The president of the Columbia Association on Wednesday acknowledged that a failed bankruptcy case played a role in the corporation’s decision to probe changing its legal status.
The CA last month announced it would ask its board of directors to approve approaching state lawmakers to file legislation to change its status from “home owner’s association” to “community benefit association.” President Milton Matthews during a February press briefing said the decision was to avoid so-called onerous HOA regulations that should not apply to an association of its size.
But Matthews during the board meeting Wednesday said a failed bankruptcy case “could put an impact” on the corporation’s overall budget, prompting him to look into quickly introducing legislation to subvert the unknown repercussions of the case.
A commercial property located on Little Patuxent Parkway filed for bankruptcy in September 2017, and a judge approved its sale for $5.275 million to be paid to debtors and lien holders.
Because the final sale price was not enough to cover what was owed to the First National Bank of Pennsylvania, the CA was not able to recoup the $70,744 it sought in unpaid fees and charges accruing over several years, court filings show. A judge disagreed with CA lawyers who argued it should receive priority in payment distribution over the bank.
Edward J. Levin, a Baltimore-based attorney who followed the bankruptcy case, in a statement said, “There may be other reasons that the Columbia Association is interested in promoting community benefit associations in Maryland.”
“But I suspect that an important reason for the proposed bill is to establish the Columbia Association assessments as having a first-priority position” in collecting liens, Levin said.
Matthews in a statement acknowledged that changing its legal status would help the CA “maintain the lien priority status.”
Matthews, however, said the process to consider legislation “began before CA knew what the outcome of the court case would be.”
“Once the verdict was rendered in late January 2019, I approached the board about speeding up our efforts, and we learned from our contacts in Annapolis that it was still possible to get this done in the 2019 legislative session,” he added.
During a contentious Wednesday meeting, Matthews said he had a “fiduciary responsibility as the president” to quickly pursue filing legislation.
“I felt that if I had not done that, I would be remiss at doing my job,” he said.
An audience member asked Matthews why the process needed to be “secret.”
CA representatives have had at least three closed-door meetings since October to discuss the legislation.
“Everyone knows banking lobbyists out there are huge. I did not want to put on front and center what we were trying to do,” Matthews said.
Keeping it hidden from banking lobbyists inadvertently kept it hidden from residents, the same audience member responded.
“I acknowledge that fully,” Matthews responded.
Last year, 16 bills amending or creating new requirements for HOAs statewide were proposed. The CA lobbied for exemptions or amendments to 11 of them because of their potential impact.
A spokesman for the CA in a press release said the board of directors would “continue their conversation in 2019 regarding recognition as a community benefit association in order to request filing the bill when lawmakers return to Annapolis in 2020.”
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This story was updated with information about a failed bankruptcy case.