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Pot-Nets Lakeside, LLC v. Lakeside Comm. Homeowners Assoc., Inc.

Superior Court of Delaware

July 17, 2017

Pot-Nets Lakeside, LLC.
v.
Lakeside Comm. Homeowners Assoc., Inc. Pot-Nets Lakeside Salaries & Wages 07/01/14-06/30/15 07/01/15 -06/30/16 Increase Pot-Nets Lakeside Repair & Maintenance 07/01/14-06/30/15 07/01/15 -06/30/16 Increase Pot-Nets Lakeside Salaries & Wages 07/01/14-06/30/15 07/01/15 -06/30/16 Increase 07/01/14-06/30/15 07/01/15 -06/30/16 Increase

          Brian S. Eng, Esquire Community Legal Aid Society, Inc.

          Michael P. Morton, Esquire Nicole M. Faries, Esquire David C. Zerbato, Esquire Michael P. Morton, P.A.

          E. Scott Bradley Judge

         Dear Counsel:

         This is my decision on Appellant Pot-Nets Lakeside, LLC's appeal of Arbitrator Ronald L. Stoner's decision that the Appellant had not proven that it was entitled to a rent increase of $33.74 per month based on a $64, 791 increase in salaries and wages and a $108, 389 increase in repair and maintenance for the fiscal year ended June 30, 2016, at the manufactured home community known as Pot-Nets Lakeside, located in Long Neck, Delaware. Appellee Lakeside Community Homeowners Association, Inc. is the homeowners association for those manufactured home owners who lease lots from the Appellant in Pot-Nets Lakeside. Appellant provides all of the property management infrastructure and services which support the operation and maintenance of Pot-Nets Lakeside. Tenants in Pot-Nets Lakeside have access to a number of on-site amenities, including a community center, gazebo and pavilions, a swimming pool, conservation areas and nature trails, a fresh water lake and other recreational amenities. Tenants in Pot-Nets Lakeside have unrestricted access to facilities located in five other Pot-Nets communities, including additional swimming pools, boating facilities and beach access. Tunnell Companies, L.P. employs the workers that do the work in the six Pot-Nets communities. The cost of work done is "charged" to each community based on the actual amount of work done in that community.

         Appellant wanted to increase the 2017 monthly lot rent because it had experienced an increase in operating and maintenance expenses in the 2016 fiscal year compared to the 2015 fiscal year. Appellant sent out the required notice of the rent increase to all affected tenants on October 4, 2016. Appellee filed a petition for arbitration on October 27, 2016. The Delaware Manufactured Home Relocation Authority appointed Ronald L. Stoner as the Arbitrator. The arbitration hearing was held on January 23, 2017. The Arbitrator issued his written decision on March 11, 2017. The Appellant then filed this appeal.

         The Arbitration Hearing

         Five witnesses testified at the arbitration hearing - Robert W. Tunnell, III, Cameron Marcelle, Carol Hastings, CPA, David Doane, CPA, and Elisabeth Greenwalt. Tunnell, Marcelle, Hastings and Doane testified for the Appellant. Greenwalt testified for the Appellee. Tunnell is part owner of the entity that owns Pot-Nets Lakeside. Marcelle is a certified arborist for Tunnell Companies, L.P. Hastings is the Controller for Tunnell Companies, L.P. Doane is the senior partner of Jefferson, Urian, Doane & Sterner, P.A., a certified public accounting firm. Tunnell Companies, L.P. is one of Doane's clients. Greenwalt is the immediate past president of Appellee.

         The following is a breakdown of the increases for Salaries & Wages and Repair & Maintenance and the testimony offered by the witnesses in support of them.[1]

Pot-Nets Lakeside Salaries & Wages
07/01/14-06/30/15
07/01/15 -06/30/16
Increase
Salaries & Wages
Operations
$110, 349.20
$126, 168.38
$15, 819.18
Landscaping
83, 238.10
121, 292.62
38, 054.52
Security
46, 711.48
52, 046.15
5, 334.67
Administration
102, 636.53
110, 278.12
7, 641.59
Total
$342, 935.31
$409, 785.27
$66, 849.96*

*$64, 791 after CPI Adjustment.

