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Subject
Introduction of Ordinance to amend Section 1-8 of the Rockville City Code entitled "Application of County Law" so as to allow Chapter 10B entitled "Common Ownership Communities" of the Montgomery County Code to apply in the City
Recommendation
Staff recommends that the Mayor and Council: 1) Introduce an Ordinance amending the City Code to allow Rockville homeowner and condominium association residents to use the services of the Montgomery County Commission on Common Ownership Communities, and 2) schedule a public hearing on November 23, 2009.
Change in Law or Policy
Montgomery County Code Chapter 10B established the Commission on Common Ownership Communities (CCOC) in 1991 to support common ownership community boards and property owners. Under Chapter 10B every common ownership community in Montgomery County, excluding those located in municipalities, must register with the County and pay a $3.00 annual fee.
In order for Rockville's common ownership communities to use the Commission's services, the Mayor and Council would need to apply the provisions of County Code Chapter 10B to the City by amending Chapter 1, Section 1-8 of the City Code. An Ordinance for Introduction is at Attachment A. The Mayor and Council are not required to conduct a public hearing but may direct staff to schedule one with the support of two Councilmembers.
Discussion
Background
Montgomery County defines a common ownership community as a development, residential condominium, or cooperative housing project that is subject to a declaration enforced by a homeowners’ association. The Commission on Common Ownership Communities was developed to provide owners, tenants, residents, boards of directors, and management companies with information, assistance, and impartial dispute resolution programs. The 15-member body also provides oversight of common ownership community activities and advises the County Council, County Executive and County Government offices on matters related to common ownership communities.
The Commission’s goals are to:
- Improve the quality of life in common ownership communities,
- Ensure proper establishment and operation of common ownership communities,
- Enhance the value of residential property in community associations, and
- Reduce the number of disputes and encourage informal resolution of disputes.
Attachment B is a memo prepared for the January 12, 2009 Mayor and Council agenda which contains a more detailed description of the CCOC.
When the CCOC was established in 1991, the City was invited by Montgomery County to include Rockville communities under the auspices of the CCOC. The Mayor and Council considered the request and received feedback from a considerable number of common ownership communities in the City that did not support participation, primarily because of the cost. The Mayor and Council decided not to participate but requested that a volunteer organization be created to perform many of the functions of the County’s Commission. A group of volunteers created the Rockville Common Ownership Communities Association (ROCOCA). The group disbanded after five years because of a significant reduction in the number of requests for assistance with disputes and the creation of the City's Mediation Program.
Currently, association boards and property owners facing a conflict are referred to the City's Mediation Program for assistance. If both parties agree to participate, staff arranges a mediation with volunteer mediators. From 2004 through 2008, the Program received seven requests for mediation between a condo/homeowner association and a property owner. In all seven cases, a property owner approached the City for assistance in resolving a conflict with their association. One dispute was resolved through a formal mediation. Five other disputes were resolved informally through communication and assistance from the Mediation Administrator. For the last dispute, the property owner did not appear for the formal mediation meeting.
Since January 2009, five individuals requested assistance to address a conflict with an HOA. In two cases, the property owner decided not to pursue mediation. In one case, the HOA did not accept the invitation to mediate. In another case, the HOA and property owner resolved the dispute on their own. For the final request, the parties have not yet responded to the invitation to mediate.
Rockville's Common Ownership Communities
Based on Montgomery County’s definition, there are currently 58 common ownership communities in the City of Rockville. They represent 7,916 housing units, including single family homes, townhomes and condominiums. A list of the common ownership communities and the number and type of housing units in each is at Attachment C. They range in size from 13 single family units in the Thirty Oaks HOA to 1,287 single family and townhome units represented by the King Farm Citizens Assembly. The table also shows the annual registration fee that would be due to Montgomery County under the FY 2010 adopted fee of $3.00 per unit. The fees due range from $39 for Thirty Oaks to $3,861 for King Farm.
Public Input
Staff gathered input through surveys of property owners and HOA presidents/property managers during the summer of 2009. The surveys asked respondents to weigh in on the value of the services provided by the CCOC and whether they support the Mayor and Council adopting legislation that provides access to the CCOC services for an annual fee to the association. At the time the HOA presidents and property managers were surveyed, the County's proposed CCOC fee for FY10 was $2.75 per unit. At the time of the property owner survey, the County had adopted a fee of $3.00 per unit for FY10.
Property Owner Survey Results
In August 2009, staff posted a survey on the web to gather input from property owners in HOAs. We received 99 responses to the property owner survey from owners in 19 of the 58 associations in Rockville. The results are summarized below and all results and comments are presented in Attachments D and E.
| Response | Number of Responses | Percent of Responses |
| The Montgomery County Commission on Common Ownership Communities (CCOC) provides education, information and technical assistance on topics such as architectural control, condominium elections, and rights and responsibilities of property owners. Would you find this type of information useful? |
| Yes | 69 | 70% |
| No | 21 | 21% |
| No Response | 9 | 9% |
| The commission manages disputes between two or more parties that involve the authority of a governing body under the laws and documents of an association. Do you think that dispute resolution services through the commission would be useful for property owners in your association? |
| Yes | 63 | 64% |
| No | 25 | 25% |
| No Response | 11 | 11% |
| Would you support the Mayor and Council adopting legislation that provides access to CCOC services at a cost to your association of $3.00 per unit annually? |
| Yes | 54 | 55% |
| No | 36 | 36% |
| No Response | 9 | 9% |
70% and 64% of property owners reported that they would find value in the educational/technical assistance and dispute resolution services provided by the CCOC, respectively. Of the 99 property owners responding, 55% support adopting legislation to provide access to CCOC services for a fee, 36% do not support adopting legislation and 9% did not respond. These results are in line with the feedback received from HOA presidents and managers.
