New Court of Appeals Decision Holds That a False and Misleading Resale Disclosure Certificate Violates the Consumer Protection Protection Act — Yours Truly Quoted By The Court

November 3, 2011

In its recent decsion in MRA Property Management, Inc., et al. v. Armstrong, No. 93, Sept. Term 2007, filed on October 25, 2011, a majority of the Maryland Court of Appeals held that the Maryland Consumer Protection Act applies to purchases of condominium units with respect to the information required to be provided by a council of unit owners in the resale certificate.  The Court ruled that, where a council of unit owners and its property management company violate the resale certificate disclosure obligations imposed by Md. Real. Prop. Code Ann. Sec. 11-135, “they engage in unfair and deceptive trade practices ‘in the sale of consumer realty.’”  Such a violation occurs where the resale certificate states that there are no known violations of the building code if there is information establishing knowledge of building defects. The Court specifically held that such a violation of the Consumer Protection Act can occur even though the defendants were not parties to the sale of the unit, were not “merchants,” and where there had been no code violation citations issued by the county. Read More »

Written By rburke Comments (0) Categories: Councils of Unit Owners, Court Decisions, Individual Unit Owners, Residential Condominiums, Statutes

Avalon Court Six Case Now A Reported Opinion

September 30, 2011

In a recent post, I discussed the decision of the Court of Special Appeals in an appeal in which I represented a group of condominium owners suing their Council of Unit Owners where the condominium’s suit against the developer for building defects was held to have been filed too late under the applicable statute of limitations.  Greenstein et al. v. Council of Unit Owners of Avalon Court Six Condominium, Inc., No. 0485, September Term, 2009. [PDF]   The unit owners sought to recover increased and special assessments that were necessary to cover the costs of repairing the defects.  Court of Special Appeals expressly held that the individual unit owners have a right of action against the council of unit owners for the board’s failure to properly execute its duty to pursue a timely claim against the developer for defects in the common elements.  This is the first Maryland appellate decision recognizing the right of individual condominium unit owners to file suit where the board of directors has failed to pursue a timely claim relating to defects in the common elements.  On September 29, 2011, the Court designated this to be a reported opinion, and it will now stand as precedent for future cases.

Written By rburke Comments (0) Categories: Councils of Unit Owners, Court Decisions, Individual Unit Owners

Award of Attorney’s Fees Under the Consumer Protection Act May Not Be Subject To An Arbitration Agreement

August 30, 2011

I obtained a noteworthy ruling this morning in the Circuit Court for Montgomery County while representing a condominium unit owner in a construction defect suit.  The sales agreement provided for arbitration of claims, and contained a provision that precludes the arbitration panel from awarding attorney’s fees.  Under Md. Cts. & Jud. Proc Code Ann.  Sec. 3-221, an arbitration award cannot include attorney’s fees unless provided for in the arbitration agreement.

 The complaint filed on behalf of the unit owner included a cause of action under the Maryland Consumer Protection Act, which provides for the award of attorney’s fees.  The Court accepted our argument that, because the damages that can be awarded under the Consumer Protection Act could not be awarded in arbitration, the Consumer Protection Act claim was not subject to the arbitration agreement, and can proceed in Court before a jury.

Written By rburke Comments (0) Categories: Councils of Unit Owners, Court Decisions, Homeowner Associations, Individual Unit Owners, Residential Condominiums, Statutes

Maryland Appellate Court Rules That Individual Unit Owners Have a Right of Action Against the Council of Unit Owners For Failing To File a Timely Suit Against the Developer For Defects In The Common Elements

August 18, 2011

Anyone who follows this blog knows that I have often warned condominium councils about the consequences of failing to take timely legal action to protect the unit owners when there is evidence of construction defects in the common elements.  The most significant consequence, of course, is that, if a contribution to repair costs is not obtained from the developer and/or its insurer, the unit owners will have to bear the full cost of repair.  Now, in an appeal in which I represented a group of individual unit owners at the Avalon Court Six Condominium in Pikesville, the Court of Special Appeals has held that individual unit owners have a right of action for negligence against the council of unit owners, acting through the board of directors, in failing to address defects in the common elements by bringing a timely claim against the developer. Read More »

Written By rburke Comments (0) Categories: Councils of Unit Owners, Court Decisions, Individual Unit Owners, Residential Condominiums

Maryland Condominum and Homeowner Association Mediation and Arbitration Services

July 14, 2011

I am pleased to report that my services as a mediator and arbitrator may now be arranged through Virtual Courthouse.  You can visit the site at www.virualcourthouse.com.   I have many years of experience in alternative dispute resolution proceedings in matters  relating to condominiums, homeowner associations, multi-family housing projects, and individual homes.  These have included cases involving contruction defects, building repairs, budgets, assessments, and association administrative issues.  Employing the services of a capable neutral party is a cost effective means of settling issues outside of litigation.

Written By rburke Comments (0) Categories: Uncategorized

Disputes As To Homeowners Association Elections May Be Submitted To the Attorney General’s Office

July 12, 2011

The Maryland General Assembly enacted new legislation aimed at helping to resolve disputes concerning the election of officers and board members of a homeowners association.  Senate Bill 532 amends Section 11B-115 of the Maryland Homeowners Association Act to give the Consumer Protection Division of the Attorney General’s Office authority to resolve election disputs.  A lot owner who believes that the governing body of an HOA has failed to comply with the election procedures under the association’s governing documents can submit their dispute to the Division for resolution if any one of five specific matters are at issue:  (1) Notice about the date, time, and place for the election; (2) the manner in which a call for nominations for the board was made; (3) the format of the election ballot; (4) the format, provision, and use of proxies during the election process; or (5) the manner in which a quorum is determined for election purposes.  The new law take effect on October 1, 2011.

