Virginia Lawyers Weekly VA Lawyers Weekly
Where a statute provides fees and charges must be authorized expressly by statute or a condo association’s “declaration,” appellee condo association’s annual lot inspection fee is invalid because the fee is not authorized by the declaration and does not relate to common area use.
Overview
“Karey Burkholder and Douglas Thompson Jr., the appellants in this case, are married and “own a home in the Palisades homeowners’ association development. The Homeowners allege that Palisades is violating the Virginia Property Owners’ Association Act, … by imposing assessments on members that fund lot-compliance inspections of every member’s property.
“The Homeowners argue that Code § 55.1-1805 allows such assessments only if expressly authorized in the association’s declaration. They say that Palisades’ declaration lacks that clarity.
“Palisades does not dispute that it uses its members’ assessments to pay for lot-compliance inspections. It says the inspections are needed to ensure that the members’ properties comply with Palisades’ declaration, articles of incorporation, bylaws, and architectural review board guidelines.
“The board of directors of Palisades obtained a legal opinion that using assessments to conduct the inspections is ‘consistent with the express language of the Declaration.’ …
“[T]he Homeowners sued Palisades in Arlington County Circuit Court, seeking to enjoin the association from continuing to use assessment moneys to fund lot-compliance inspections.
“At the close of the Homeowners’ case-in-chief, the circuit court struck their evidence and found for Palisades. The court later awarded Palisades $67,481.68 in attorney fees based on the Act’s fee-shifting provisions in Code § 55.1-1828. The Homeowners appeal.”
Code § 55.1-1805
“Palisades argues at the outset that the Homeowners misunderstand Code § 55.1-1805. Palisades says that the statute applies only ‘to charges imposed on an individual lot and lot owner as opposed to assessments imposed on the community as a whole.’
“Since assessments for lot-compliance inspections are imposed on all the lot owners, and not on the plaintiffs individually, Palisades argues that the statute is irrelevant.
“Palisades cites no precedent for its interpretation, and we reject it.
“Palisades misplaces its reliance on the singular terms ‘a lot or a lot owner’ in the sentence prohibiting assessments for services unrelated to the common area.
“Under Code § 1-227, ‘[a] word used in the singular includes the plural and a word used in the plural includes the singular.’ Thus, applying the predecessor version of that statute, the Supreme Court held in Wolfe v. Commonwealth, 167 Va. 486 (1937), that a defendant who stole five cows could not evade criminal responsibility simply because the statute criminalized the ‘larceny of a cow.’ … (emphasis added). …
“The same principle applies here. Palisades cannot escape the restrictions in Code § 55.1-1805 by imposing an otherwise illegal fee on two or more property owners – or on all the owners – rather than on a single owner individually. …
“[O]ur reading protects residential property owners by prohibiting assessments not expressly authorized in the declaration if the moneys are used to fund items unrelated to the common area.
“Palisades’ construction, by contrast, would permit assessments for all manner of things unrelated to the common area as long as the assessment is imposed on two or more lot owners, or on all of the owners.
“Palisades’ reading would therefore gut the protection the statute affords to a purchaser’s normal investment expectations.”
No express authorization
“[T]he outcome here turns on whether an assessment for lot-compliance inspections is ‘expressly authorized’ by Palisades’ declaration. …We agree with the Homeowners that the phrase ‘expressly authorized’ means what it says. It imposes a clear-statement rule – the ‘legal drafter’ must ‘use clarity of expression.’ …
“Palisades tries to satisfy the clear-statement requirement mainly by pointing to three provisions of the declaration. Article III, § 3(c)(3) empowers Palisades’ board of directors ‘[t]o fix, levy, and collect assessments as provided in Article V.’
“Article III, § 3(c)(5) empowers Palisades ‘[t]o employ, enter into contracts with, delegate authority to, and supervise such persons or entities as may be appropriate to manage, conduct, and perform the business obligations and duties of the Association.’
“And Article V, § 3(a)(viii) allows annual assessments to be used for ‘[t]he implementation, administration, and enforcement of this Declaration, including, but not limited to, court costs and attorney fees.’
“Palisades concludes from these provisions that the declaration ‘expressly authorizes it to impose assessments on its members, employ agents to carry out authorized tasks, and use assessments to enforce the requirements of its Declaration.’
“We agree with Palisades’ characterization as far as it goes.
“But what the declaration does not expressly authorize – what it fails to ‘[c]learly and unmistakably communicate[],’ or to communicate with ‘with directness and clarity,’ … is the authority to use assessments to pay for the lot-compliance inspections at issue. Such authority may well be implied. But it is not express.
“The drafters knew how to expressly authorize specific assessments when they wanted to. For instance, Article V, § 4(b) empowers Palisades to ‘levy a Restoration Assessment upon any Lot whose owner fails to maintain such Lot, as provided in Article VI, Section 2.’
“Article VI, § 2(b) then provides that, ‘[w]hen so assessed, a statement for the amount thereof shall be rendered to the Owner of said Lot, at which time the assessment shall become due and payable and a continuing lien upon such Lot.’
“That express authority to impose a restoration assessment highlights the lack of similar express authority to spend assessment moneys on lot-compliance inspections. Article VI, § 2(b) runs on for a page and a half. But conspicuously absent is any mention of assessments to fund lot inspections to see if the homeowners are breaking any rules. …
“We conclude that imposing assessments for lot-compliance inspections fails the clear-statement test: those assessments are not ‘expressly authorized’ by the declaration.”
Attorney fee
“Because we find that Code § 55.1-1805 prohibits Palisades from imposing assessments to fund lot-compliance inspections that are not authorized by the declaration, Palisades is not ‘the prevailing party’ entitled to ‘reasonable attorney fees’ or costs under Code § 55.1-1828(A).
“Instead, the Homeowners have prevailed and are thus entitled to recover their reasonable attorney fees and costs under that statute.”
Reversed and remanded.
Burkholder, et al. v. Palisades Park Owners Ass’n, Record No. 0187-22-4, Feb. 7, 2023. CAV (published opinion) (Raphael; Athey, dissenting). From the Circuit Court of Arlington County (Newman Jr.). Norman A. Thomas for appellants. William L. Mitchell II for appellee. VLW 023-7-070, 16 pp.
