We’ve performed a careful review of the proposed governing documents, and there is one obvious conclusion: the documents as proposed are bad for just about every member, unless you are M & S or a future member of the Covenants Committee. There are 6 areas where the proposed documents hurt nearly every member:
- Assessments
- Easements
- Amendment
- Adding Land
- Rights & Protections
- Restrictions
Never forget that if your home or lot is a property at Lake Holiday, it is part of the Submitted Land and is covered by these governing documents.
ASSESSMENTS
The proposed documents empower the board to accelerate the due date on your assessments if you fall behind on 2 monthly payments (Declaration pg 57). That means if you miss just 2 monthly payments, the Board has the ability to demand payment of the entire assessment for the whole year. We think that demanding payment of nearly an entire year’s worth of assessments is mean-spirited. Imagine you are a homeowner who mistakenly falls behind on your first 2 monthly assessments of the year. Then, you show up at the Association office to pay the past due balance. The proposed documents empower the Association to respond: Sorry, buster, you now not only have to pay for those 2 months – but you have to pay the entire year – in advance. You’ve been accelerated! That’s over $1000 for you to pay in a lump sum, over and above the dues for 2 months. If you don’t pay, you’ll be hit with late fees, interest, liens, and attorney’s fees. Acceleration is simply too harsh and is not allowed under the current governing documents.
If acceleration were not bad enough, the proposed documents authorize Individual Assessments (Declaration pg 23). These assessments may be for:
the amount of any charges imposed on that Owner….
Individual assessments allow the Board to send just you a bill for any charge without any limit. When assessments can be made individually, there is simply too much room for abuse. If general assessments rise too much, you and your neighbors suffer equally. But if an assessment is made to you individually, your neighbor has nothing to complain about. The political process is in an important tool to keep assessments in check by uniting owners with shared concerns. Individual Assessments short circuit that process.
For owners of multiple lots, the Association wants to dramatically expand its power to lien your properties. Right now, liens apply to the lot which was originally assessed. But the Association wants to expand the scope of its liens to every lot owned by you, even to lots you purchased after the original assessment was made (Declaration pg 57). This is over the top.
The Association’s also wants to expand the scope of its lien authority to people who were not even owners when the charges for which a lien is sought were made. Under the proposed Declaration, a buyer is responsible for some of the obligations of the seller (Declaration pg 25). This will make it much harder to sell every property at Lake Holiday. What buyer will want to accept liability for obligations that occurred before his purchase? Buyers will be bothered by this and will simply look elsewhere.
EASEMENTS
The proposed declaration causes you to grant easements to M & S and to the Association over and through your lot – without any compensation. The easement being granted by the proposed governing documents is over every lot in the Submitted Land (Declaration pg 13). Remember, that includes your lot. M & S shall have a:
nonexclusive blanket easement over and through the Submitted Land….
The easement granted to the Association is slightly broader, and it’s assignable, which might make it possible for the Association to grant others easements over and through your property. These are not utility easements, which are provided for separately, and are not restricted to certain areas of your property, as utility easements are. They are blanket easements over and through all of your lot. They are blanket easements to facilitate development and apply to such things as storage of building materials and equipment. Why does the Association feel it is necessary to grant an easement over and through every lot in the subdivision, many of which are in nearly completely developed sections, to facilitate development in just a few sections? Why should you as an owner in Section 2 or Section 8A, for example, grant an easement without compensation to M & S to facilitate development in Section 12, which is nowhere near your property? And if easements to facilitate development are truly important, why are they granted to only one party other than the Association?
AMENDMENT
The proposed governing documents dramatically reduce the number of members required to make changes to the documents. For simplicity, let’s say that there are approximately 1400 members paying dues and current on those obligations. Under the existing Articles of Incorporation, the approval of more than 67% of these 1400 members are required to change this important document. That means 939 votes would be required to pass an amendment. But under the proposed Articles of Incorporation, only a majority of the votes actually cast would be required to make any change (Articles pg 12). Since the quorum under the proposed documents is only 20% of eligible members (Bylaws pg 3), or 280 of the 1400 eligible members, only a majority of the quorum – or 141 votes – is required to make major decisions. If a meeting is called and the 20% quorum is not reached, a majority of those in attendance may vote to reduce the quorum to 15%, which means this 141 votes could drop to as little as 106. Is it reasonable to allow 106 votes to make important changes to governing documents – when M & S and its affiliated builders control nearly this many, if not more, votable lots?
These documents as proposed have reduced your voting rights when compared to earlier drafts. The safeguard that members were guaranteed a right to vote on material amendments has been removed entirely from earlier versions. In drafts of the proposed declaration from 2005, the section on amending the declaration contained language that gave members facing material changes to their property rights an absolute protection:
Any Material Amendment or Extraordinary Action must be approved in writing, or at a meeting duly called for the purpose of approving the Material Amendment or Extraordinary Action, by Owners….
But this entire section (which was 15.3) has been stricken from the document currently being proposed for a vote. What we are left with is that a mortgagee receives this absolute protection, but you as an owner do not (Declaration pg 60). In the same section, M & S receives an absolute protection that its rights can not be diminished without its prior consent. But you along with every other dues-paying owner have been deleted. Enough is enough; that is not right.
