A Maryland condominium board of directors’ approval of a $1.2 million contract to update the fire alarm system was invalid where the board did not provide proper advance notice to unit owners, according to a recent decision of the Maryland Court of Special Appeals.
Although neither the condominium bylaws nor the Maryland Condominium Act expressly required notice of a special board meeting be given to unit owners, the appeals court ruled that it is implicit in the open meeting requirements of the Condominium Act that owners be provided with the same notice which the bylaws require to be provided to the directors.
Implied Notice Requirement. In Willoughby Condominium of Chevy Chase v. Dillin, the condominium bylaws provided that 3 business days’ notice of a special meeting of the board must be provided to the directors, but did not require notice to all unit owners. On a Tuesday morning, the condominium posted notice of a meeting scheduled for Thursday at 6 PM on the lobby bulletin board and the condominium association’s website. After the contract was approved by the board, the action was contested by a unit owner who filed a complaint with the Montgomery County Commission on Common Ownership Communities (CCOC), contending that insufficient notice had been provided to unit owners and that the upgrade to the fire alarm system was an “improvement” to the common elements which required approval of the unit owners.
The CCOC hearing panel concluded that the Maryland Condominium Act regarding meetings of the “council of unit owners” required 10 days’ notice to unit owners before a special board meeting. It also agreed that the alarm system upgrade was an “improvement” which the board was not authorized by the condominium bylaws to approve without the approval of a majority of the unit owners of the 815-unit condominium.
In a decision of the Maryland Court of Special Appeals issued nearly 3 years after the disputed board meeting, the court noted the Condominium Act provided that notice of special board meetings shall be given as provided in the condominium bylaws, which required 3 business days’ notice to each director but did not address notice to the unit owners. In light of the statutory requirement that board meetings generally must be open for unit owners to attend and provide comments, the appeals court determined that “it only makes sense that the Board was required to provide to unit owners the same three business days’ notice that the bylaws required providing to the Board members.”
In computing the required notice, the court noted that both Maryland statute and common law exclude the day the notice is provided. Therefore, because the notice provided on a Tuesday morning for a board meeting held on Thursday evening was 1 day short, the board action to approve the fire alarm contract was invalid.
Although not at issue regarding the disputed contract, the appeals court also noted that the bylaw provision which allowed for action without a meeting (if the action is approved by written consent of the board members) is “likely in conflict” with the open meeting requirements of the Maryland Condominium Act.
Repair or Improvement? The proposed upgrade to the fire alarm system included a change in the appearance of the building hallways by the installation of vertical pilasters encasing electric wires. The owner who contested the alarm contract contended that only the pilasters were an “improvement” which must be approved by the unit owners, and conceded that the other components of the updated alarm system were a “repair”.
Noting that it was “puzzled by the CCOC’s cursory, two-sentence conclusion that the entire project constituted an improvement”, the Court of Special Appeals stated that it was not persuaded that the pilasters constitute an “improvement” requiring unit owner approval. It further suggested that pilasters might be better considered part of the overall “repair” of the alarm system to comply with the Montgomery County Fire Safety Code. However, the appeals court did not decide if the pilasters are an “improvement” or a “repair”, but instead instructed that the condominium board first consider the issue since the alarm contract would have to be further considered after proper notice of the board meeting where action is taken.
Additionally, the court noted that it did not make “practical sense” to require unit owner approval for a regulatory upgrade that the owners are legally obligated to comply with, especially when board decisions that are taken in good faith would generally be shielded under the “business judgment rule”.
Although the decision of the Court of Special Appeals is “unreported”, and therefore not a binding precedent, it is instructive for condominiums, homeowners associations and housing cooperatives regarding board meeting procedures and changes to common property.
Posted by Thomas Schild Law Group, LLC which represents condominiums, homeowner associations, and housing cooperatives throughout Maryland (including Montgomery County, Prince George’s County, Howard County, Frederick County, and Baltimore) and Washington, D.C.