Tucked away in the streets off Connecticut Avenue in Chevy Chase are a group of houses that comprise a tiny governmental unit called Section Five. One of nine such independent taxing districts in Montgomery County, its citizens set their own tax rate and elect five residents to a committee to carry out the rules and regulations adopted in 1923 for the section.

Usually the committee is concerned with little more than proper leaf collection, balancing the $50,000 annual budget or discussing whether a neighboring family can put a fence on their property.

But that was before No Gain, a two-acre estate at the corner of Brookeville Road and Thornapple Street, was put up for sale. The main house at No Gain was built in the late 1700s, with a log cabin on the property dating from 1740. No Gain has a reported $350,000 price tag and potential for subdivision.

Dr. and Mrs. Spencer Gordon Jr. fell "in love at first sight" with the property and made an offer to buy it. Members of the National Trust, they said they "dreamed" how to place much of their furniture, which is of the same period, about the house. Mrs. Gordon, who contributes many of her botanical "specimens" to the National Arboretum, planned to "bring as many araleas, camellias and specimens" to No Gain as she could. Their youngest son saw No Gain as a potential haven for birds.

The Gordons could not but the property, however, unless Dr. Gordon, who is a practicing psychiatrist, could restore and use the lob cabin for his office, they said.

The Gordons, who now live in Section Four, knew the nature of these small communities - and how everyone wants to have a say in their government - and wrote an introductory letter to all the citizens of Section Five selling them of their intentions for the property.

The Gordons assured the residents among other things, that they felt "it would be sinful to let No Gain be subjected to further subdivision by land spectulators." The current owners, Mr. and Mrs. William Kenneth Frizzell, had applied to the Washington Suburban Sanitary Commission fora sewer allocation that would pwemit potential subdivision of the property. The Gordons said they would withdraw the application.

But the Section Five committee had a problem with the Gordon's purchase. According to the sections's rules and regulations, "no trade, business, manufacture or sales, or nuisance of any kind" could be "carried on or permitted upon said premises." The attorney for the committee, Edward L. Genn, said he was of the opinion that "trade or business" inclined professions such as psychiatry and would prohibit Dr. Gordon from practicing in the log cabin.

The residents of Section Five objected. "Why couldn't the rules be overlooked ormade edception to because of the nature of the new occupants and all they had planned to do with the house?" asked one homeowner. Petitions were drawn up and signed by 124 residents - the section contains 225 houses. The outcry escalated until some residents were calling the committee chairman, Bruce Lane, a "little Caesar" and a "little god."

A neighbor of the Frizzells complained in a community meeting that a psychiatrist's office would increase traffic on Thornapple Road. He said he was concerned because of his small children. Others noted that Gordon averaged only 24 patients in a seven-day period and that one car an hour would not change traffic that much.

Others said they were afraid that if they made one exception, beauty parlors would begin to appear in the basements of some of the houses. Supporters of the Gordon purchase said that the county zoning would prohibit that from happening.They said that many people in the section were already conduction business in their homes. The area has more than a few free-lance writers and artists, and the current owner of No Gain used the home in his business as an architect. Besides, they said, Lane, a tax attorney, had a "business" phone in his home.

Supporters of the Gordon purchase said they were "fearful of development." Zoning would permit construction of up to four more houses on the property.

Time was getting short. The Frizzells, who are moving to California need to sell the house quickly. Frizzell's lawyers met with the Gordons' lawyers who then met with the committee's attorneys. The Gordons wanted to go to settlement. The controversy was all the neighborhood was talking about.

Last weekend the Gordon's met with Lane and other committee members and discusses "compromises." There was a possibility of a waiver, it seemed, if the Gordons would sign a covenant to the purchase agreement that "would prohibit the subdivision of No Gain either in perpetuity or for a long term of years (50)."

The Gordons could not agree. "That's not a feasible thing to do," said Mrs. Gordon. "That is something more than anybody in his right head would submit to."

The Gordons say they will no longer pursue the purchase of No Gain. "I am very upset about this," said Mrs. Gordon. "When you come against a stone wall that's awfully high, you can chip away at it but not make it fall down. If my name were Rockefeller, we might try, but it's not. There's no way we can continue."

Lane, who said the legal fees involved in the committee's decision to follow their rules were "substantial," said the "choice is not between the subduviders and Doctor Gordon," on this property such as this."

The future owners of the No Gain are still unknown. Frizzell had no comment on other potential buyers.

The committee says, however, that it will be watching.