(Aug. 29, 2019) Looking to hit the ground running, newly elected Ocean Pines Association Board of Director members Tom Janasek, Larry Perrone and Camilla Rogers attended an hours-long informational session at the Beach Club on 49th Street in Ocean City on Monday.
OPA legal counsel Jeremy Tucker opened the session with a crash course in homeowner association guidelines and OPA-specific governing documents.
Tucker said the OPA was legally established through covenants, which include automatic membership in the association when property is purchased and an obligation to pay annual assessment fees.
Although people in arrears on assessment payments may plead ignorance regarding their financial obligations, Tucker said those claims lack legal merit.
“I think most people buy into Ocean Pines knowing the benefits,” he said.
The OPA Board of Directors oversees covenant enforcement, most notably related to individual property maintenance issues or violations of use restrictions, Tucker said.
“We, as the board, cannot change covenants,” he told the new directors, adding that changes to governing documents require a majority vote of property owners.
Ocean Pines is a common interest community, he said, and is organized through its Declaration of Restrictions, underneath which comes the OPA Charter, followed by bylaws that are further delineated by rules and restrictions.
To qualify for tax-exempt status, Tucker said the OPA is designated a 501C4, which mandates common areas and facilities are open to the general public.
Tucker said the OPA is regulated by federal, stare and county codes, which for the former includes meeting requirements for the Americans With Disabilities Act and the Fair Housing Amendments Act.
The federal legalities often involve limiting an HOA’s ability to restrict architectural modifications requested by a resident with disabilities.
“We have to allow modifications or accommodations to our rules,” he said.
Tucker said if a property owner, in light of a physical disability, required a lift or ramp to gain access to his or her residence, the OPA would have to grant the request.
“The premise under the FHA Act is equal use,” he said. “Everybody gets equal use regardless of their disability.”
At the state level, Tucker said Maryland HOA law restricts the ability to prohibit placement of solar panels on an individual property.
“We can adopt reasonable rules regarding placement,” he said.
For example, Tucker said, an HOA could limit placement to a back yard or other designated yard area if the rules did not interfere with solar collection.
Although the board of directors is granted overall control of the OPA, Tucker said the general manager’s position has hands-on management duties.
“The bylaws specifically delegate the general manager a significant amount of authority,” he said.
Tucker said the intent of outlining specific duties and powers for the general manager is to avoid micromanagement by board members.
“Each side has its own responsibilities,” he said.
In answer to questions regarding the merits of maintaining the OPA’s tax-exempt status, Tucker said while abandoning the course would allow restricting non-resident membership, the cost could be substantial.
“The money that we make from the restaurant is tax exempt and you would lose, potentially, all that revenue from the outside memberships,” he said
Worse still, Tucker said budget ledgers would be tilted far askew, likely requiring less-than-palatable alternatives.
“The net effect … your assessments would skyrocket,” he said.
Without the 501C4 qualifications, Tucker said only homeowner assessments would remain tax exempt.
“There’s a number where it might make sense [but] if you limit who comes in, at what point do you start losing significant money and your operating costs are still the same?” he said.
Janasek estimated nonresident pool usage is in the single-digit percentiles, while noting that dropping the tax-exempt status would permit restricting their presence from further overcrowding the aquatic facilities.
While the IRS does permit HOAs to charge slightly different rates for non-residents, Tucker said there are limits.
“It cannot be something that can be seen as a deterrent by the IRS,” he said.
Future fees adjustments could be examined in more detail, Tucker said.
OPA President Doug Parks said while the issue is worthy of discussion, the percentages for user groups would have to be established first.
Tucker said the OPA Code of Ethics is more restrictive than state laws regarding board members’ potential conflicts of interest.
The general rule under Maryland law is a contract is not voidable due to a conflict of interest if the involved party does not cast the deciding vote.
“Directors should be able to take advantage of their connections, as long as it’s disclosed,” he said.
Despite the legal wiggle room provided at the state level, Tucker said the OPA rules prohibit a board member from making a recommendation if he or she has a material interest.
“This is to eliminate any appearance of favoritism,” he said. “If there is a conflict of interest, you cannot participate in the conversation, unless recommending not using.”
Tucker said the OPA Directors Code of Ethics also includes a provision that prohibits board members from directing association employees unless agreed to by the entire governing body.
This is meant to prevent employee confusion by having various managers and officers giving different directions.
“There’s a difference in calling to notify and calling to instruct,” he said.