Virginia Lawyers Weekly

A second lawsuit challenging the actions of a community homeowners’ group in Virginia has been dismissed. U.S. District Judge Norman K. Moon ruled that evidence did not support charges of racketeering and extortion against the Dogwood Valley Citizens Association.

The Aug. 28 decision followed a two-day bench trial in June at the U.S. District Court in Charlottesville. The case is Miller v. Dogwood Valley Citizens Ass’n Inc. (VLW 008-3-328).

Despite a litany of court decisions ruling that the DVCA was not a “property owners’ association” under the Virginia Property Owners’ Association Act and had no power to impose special assessments, the DVCA allegedly persisted in efforts to force residents to contribute for road maintenance and other common needs.

Those efforts amounted to racketeering and extortion under the federal RICO statute, according to the plaintiffs, a group of disgruntled Dogwood Valley property owners. Moon held, however, that the DVCA “legitimately believed it had a claim of right to the special assessments” that it levied. That belief, he ruled, defeated the claims of extortion and racketeering.

“[T]he evidence clearly establishes that Defendants simply tried to collect the monies necessary to maintain the roads and common areas as required by the deeds of declaration and the DVCA bylaws,” Moon wrote.

The resolution of the Miller lawsuit would seem to offer little help for Dogwood Valley residents still driving over poorly maintained gravel roadways. Moon held that the DVCA has the authority, based on a 1968 deed of dedication, to collect annual assessments or “road fees” of $15 per lot. Larger “special assessments” have been disallowed by the courts, however. Moon noted the January decision of the Virginia Supreme Court that the DVCA was not a valid POA and did not have the duty to maintain roads or common areas because the deeds of dedication did not impose that duty.

The Dogwood Valley decision marked the second recent victory for homeowners’ groups facing challenges based on monetary assessments. Moon’s opinion came just days after Frederick County Circuit Judge John R. Prosser upheld the validity of the property owners’ association at the large Lake Holiday development near Winchester.

At Lake Holiday, a few landowners objected to paying fees because they weren’t getting the same services as other owners, including water and sewer. The lawsuit asked the court to declare that the community’s property owners’ association was not a statutory POA and had no legal authority to impose or collect assessments.

The plaintiffs claimed that inconsistent language in the deeds to the approximately 2,700 lots at Lake Holiday invalidated the POA under the Virginia statute.

Granting the defendants’ demurrer, Prosser reportedly cited decisions by fellow Frederick County Circuit Judge John B. Wetsel Jr., who in 1998 appointed a receiver to handle Lake Holiday operations. Wetsel apparently never questioned the statutory authority of the Lake Holiday Country Club, which serves as the property owners’ association at the community.

The Lake Holiday case spawned legislation to establish the validity of property owners’ associations at communities where development took place in stages. Sen. Jill H. Vogel, R-Winchester, said that, even though her bill was abandoned in committee in July, she intends to pursue her effort in the 2009 session.

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