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                                                                   Exhibit 10.41

                                 August 26, 1999

Ms. Debra L. Shotwell
1272 Chianti Court
Pleasanton, CA 94566

Dear Debbie:

     This letter agreement ("Agreement") confirms the terms of your resignation
from employment with AvalonBay Communities, Inc. ("Company," a term which for
purposes of this Agreement includes its related or affiliated entities).

     1. Resignation Date. Your resignation from employment as Senior Vice
President-Administration and all other offices and positions with the Company
shall be effective August 10, 1999 ("Date of Resignation"). By entering into
this Agreement, you are also acknowledging your resignation, as of the Date of
Resignation, as a director or officer of any entity that is related or
affiliated to the Company.

     2. Severance Pay. In recognition of your service to the Company, and in
full satisfaction of any and all claims you may have against the Company (other
than with respect to payment of accrued base salary through the Date of
Resignation, your rights under restricted stock agreements and option
agreements, and any benefits you may be entitled to through December 31, 1999 as
a result of prepaid premiums that the Company may have heretofore paid under
your split dollar life and disability plans) as more fully set forth in Section
4, promptly after execution of this Agreement the Company shall pay to you One
Hundred Fifty Thousand Dollars ($150,000), subject to applicable deductions and
withholdings and less any monies you owe to the Company on account of loans that
the Company previously made to you (approximately $8,400).

     3. Restricted Stock and Stock Options.

        (a) Your right to exercise following the Date of Resignation any stock
options you may have shall be governed by the provisions regarding such options
in the applicable stock option agreements and the applicable stock option plan
of the Company. For convenience, Exhibit A hereto sets forth the options (with
applicable option exercise prices and expiration dates) in which you are vested
as of the Date of Resignation. You acknowledge that all other options have
lapsed or will terminate.

        (b) For convenience, Exhibit B sets forth a list of all shares of
restricted stock you were granted and that (to the extent you have not already
disposed of) you will retain following the Date of Resignation. To the extent
the Company has not already done so, upon the execution of this Agreement the
Company shall promptly deliver to you certificates representing such shares with
no restrictive legends, and such shares shall be freely transferable by you
subject to applicable securities laws.

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Ms. Debra L. Shotwell
August 26, 1999
Page 2

        (c) You acknowledge that the Company has advised you to consult an
attorney regarding your continued obligations under Section 16 of the Securities
Exchange Act of 1934, as amended, as well as other federal and state securities
(including insider trading) laws.

     4. Release of Claims. The parties agree that the payments to you under
Section 2 of this Agreement are in full satisfaction of all claims you may have
in respect of your employment by the Company or its affiliates and are provided
as the sole and exclusive benefits to be provided to you in respect of the
resignation of your employment. To effectuate that agreement, you hereby
covenant and agree as follows:

        (a)   You, on behalf of yourself and your successors, heirs, assigns,
executors, administrators and/or estate, hereby irrevocably and unconditionally
release, acquit and forever discharge the Company, its subsidiaries, divisions
and related or affiliated entities, and each of their respective predecessors,
successors or assigns, and the officers, directors, partners, shareholders,
representatives, employees and agents of each of the foregoing (the
"Releasees"), from any and all charges, complaints, claims, liabilities,
obligations, promises, agreements, controversies, damages, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses (including
attorneys' fees and costs actually incurred), known or unknown, that directly or
indirectly arise out of, relate to or concern your employment or termination of
employment with the Company ("Claims"), which you have, own or hold, or at any
time heretofore had, owned or held against the Releasees up to the date on which
you execute this Agreement, including without limitation, express or implied,
all Claims for: breach of express or implied contract; promissory estoppel;
fraud, deceit or misrepresentation; intentional, reckless or negligent
infliction of emotional distress; breach of any express or implied covenant of
employment, including the covenant of good faith and fair dealing; interference
with contractual or advantageous relations; discrimination on any basis under
federal, state or local law, including without limitation, Title VII of the
Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, as
amended, and the California Fair Employment and Housing Act, Cal. Gov't. Code ??
12940, et seq., as amended; and all claims for defamation or damaged reputation.

        (b)   You acknowledge that you are familiar with Section 1542 of the
California Civil Code, which reads as follows:

              A general release does not extend to claims which the creditor
              does not know or suspect to exist in his favor at the time of
              executing the release, which if known by him must have materially
              affected his settlement with the debtor.