         Robert W. Tunnell, III

A-73 The cost of removing the pool furniture from the boxes and placing them round the pool is included in Salaries & Wages.
A-78 Landscaping is cutting the grass, pulling weeds, planting annual flowers, tree maintenance. It is anything to do with maintaining any of the landscaping.
A-96 Salaries & Wages would include Salaries & Wages of our employees doing repairs and maintenance and the person planting the flowers, salaries and wages of the person cutting a tree or doing power washing or cleaning, etc.
A-98 A significant portion of the Salaries & Wages category was caused by tree maintenance. There were a large number of tree requests and hazards that we saw during this four-month period when compared to the prior 12 months.
A-107 There were 71 entries on the tree log for 7/1/14 - 6/30/15.
There were 419 entries on the tree log for 7/1/15 - 6/30/16.
A-109 Work detail reports and timesheets are turned in weekly to the accounting department and are used to determine the costs of the tree work.
A-140 The largest part of the increase in Salaries & Wages was $38, 000 in landscaping, and a lot of that was done because of the tree work.
A-140 The security increase in Salaries & Wages was because of pay raises given to the security staff. We did a pay raise for patrol people and gate guards because of the surrounding labor market. The security department got higher increases than other departments.
A-141 The administration and operations departments were increased as well. Operations - some of that was dealing with the pool and some of the pool furniture, labor to dispose of that, etc.
A-152 We also added an additional security patrol on our schedule as well. That and increased wages were the two factors responsible for the security Salaries & Wages increase.
A-158 We incurred extra Salaries & Wages for replacing the lights in the community center with LED lights.

         Cameron Marcelle

A-170 Keeps logs of tree work done in each Tunnell community.
A-171 71 log entries in July 2014 - 2015.
A-171 All tree work done was necessary.
A-172 419 entries for the next year.
A-173 Tenant requests for tree work have gone up.
A-180 Cameron Marcelle prioritizes the work in the communities - extreme priority, priority work and routine work.
A-181 Did more tree work in 2015 - 2016 than the prior year, partly because the tree program started in 2010 on the other end of Long Neck and we've been moving up Long Neck ever since.

         Carol Hastings, CPA

A-185 Makes sure that Salaries & Wages and expenses have been categorized correctly and assigned to the proper communities.
A-190 Does not analyze whether Salaries & Wages increases reflect an increase of employees and/or wages.
A-191 Increase in Salaries & Wages for Lakeside was due to a combination of more employees (working there) and an increase in wages.

         David Doane, CPA

A-196-200 Verified accuracy of Salaries & Wages and Repair & Maintenance as to them being in the proper category and amount.
A-326 The Appellant submitted a letter from Doane stating that he had compared the expenses recorded for Salaries & Wages and Maintenance for Lakeside and that they had increased as follows:

Salaries & Wages

$66, 849

Maintenance

$108, 389

A-328 The Appellant submitted an exhibit stating that Salaries & Wages includes Maintenance & Operations, Landscaping, Administration, Security, Salaries & Wages only.

         Elizabeth Greenwalt

A-209 Attended the rent justification meeting on October 4.
A-212 Said that the Tunnells did not give details about the increases at the meeting and that they don't give much information.
A-218 Believes that the information should have been broken down into categories.
A-222 Wanted more information about increases to compare it to amounts they are already paying as part of the rent.
Pot-Nets Lakeside Repair & Maintenance
07/01/14-06/30/15
07/01/15 -06/30/16
Increase
Repair & Maintenance
$180, 897
$289, 376
$108, 389*

*$107, 303 after CPI Adjustment.

         Robert W. Tunnell, III

A-75 A subcontractor painted the roof of the Lakeside Community Center. This was an increase in Repair & Maintenance.
A-96 Repair & Maintenance would be building, painting, changing a light bulb, power washing, cleaning, etc.
A-97 Repair & Maintenance included for most of the painting the two different subcontractors we hired to do that.
A-115 The types of work done under Repair & Maintenance were, for example, painting of the buildings, HVAC issues, etc.
A-125 There is ongoing routine painting in the community.
A-157 We replaced a major motor in one of the fountains. It was like $2, 700.
A-158 We replaced all the light bulbs in the Community Center with LED lights for $2, 800.
A-158 We did a large amount of painting. We painted railings and the bridges on the lake, as well as the roof of the Community Center and then some other buildings.
A-158 We had some HVAC issues in the Community Center. That was $7, 000 of the increase. The rest was materials.
A-160 We spent $43, 000 on painting. It was the total done in 2015-2016. Robert Tunnell did not know what was spent on painting the prior year.
A-116 Discussed some major Repair & Maintenance items for 7/1/15 to 6/30/16 using the following exhibit that was only used for the arbitration hearing.
Pot-Nets Lakeside Major R&M Items 7/1/15 to 6/30/16 (Exhibit 13)
1. Replaced 1 fountain motor - 10/5/15 cost of $2, 741.
2. Community Center - Replacement of all light bulbs with LED lights - 10/15 $2, 804.
3. Painting - Gazebo and bridges summer of 2015, remainder of buildings spring 2016 $43, 385 in total.
4. Community Center - HVAC Issues 10 & 11/15, 4/16 $7, 053 in total.

         Routine Repair & Maintenance includes but is not limited to the following:

* Community Center
Cleaning
Trash Service
Fire Protection Service
Termite/Pest Control
HVAC/Mechanical repairs
Furniture/fixtures
* Roads/Parking Lots
Catch Basin Repairs
* Landscaping
Sod
Irrigation Parts
Annual Flowers $3, 148
Chemicals/Fertilizer
* ...

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