Montgomery Condos Must Disclose Names Of Delinquent Owners
The Washington Post – Washington, D.C.
By Benny L. Kass, Published: April 5, 2014
If you live in a Montgomery County condominium and are delinquent on your periodic assessment, your name must be disclosed if a request is made by another unit owner.
That’s the decision of the Montgomery Commission on Common Ownership Communities (CCOC), which was affirmed in February by the 6th Judicial Circuit Court of Maryland.
Carl Brown is an owner at Americana Finnmark Condominium Association in Silver Spring. A couple of years ago, he raised several concerns with the association’s management company, including a request for a list of the names and unit numbers of all owners who were delinquent. Brown’s legal argument in support of his request was based on the bylaws of his association, which specifically state that the board of directors may post a list of members who are delinquent.
When the association refused to honor any of Brown’s requests, he filed a complaint with the CCOC. This is a governmental agency with authority to adjudicate disputes between homeowners and their associations.
The CCOC referred the matter to a Montgomery County hearing examiner, who concluded that Brown could obtain a report with the names of delinquent owners redacted. Moreover, the examiner denied Brown’s request that the association publicly post a list of delinquent owners. Her reasoning was based on the language of the bylaws, namely that the board “may” post. This, according to the examiner, “left the matter to the discretion of the Board . . . and thus comes within the scope of the business judgment rule.”
That rule – which applies in Maryland and Virginia – essentially means that “courts will not second-guess the actions of directors unless it appears that they are the result of fraud, dishonesty or incompetence,” according to a 1992 Maryland court case. While the District previously rejected that rule, legislation awaiting the mayor’s approval would follow the law in neighboring jurisdictions.
The CCOC rejected the examiner’s recommendation regarding the disclosure of the names of delinquent owners. However, it agreed with the examiner that the association is under no duty to publicly post the names of its delinquent members.
On Feb. 28, this ruling was affirmed by the Maryland court.
Publication of delinquent homeowners’ names is a hot topic in community associations. Proponents of disclosure argue that unit owners who are delinquent will be shamed into bringing themselves current. Opponents say that disclosure is an intrusive invasion of privacy and that the board has other remedies – such as filing liens, lawsuits and foreclosures – to address the issue.
What should a condo board do when faced with a request for the names of delinquent owners? In Maryland – especially in Montgomery – the law is clear. The board must release those names.
However, there are some conditions that a board should impose on itself as well as on the owner receiving the list. First, make absolutely sure that the list is accurate. If, for example, the list says that Mark is delinquent as of the date the owner received the list but Mark paid up before the list was printed, it is an error and Mark could sue the association for libel. Accordingly, the list that the board submits should be dated at least one month before it is provided to anyone. That way, one can correctly state that “as of Feb. 1, Mark was delinquent” in a certain dollar amount.
Next, the owner requesting the list should be asked to sign a confidentiality agreement, consenting not to circulate the names outside the condominium association. This is consistent with the law of this case, namely that the delinquency list does not have to be posted for all to see.
Finally, the board should advise all owners who are delinquent that it is about to provide a list to a requesting owner and then give them a few days to bring themselves current so they can be removed from the list.
The Virginia condo act has language similar to Maryland’s. Maryland law allows the withholding, among other things, of “an individual’s personal financial reports.” Virginia law allows associations to withhold “personnel matters relating to specific, identified persons.” The District’s law is less clear: It merely says that books and records must be made available for examination by owners, and has no language that authorizes any withholding. And the courts in the District, when confronted with an issue that has never been decided before in the city, will often rely on Maryland law.
Delinquent owners clearly will object to any disclosure.
If a unit owner has a legitimate reason for the delinquency, he or she can meet in private with the board (called executive session) and explain the problem. The board can work out a reasonable payment plan, but any such agreement must be reduced to writing and signed by the owner and a board member.
Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. For a free copy of the booklet “A Guide to Settlement on Your New Home,” send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.