You acknowledge and agree that you are releasing unknown claims and waive all
rights that you may have under Civil Code Section 1542 or under any other
statute or common law principle of similar effect.

        (c)   You represent and warrant that you have not filed any complaints
or charges asserting any Claims against the Releasees with any local, state or
federal agency or court. You further

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Ms. Debra L. Shotwell
August 26, 1999
Page 3


represent and warrant that you have not assigned or transferred to any person or
entity any Claims or any part or portion thereof.

        (d)   You agree that you will not hereafter pursue any Claim against any
Releasee by filing a lawsuit in any local, state or federal court for or on
account of anything which has occurred up to the present time as a result of
your employment, and you shall not seek reinstatement with, or damages of any
nature, severance, incentive or retention pay, attorney's fees, or costs from
the Company or any of the other Releasees; provided, however, that nothing in
this Section 4 shall be deemed to release the Company from any claims that you
may have (i) under this Agreement, (ii) for indemnification pursuant to and in
accordance with applicable statutes, the by-laws of the Company and Section 4(b)
of the Employment Agreement between you and the Company, dated March 9, 1998
("Employment Agreement"), (iii) for vested pension or retirement benefits under
the terms of qualified employee pension benefit plans, (iv) for any benefits you
may be entitled to through December 31, 1999 as a result of prepaid premiums
that the Company may have heretofore paid under your split dollar life and
disability insurance plans, or (v) accrued but unpaid base salary.

     5. Release by the Company.

        (a)   The Company, on behalf of itself, its directors and officers (but
only to the extent the Company's agreement in this regard is legally binding on
them), its subsidiaries, divisions and related or affiliated entities and each
of their respective predecessors, successors or assigns hereby irrevocably and
unconditionally releases, acquits and forever discharges you, your successors,
heirs, assigns, executors, administrators and/or estate (the "Shotwell
Releasees"), from any and all charges, complaints, claims, liabilities,
obligations, promises, agreements, controversies, damages, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses (including
attorney's fees and costs actually incurred) known or unknown, that directly or
indirectly arise out of, relate to or concern acts or omissions reasonably taken
or not taken by you in the course of your employment and termination of
employment with the Company in good faith (the "Company Claims").

        (b)   The Company acknowledges that it is familiar with Section 1542 of
the California Civil Code, which reads as follows:

              A general release does not extend to claims which the creditor
              does not know or suspect to exist in his favor at the time of
              executing the release, which if known by him must have materially
              affected his settlement with the debtor.

     The Company acknowledges and agrees that it is releasing unknown claims and
waives all rights that it may have under Civil Code Section 1542 or under any
other statute or common law principle of similar effect.

        (c)   The Company represents and warrants that it has not filed any
complaints or charges asserting any Company Claims against the Shotwell
Releasees with any local, state or federal agency or court. The Company further
represents and warrants that it has not assigned or transferred to any person or
entity any Company Claims or any part or portion thereof.
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Ms. Debra L. Shotwell
August 26, 1999
Page 4
        (d)   The Company agrees that it will not hereafter pursue any Company
Claim against any Shotwell Releasee by filing a lawsuit in any local, state or
federal court for or on account of anything which has occurred up to the present
time as a result of your employment to the extent set forth in Subparagraph 5(a)
above; provided, however, that nothing in this Section 5 shall be deemed to
release you from any claims the Company may have (i) under this Agreement or
(ii) for claims not otherwise released by Section 5(a) above.

     6. Employment Agreement. Except as set forth in the next sentence or as
expressly provided elsewhere in this Agreement, this Agreement supersedes all
provisions of your Employment Agreement and all such provisions terminate upon
the Date of Resignation. Nothing contained herein, however, shall be deemed to
terminate your obligations to the Company or the Company's obligations to you
under Sections 4(b) (Indemnification), 6 (Records/Nondisclosure/Company
Policies), 7(d) (Excise Tax Payment), 8(b)-(c) (Non-Solicitation and Specific
Enforcement) and 13 (Resolution of Disputes) of the Employment Agreement,
Annexes A (Code of Ethics) or B (Nondisclosure Agreement) thereto, or the
Company's Stock Option Plan or the stock option agreements entered into by you
from time to time.