Each survey question provided space for additional comments. Some of the written comments express residents' satisfaction with the current practices of their association boards and dissatisfaction with legislation that will create "another layer of bureaucracy." Other comments indicate that residents who have experienced conflict or frustration with their association boards welcome a new source of advice and dispute resolution. Some comments noted the court costs that could be avoided by having the CCOC as a resource. In terms of the CCOC annual fee, comments ranged from "that's absurdly cheap" to "my condo fee is high enough already."
In addition to the survey results, City staff received phone calls or e-mails from 13 residents since the beginning of 2009 expressing a need for the CCOC's services and support for Rockville participating in the program. Two individuals attended Mayor and Council Drop In to share their thoughts. Residents contacting staff generally report feeling that the association board treated them unfairly. They express frustration with the fact that they cannot access the CCOC services, and feel that they do not have anyplace to go for help and cannot afford the time and/or money to go to court. They also express feeling powerless because they don't have the resources typically available to association boards, such as attorneys and professional property managers.
HOA and Condo Association Survey Results
In July 2009, staff shared with the Mayor and Council the results of a survey distributed to the presidents and property managers of homeowner and condominium associations. The results are summarized again in the following table.
| Response | Number of Responses | Percent of Responses |
| Would educational programs and technical assistance offered by the Commission on Common Ownership Communities (CCOC) be useful to your board and property owners? |
| Yes | 17 | 68% |
| No | 6 | 24% |
| No Response | 2 | 8% |
| Do you feel that the commission’s dispute resolution services would be useful to your community? |
| Yes | 14 | 56% |
| No | 8 | 32% |
| No Response | 3 | 12% |
| Would you support the Mayor and Council adopting legislation that provides access to CCOC services? |
| Yes | 14 | 56% |
| No | 8 | 32% |
| No Response | 3 | 12% |
Based on additional comments submitted, respondents who do not support adopting legislation indicated that the board and property owners have been able to resolve disputes through processes outlined in the association bylaws, and communication and coordination with the property owner. Those respondents do not feel that the cost to participate is worthwhile because existing dispute resolution practices have worked.
Benefits of Participating in the CCOC
1) The Commission promotes an equitable ‘balance of power’
Montgomery County Code Chapter 10B states that “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. Owners and residents in these common ownership communities are in effect citizens of quasi-governments, which provide services in lieu of government services, levy assessments, and otherwise have a significant impact on the lives and property of owners and residents.”
The Commission on Common Ownership Communities was created to promote an equitable balance between the powers of governing bodies, owners and residents through regulation, education, and dispute resolution services. If the Mayor and Council amend the City Code, Rockville’s 58 common ownership communities and their residents would have access to non-voluntary dispute resolution, information and support from experts in the field of common ownership communities.
2) The Commission’s dispute resolution process is not voluntary and is enforceable
The Commission’s program provides an enforceable means of conflict resolution regardless of whether both parties in the dispute have agreed to participate. In contrast, Rockville’s Mediation Program is voluntary. If either party in the dispute chooses not to participate, a mediation is not held and the case is closed.
The Commission schedules a mediation session even if only one party has expressed interest in mediation. If a party does not cooperate with a Commission attempt to mediate, a hearing is scheduled. If any party does not appear at the scheduled hearing, the hearing panel may order any relief to another party that the facts on record warrant.
While City staff follows up with mediation participants, the City of Rockville does not enforce agreements reached in mediation. A dispute brought to the CCOC and settled by mediation agreed to by the parties is binding, has the force and effect of a contract, and may be enforced accordingly. In addition, the decision of a hearing panel is binding on the parties and may be enforced by the Commission.
3) The Commission's dispute resolution process provides an alternative to going to court
If a party in a conflict is not open to mediation or mediation is not successful in resolving a conflict, Rockville associations’ and property owners’ only other option is to go to court. The cost to take a dispute to court prohibits some residents from ever resolving a dispute. The Commission's non-voluntary and enforceable approach to dispute resolution helps both associations and property owners to avoid the costly and time-consuming process of going to court.
4) There is no cost to the City to opt in to the Commission’s program
Opting in requires that the Mayor and Council adopt an ordinance amending Chapter 1 of the City Code to apply the provision of County Code Chapter 10B to the City. Common ownership communities would then be required to pay the annual registration fee of $3.00 per unit for FY10.
