional information, please advise.
Our draft amendment is attached.
website: www.montgomerycountymd.gov/ccoc email: consumerprotection@montgomerycountymd.gov
Stay in touch with the CCOC by signing up at eSubscription: www.montgomerycountymd.gov--I want to­
Register, reserve, enroll-eSubscription-Create account-Consumer Protection---CCOC
l!...Y
/fil
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Council Bill 19-13:
Suggested Amendment from the CCOC
Section lOB-13(d)(3) ofBi1119-13 should read:
(d) The hearing panel may award costs, including [a] reasonable attorney's
(fee]
fees, to any prevailing party if.;.
ill
[another]
the losing party: [filed a frivolous dispute, unreasonable
rejected mediation, or substantially delayed the dispute resolution process,
etc.]
0· ..
(3) the prevailing party filed the dispute to enforce the association
documents or a State or County law regulating common ownership
communities. In considering whether to make an award ofreasonable
attorney fees under this subsection, the hearing panel may take into account
the extent to which the complainant prevailed on all issues the complainant
raised in the dispute and the factors listed
in
subsection (1) of this section.
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ROCKVILLE, MARYlAND
MEMORANDUM
July 8, 2013
Nancy Navarro, President County
counCil~
Jennifer A. Hughes, Director, Office of M
m~d
Budget
Joseph F. Beach, Director, Department of
i
ance
Council Bill 19-13 - Common Ownership Communities - Administrative
Hearing- Attorney's Fees
TO:
FROM:
SUBJECT:
Please find attached the fiscal and economic impact statements for the above­
referenced legislation.
JAH:aw
c: Kathleen Boucher, Assistant Chief Administrative Officer
Lisa Austin, Offices of the County Executive
Joy Nurmi, Special Assistantto the County Executive
Patrick Lacefield, Director, Public Information Office
Joseph F. Beach. Director, Department of Finance
Michael Coveyou, Department ofFinance
Eric Friedman, Office of Consumer Protection
Alex Espinosa, Office ofManagement and Budget
Naeem Mia, Office ofManagement and Budget
Amy Wilson, Office of Management and Budget
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Fiscal Impact Statement
Council Bi1119-13 Common Ownership Communities­
Administrative Hearing - Attorney's Fees
1. Legislative Summary.
The Bill would expand the authority ofthe Commission on Common Ownership
Communities to award attorney's fees to a prevailing party in certain disputes to enforce
the association documents or a State or County law regulating common ownership
.communities.
2. An estimate of changes in County revenues and expenditures regardless of whether
the revenues or expenditures are assumed in the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
Implementation ofthe bill would 110t impact CotU1ty revenues or expenditures as award
of attorney's fees to the prevailing party would be by and between unit owner or
occupant and common ownership community associations.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Not Applicable
4. An actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
Not Applicable
5. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
Not Applicable
6. An estimate of the staff time needed to implement the bill.
While this bill could possibly increase the number of awards given by the Commission,
existing staff is implementing the current procedures and no additional staff time would
be required.
7. An explanation of how the addition of new staff responsibilities would affect other
duties.
Not Applicable
8. An estimate of costs when an additional appropriation is needed.
Not Applicable
9. A description of any variable that could affect revenue and cost estimates.
Not Applicable
10. Ranges of revenue or expenditures that are uncertain or difficult to project.
Not Applicable
11.
If
a bill is likely to have no fiscal impact, why that is the case.
Award of attorney's fees to the prevailing party would be by and between unit owner or
occupant and common ownership community associations and would not impact County
revenues or expenditures.
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12. Other fiscal impacts or comments.
Not Applicable
13. The following contributed to and concurred with this analysis:
Marsha Carter, Office of Consumer Protection; and
Amy Wilson, Office of Management
and Budget
Date
}
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Economic Impact Statement
Bill 19-13, Common Ownership Communities - Administrative Hearing - Fees
Background:
This legislation would expand the authority of the Commission on Common Ownership
Communities (CCOC) to award attorney's fees to a prevailing party in certain disputes.
According to CCOC, current law allows the CCOC to award attorney fees to a prevailing
party only if the association documents require an award of fees. Most associations'
documents state that if the association must take legal action to enforce the documents
then the losing member must reimburse it for such costs. However, few association
documents state that
if
the homeowner successfully sues to enforce the documents, then
the losing association must reimburse the member for his or her fees and costs.
The Bill would amend Section IOB-13(d) of Chapter lOB of the Montgomery County
Code - Common Ownership Communities.
1. The sources of information, assumptions, and methodologies used.
• Sources of information and data were provided by the Commission on Common
Ownership Communities (CCOC).
• According to CCOC, homeowners filed two-thirds of the complaints but win only
one-third of
all
cases going to a hearing. Associations filed one-third of the
complaints but win two-thirds of all cases going to a hearing.
• CCOC reviewed thirty-seven (37) ofthe most recent Decisions and Orders over
the past three years. Ofthose cases, twenty-six (70%) were filed by homeowners
and eleven (30%) were filed by associations. Ofthe thirty-seven cases,
homeowners were represented by attorneys in four cases and the associations
were represented by attorneys in fourteen cases. In four ofthe thirty-seven
decisions, CCOC awarded attorney fees to the association and no awards to the
homeowners.
2. A description of any variable that could affect the economic impact estimates.
• CCOC staffreviewed 325 complaints closed between 2010 and 2012. Of those
cases, 236 were filed by homeowners. The economic impact or benefits of Bill
19-13 is limited to those homeowners who are awarded attorney's fees if they are
the prevailing party. Given the total number of cases filed by the homeowners
between 2010 and 2012, the total economic impact of Bill 19-13 to the County's
employment, spending, personal income, investment, savings, and property values
would be minimal.
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment, incomes, and property values in the County.
• The economic impact of Bill 19-13 would have minimal effect on the County's
economy because of the number of cases that have been filed by the homeowners.
Page 1 of2
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Economic Impact
Statem~nt
Bill 19-13, Common Ownership Communities - Administrative Hearing - Fees
4.
If
a Bill is likely to have no economic impact, why is that the case?
• The bill would have
minimal
economic impact because ofthe number of cases or
homeowners who have filed a dispute over the past three years.
5.
The following contributed to and concurred with this analysis:
David Platt
and
Mike Coveyou ofthe Department ofFinance and Peter Drymalski of CCOC.
b'
Date
I I
LI--,
/(3
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