     7. Return of Property. In accordance with Section 4 of the Nondisclosure
Agreement, dated as of March 9, 1998, by and between you and Bay Apartment
Communities, Inc. (a predecessor to the Company) and incorporated in the
Employment Agreement as Annex B ("Nondisclosure Agreement), to the extent you
have not already done so, (i) you will return to the Company all records,
correspondence, notes, financial statements, computer printouts and other
documents and recorded material of every nature (including copies thereof) that
may be in your possession or control dealing with Confidential Information (as
defined in Section 8 of the Nondisclosure Agreement), and (ii) you will return
to the Company all other property.

     8. Litigation Cooperation. You agree to continue to serve the Company as a
litigation consultant and, in connection therewith, to cooperate fully with the
Company in (i) the defense or prosecution of any claims or actions which already
have been brought or which may be brought in the future against or on behalf of
the Company and (ii) responding to, cooperating with, or contesting any
governmental audit, inspection, inquiry, proceeding or investigation, which
relate to events or occurrences that transpired during your employment with any
of the Company. Your full cooperation in connection with such claims or actions
shall include, without implication of limitation: promptly notifying the Company
in writing of any subpoena, interview, investigation, request for information,
or other contact concerning events or occurrences that transpired during your
employment with any of the Company; being available to meet with counsel for the
Company to prepare for discovery or trial; to testify truthfully as a witness
when reasonably requested and at reasonable times designated by the Company; and
to meet with counsel or other designated representatives of the Company; to
prepare responses to and to cooperate with any Company's processing of
governmental audits, inspections, inquiries, proceedings or investigations. The
Company agrees to reimburse you for any reasonable out-of-pocket expenses that
you incur in connection with such cooperation, subject to reasonable
documentation. The Company shall compensate you at an hourly rate derived from
your last applicable Base Salary for time that you reasonably spend complying
with your obligations as a litigation consultant under this Section, except that
the Company shall not, under any circumstances, compensate

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Ms. Debra L. Shotwell
August 26, 1999
Page 5


you for time spent testifying under oath or responding to questions from
governmental investigators in a capacity as a fact witness. The Company will
try, in good faith, to exercise its rights under this Section so as not to
unreasonably interfere with your personal schedule or ability to engage in
gainful employment. In the event other commitments preclude you from being
available to the Company when requested, you may decline a Company request for
cooperation so long as you promptly provide to the Company reasonable
alternative dates when you will be available to provide such cooperation.

     In furtherance of your obligations under this Agreement, you agree that you
shall not disclose, provide or reveal, directly or indirectly, any information
concerning the Company, including without implication of limitation, their
respective operations, plans, strategies or administration, to any other person
or entity unless compelled to do so pursuant to (a) a valid subpoena or (b) as
otherwise required by law, but in either case only after providing the Company,
through the Office of its General Counsel, with prior written notice and
opportunity to contest such subpoena or other requirement. Written notice shall
be provided to the Company as soon as practicable, but in no event less than
five (5) business days before any such disclosure is compelled, or, if later, at
least one business day after you receive notice compelling such disclosure.

     9. Nondisparagement and Nondisclosure. You agree not to take any action or
make any statement, written or oral, which disparages or criticizes the Company
or its officers, directors, agents, or management and business practices, or
which disrupts or impairs the Company's normal operations. The Company agrees to
instruct its directors and executive officers not to take any action or make any
statement, written or oral, which disparages or criticizes you or your
management and business practices. The provisions of this Section 9 shall not
apply to any truthful statement required to be made by you or any director or
executive officer of the Company, as the case may be, in any legal proceeding,
governmental or regulatory investigation, in any public filing or disclosure
legally required to be filed or made, or in any confidential discussion or
consultation with professional advisors. You agree not to disclose the terms of
this Agreement except (a) to your professional advisors, including accountants
and attorneys (provided they agree to keep such information confidential), (b)
to the extent that, prior to your disclosure, the Company has previously
disclosed such information in its filings with the Securities and Exchange
Commission, and (c) (i) pursuant to a valid subpoena or (ii) as otherwise
required by law, but in either of the latter two cases only after providing the
Company, to the attention of its Chief Executive Officer, with prior written
notice and reasonable opportunity to contest such subpoena or other requirement.
In the case of the circumstances contemplated by Subsections 9(c)(i) or (ii),
written notice shall be provided to the Company as soon as practicable, but in
no event less than five (5) business days before any such disclosure is
compelled, or, if later, at lease one (1) business day after you receive notice
compelling such disclosure.