ADDING LAND
By approving these proposed changes to the governing documents, you’ll be adding large parcels of land to Lake Holiday. The proposed declaration makes all of the real estate owned by M & S part of the Submitted Land (Declaration pg 2). Take a look at the map below (if you click on it, it will expand for better viewing). All of the land in bright red is not covered by any of the 17 deeds of dedication for Lake Holiday, but is real estate owned by M & S.
If the proposed declaration is approved, this land will become part of the Lake Holiday subdivision. It totals over 300 acres. If resources like the lake or utility infrastructure are fixed or constrained, will adding 300 acres and the hundreds and hundreds of homes they could bring help existing property owners? As an existing property owner, you have to stop this from happening.
RIGHTS & PROTECTIONS
The proposed documents create “haves” and “have nots.” Unfortunately, most members are in the “have not” group. The proposed declaration creates “special rights” for M & S unavailable to most members (Declaration pg 20). For example, M & S and owners in undeveloped sections can post “For Sale” signs, but owners in other sections can not. Signage is a very important tool to sell real estate. If it is acceptable for a builder or homeowner in Section 8A to use a “For Sale” sign, why is not acceptable for his neighbor in Section 4A to do the same? Many streets, such as Lakeview Drive, have homes side by side that are in different sections. One of these homeowners might be able to post a “For Sale” sign – but his neighbor might be prohibited from posting such a sign. Weren’t we told that we needed to revise the governing documents to remove conflicting provisions? These documents create conflicts.
Signage is not the only example of unequal treatment. M & S can re-subdivide and combine lots but other members can not (Declaration pg 30). Under the proposed declaration, M & S can appoint 2 of the 5 members of the Initial Construction Subcommittee (Declaration pg 42). How will small builders fare when 2 of the 5 votes on this important subcommittee are controlled by their competitor? The rights of M & S can not be diminished without its consent, but that protection does not apply to other members (Articles pg 12). Under the proposed governing documents the Board will have the power to assess “Road Use Fees” payable by homeowners undertaking remodeling projects and some builders, but those doing construction work in M & S sections will be exempt from this Road Use Fee (Declaration pg 24). This will make homeowners who remodel and small builders pay for road use, but the large volume of construction traffic in sections owned by M & S will be exempt from this fee.
One of the most troubling issues in the proposed documents is that they allow conflicts of interest (Bylaws pg 13). An Officer or Director of the Association is not
liable to the Association or any Owner…for any loss incurred by the Association…, nor shall any such Director or Owner be accountable for any gains or profits realized therefrom.
How is it a good thing to allow conflicts of interest for Officers and Directors, or to say that an officer or director should not be accountable? Should Officers and Directors with conflicts of interest not be liable and not be accountable, particularly when the Association suffers a loss? Just who is this provision trying to protect?
The proposed governing documents want to take away a number of important voting rights. Your right to vote on the sale of common property and allowing the Association to incur debt (Articles pg 11) will be removed if the proposed changes become effective. The Association even makes changing your mind impossible. Under the proposed documents, an absentee ballot, once submitted, may not be retracted or revoked (Bylaws pg 5). If these proposed documents are approved, prospective buyers of property at Lake Holiday might just change their minds – while they still can.
RESTRICTIONS
The proposed governing documents contain a number of restrictions, each of which is small, but add up to a placing serious constraints on how single family homeowners use their property. For example, you won’t be able to lease you property for less than 6 months (Declaration pg 38), and you won’t be able to have more than 3 pets of certain types (Declaration pg 35). As one member observed to us recently: “I bought a single family home here. I didn’t buy a condominium.” The documents also propose to restrict a member from using common area – such as the lake itself – if that member is not in compliance (Declaration pg 56). The proposed declaration also wants to empower the board to create limited common areas (Declaration pg 18) that would be off-limits to some members. In other words, there might be a big “Keep Out” sign with your name on it blocking you from using some of the common area that you paid for and presently enjoy.
But what if you’re lucky enough to be a future member of the Covenants Committee or Initial Construction Subcommittee? Get ready for your paycheck! The proposed declaration authorizes the Board of Directors to compensate members of these committees (Declaration pg 43). Don’t be fooled by the half-hearted provision contained in the proposed documents (Bylaws pg 14) that officers and directors can not be paid a salary. It includes this important out:
this provision shall not preclude the payment of salary or other compensation for the performance by such Director or Officer of other services to the Association….
Since Directors can serve on the Covenants Committee, this is a direct mechanism to pay directors, something that is contrary to the current governing documents.
WHAT SHOULD WE DO ABOUT ALL OF THIS?
These proposed documents are simply not in character with the current governing documents. Most current deeds of dedication are just a handful of pages; the deed of dedication for Section 8A, for example, totals only 7 pages. The newly proposed deed of dedication is 72. If this dedication is approved, it would be attached to your deed and would be part of the permanent land records of Frederick County. We think making these drastic and negative changes will have a negative impact on property values at Lake Holiday. How will prospective property buyers react when handed almost 120 pages of rules and regulations?
The existing governing documents are not defective, and some of them were revised in the relatively recent past. The existing Articles of Incorporation were amended in 1999, and the Bylaws were amended in 2000. We need to send a clear message to the Board to stop wasting our money paying lawyers to revise documents that take away our property rights. We need to stop these proposed documents now.
We urge you to sign our proxy to vote NO on these documents and put an end to this nonsense.
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