Disadvantages of Participating in the CCOC
1) Registration and payment of the annual fee is mandatory for all HOAs and condominium associations
Montgomery County Code Chapter 10B is written to require every homeowner and condominium association to register with the County, pay an annual fee and have access to the Commission's services. Under Chapter 10B an association cannot choose to not participate. The County's goal was to ensure that all HOA residents could access the CCOC, rather than relying on HOA boards of directors to choose to participate in the CCOC. If the Mayor and Council adopt an ordinance to amend City Code to allow access to the CCOC, the requirement that all associations participate and pay the fee will apply.
An additional fee may not be well received by some association leaders and individual property owners. Given the 7,916 units in Rockville, the total amount that the County would collect from common ownership communities in Rockville under the current $3.00 per unit fee equals $23,670. Fees per community would vary significantly due to the range of sizes of common ownership communities in Rockville. Attachment C shows the fees per association.
2) The demand for the Commission’s service and value for the investment is unclear at this time
It is difficult to predict how many disputes will be brought to the Commission by Rockville associations and property owners. While some conflicts have been brought to the City’s attention, the extent of the demand for this type of service is not clear. Association leaders and property owners who have not experienced conflicts in their communities or who do not foresee using the services may feel the value is not worth the expense.
Comments from Montgomery County
Staff has maintained communication with County staff throughout the Mayor and Council's discussions of the CCOC. County staff reports that the Commission on Common Ownership Communities is pleased that Rockville may participate. They are happy to provide the Mayor and Council with additional information or answer questions as you consider whether to adopt the Ordinance.
If the Mayor and Council adopts the Ordinance, the CCOC will send a letter to each common ownership community board of directors welcoming them and informing the leadership that they need to register with the County and pay the annual fee. As soon as the association is registered, the board and property owners can use the Commission's services.
The Commission will ask the boards of directors and management companies to forward information about the CCOC's services to all property owners in the association. The Commission is also considering holding an information session for Rockville association residents to introduce the services now available. The City will also use our communication resources to notify residents.
Mayor and Council History
The Mayor and Council initially considered adopting County Code Chapter 10B when the County created the CCOC in 1991. After gathering input from HOAs and condominium associations, the Mayor and Council decided not to participate.
Following an inquiry from two Rockville residents in 2008, the Mayor and Council requested additional information about the CCOC and received a briefing on January 12, 2009. The Mayor and Council directed staff to gather input from common ownership communities on the value of and interest in participating in the County's program. The results of a survey of association presidents and managers were presented to the Mayor and Council on July 13, 2009. Staff was directed to seek input from property owners in common ownership communities as a next step. Those survey results are summarized in this agenda item and provided in full at Attachments D and E.
Options Considered
The Mayor and Council has two options regarding legislation:
1) Adopt an ordinance to require associations to register with the County, pay an annual fee and access the services of the CCOC; or
2) Not adopt an ordinance and continue excluding all Rockville HOA/condo residents from accessing the CCOC services.
Staff recommends adopting legislation in order to provide an additional resource for a minimal cost. Investing in this resource provides something akin to insurance. Most residents will never need the services, but adopting legislation will ensure that the resource is there for any association board or property owner that finds themselves in need of assistance. The resource is particularly important to help parties in a dispute to avoid going to court. The County's registration fee is $3.00 per unit and is paid by the HOA/condo association annually. Staff expects that fee to be passed on to property owners through the annual HOA/condo association fee. While staff is sensitive to the difficulties residents face in this economy, the fee represents a nominal cost for the "insurance" provided.
The Mayor and Council has two additional options regarding process:
1) Introduce and adopt an ordinance to amend City Code Chapter 1, Section 1-8 without a public hearing or
2) Introduce an ordinance followed by an advertised public hearing prior to adoption.
Input from two community surveys indicates that a slight majority of respondents support the Mayor and Council adopting legislation that provides Rockville HOA/condo associations access to the CCOC. Among association board presidents and managers, 56% support legislation. Among association property owners, 55% support legislation. More formal input via a public hearing is recommended given the slight majority expressing support, the limited number of individuals responding to the two surveys, and the fiscal implications for associations. Seeking as much public input as possible is also important since individual associations and individual property owners do not choose whether to participate, rather by adopting the legislation the City is binding all associations to the County requirement to register and pay the fee.
Public Notification and Engagement
In June 2009, staff engaged homeowner and condominium association representatives through a survey about the value of CCOC services. In August 2009, staff posted a survey on the City's web site targeting property owners in common ownership communities. An invitation to complete the survey was sent to all common ownership community boards to transmit to their residents via e-mail listserves, web sites, newsletters and other postings. Information about the survey was also posted on the front page of the City web site and on Rockville Central.
Fiscal Impact
There is no fiscal impact for the City government associated with amending City Code Chapter 1, Sec. 1-8 to adopt County Code Chapter 10B. If the Mayor and Council amends the City Code, all common ownership communities will be required to register with the Commission on Common Ownership Communities and to pay an annual fee of $3.00 per unit.
Next Steps
Staff recommends the following tentative schedule of next steps:
1) October 12: Introduction
2) November 23: Public Hearing
3) December 7: Discussion & Instruction
3) December 14: Adoption
Attachments
  
 
City Manager:
Scott Ullery, City Manager
Approved on: 10/05/2009
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