     10. Exclusivity. This Agreement sets forth all the consideration to which
you are entitled by reason of your resignation of your employment, and you shall
not be entitled to or eligible for any payments or benefits under any other
Company severance, bonus, retention or incentive policy, arrangement or plan,
including, without implication of limitation, your Employment Agreement.

     11. Tax Matters. All payments and other consideration provided to you
pursuant to this Agreement shall be subject to any deductions, withholding or
tax reporting that the Company reasonably determines to be required for tax
purposes.

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Ms. Debra L. Shotwell
August 26, 1999
Page 6


     12. Notices, Acknowledgments and Other Terms.

        (a)   You are advised to consult with an attorney before signing this
Agreement. You acknowledge that you have consulted with an attorney of your
choice. You acknowledge that you have been given a reasonable period of time to
consider this Agreement before executing it.

        (b)   You acknowledge and agree that the Company's promises in this
Agreement include consideration in addition to anything of value to which you
are otherwise entitled by reason of the termination of your employment.

        (c)   You acknowledge that you have been given the opportunity, if you
so desired, to consider this Agreement for fourteen (14) days before executing
it. If you breach any of the conditions of the Agreement within the fourteen
(14) day period, the offer of this Agreement will be withdrawn and your
execution of the Agreement will not be valid. In the event that you execute and
return this Agreement within fourteen (14) days or less of the date of its
delivery to you, you acknowledge that such decision was entirely voluntary and
that you had the opportunity to consider this letter agreement for the entire
fourteen (14) day period.

        (d)   By signing this Agreement, the parties acknowledge that they are
doing so voluntarily and knowingly, fully intending to be bound by this
Agreement. Each of the parties also acknowledges that she/it is not relying on
any representations by any representative of the other party concerning the
meaning of any aspect of this Agreement. Each of the parties understands that
this Agreement shall not in any way be construed as an admission by the other
party of any liability or any act of wrongdoing whatsoever and that each party
specifically disclaims any liability or wrongdoing whatsoever against the other
party on the part of herself, itself and her/its officers, directors,
shareholders, employees and agents. Each of the parties understands that if
either party does not enter into this Agreement and brings any claims against
the other party, the other party will dispute the merits of those claims and
contend that she/it acted lawfully and for good business reasons.

        (e)   In the event of any dispute, this Agreement will be construed as a
whole, will be interpreted in accordance with its fair meaning, and will not be
construed strictly for or against either you or the Company. Section headings
and parenthetical explanations of section references are for convenience only
and shall not be used to interpret the meaning of any provision or term of this
Agreement.

        (f)   The law of the State of California will govern any dispute about
this Agreement, including any interpretation or enforcement of this Agreement.

        (g) In the event that any provision or portion of a provision of this
Agreement shall be determined to be illegal, invalid or unenforceable, the
remainder of this Agreement shall be enforced to the fullest extent possible and
the illegal, invalid or unenforceable provision or portion of a provision will
be amended by a court of competent jurisdiction, or otherwise thereafter shall
be interpreted, to reflect as nearly as possible without being illegal, invalid
or unenforceable the parties' intent if possible. If such amendment or
interpretation is not possible, the illegal, invalid or


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Ms. Debra L. Shotwell
August 26, 1999
Page 7

unenforceable provision or portion of a provision will be severed from the
remainder of this Agreement and the remainder of this Agreement shall be
enforced to the fullest extent possible as if such illegal, invalid or
unenforceable provision or portion of a provision was not included.

        (h)   This Agreement may be modified only by a written agreement signed
by you and an authorized representative of the Company.

        (i)   This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and, except as expressly
provided herein, supersedes all prior agreements between the parties with
respect to any related subject matter.

        (j)   This Agreement shall be binding upon each of the parties and upon
their respective heirs, administrators, representatives, executors, successors
and assigns, and shall inure to the benefit of each party and to their heirs,
administrators, representatives, executors, successors, and assigns.

     If you agree to these terms, please sign and date below and return this
Agreement to the Company's General Counsel within the time limits set forth
above. This Agreement may be executed in two counterparts, and the two
counterparts, when taken together, shall constitute one and the same Agreement.

                                   Sincerely,

                                   AvalonBay Communities, Inc.

                                   By:/s/Richard L. Michaux
                                      ---------------------------
                                         Richard L. Michaux
                                          Chief Executive Officer

Accepted and Agreed to:

    /s/Debra L. Shotwell
-----------------------------
Debra L. Shotwell

Dated:      8/28/99
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