Written By rburke Comments (0) Categories: Homeowner Associations, Statutes

Title 11 Condominium Warranties May Not Be Excluded Or Modified

June 29, 2011

Unlike the Title 10 warranties that are applicable to the sales of all new homes in Maryland, including condominiums, the Title 11 condominium warranties “may not be excluded or modified” by any action or written document.   In other words, the purchaser cannot be required to agree to eliminate these statutory warranties, or change the terms of the warranties as required by the statute.  Any such agreement, written or otherwise,  is invalid.   This recognizes that a condominium purchaser is buying an interest in the common elements of a building, or perhaps a number of buildings, and is not have the same ability as a purchaser of an individual home to inspect the entire premises.  It includes both the warranty on components of the common elements that is given by the developer to the council of unit owners, and the warranty on components of the individual units that is given by the developer to each individual unit owner purchaser.   Therefore, the condominium warranties apply regardless of any agreement to exclude them or modify the content.  However, the Title 11 condominium warranties are expressly limited so as not to apply “to any defects caused through the abuse or failure to perform maintenance by a unit owner or the council of unit owners,” and are also inapplicable to non-residential condominium regimes.

Written By rburke Comments (0) Categories: Councils of Unit Owners, Individual Unit Owners, Residential Condominiums, Statutes

Warranties Under The Maryland Condominium Act

June 6, 2011

Section 11-131 of the Maryland Condominium Act provides significant warranty protections for the purchasers for new condominium units. Section 11-131 (a) codified the ruling in Starfish, and established that new home warranties under Section 10-203 “apply to all sales by developers” of condominiums, and that “a newly constructed private dwelling unit means a newly constructed or newly converted condominium unit and its appurtenant undivided fee simple interest in the common areas.” Specific warranties are applicable to certain specified components of both individual units and the common elements, and they are the obligation of the condominium’s developer.

Section 11-131(c) of the Condominium Act provides “an implied warranty on an individual unit from a developer to a unit owner” that is expressly in addition to the warranties provided by Section 10-203. Indeed, the Court of Appeals has held that the Title 10 warranties and the condominium warranties under Title 11 run concurrently, and aggrieved purchasers may proceed under either or both. This additional implied warranty is limited to specifically identified components, commences with the transfer of title to that particular unit, and extends for a period of one year. The warranty makes the developer “responsible for correcting any defects in materials or workmanship in the construction of walls, ceilings, floors, and heating and air conditioning systems in the unit,” and further warrants that “the heating and air conditioning systems have been installed in accordance with acceptable industry standards.” The stated standards are “[t]hat the heating system is warranted to maintain a 70°F temperature inside” and “[t]hat the air conditioning system is warranted to maintain a 78°F temperature inside” when the outdoor temperature and winds are “at design conditions established by the Energy Conservation Standards Act … or those established by the political subdivision” in which the condominium is located. This establishes what is, essentially, a strict liability standard; i.e., if the existence of a defect is proven, the developer is responsible for damages consisting of the cost of correction.

Section 11-131(d) provides for “an implied warranty on the common elements from developer to the council of unit owners,” that is also expressly in addition to the implied warranties provided in Section 10-203. Like the warranty on the units, this common element warranty is also applicable only to specific components, consisting of “the roof, foundation, external and supporting walls, mechanical, electrical, and plumbing systems, and other structural components.” The reference to “external and supporting walls” encompasses not only the wall framing members, but cladding systems as well. The inclusion of “structural components” broadens the application of the warranty to any common element component that is part of the building’s structure and framing, as well as community amenities that have a structural capacity, such as paving, pools, sport courts, curbs, steps and sidewalks, and drainage areas. Read More »

Written By rburke Comments (4) Categories: Councils of Unit Owners, Individual Unit Owners, Residential Condominiums, Statutes, Warranties

Legislature Limits Condominium Purchaser’s Rescission Rights For Amended Condominium Documents

April 27, 2011

The recent session of the Maryland General Assembly passed House Bill 887, which limits the right of recission belonging to purchasers of a new condominium units.   The measure, which takes effect October 1, 2011, amends Section 11-126(e) of the Maryland Condominium Act.  That statute gives new condominium purchasers the right to rescind their contracts after receiving certain condominium documents, or if the documents are amended after execution of the sales contract.  The new law requires purchasers who receive amended condominium documents to demonstrate that they have a right to approve the amendment, and that the amendment “materially and adversely” affects their rights.  The purchaser’s reasons must be stated in writing.

Under current law, a purchaser of a new condominium unit has an absolute right to rescind their sales contract within 15 days after receiving the documents and information required to be provided to all new condominium purchasers.  The purchaser is not required to state any reasons for the rescission.  Section 11-126(b) contains the long list of materials that must be furnished to a new condominium purchaser, which are normally part of the Public Offering Statement for the condominium.  Under Section 11-126(d), the material provided cannot be amended “without the approval of the purchaser if the amendment would affect materially the rights of purchaser.  There is are exceptions for amendments required by a governmental authority or public utility, or “if the amendment is made as result of actions beyond the control of the vendor or in the ordinary course of affairs of the council of unit owners.”   In the event of an amendment, the purchaser has a right to rescind the contract with 5 days of receipt of the amendment.

Under the new law, purchaser maintain their right to rescind after receiving the required documents, and may still do so without stating a reason.  However, a purchaser seeking to rescind after an amendment of the documents must state reasons in writing showing that (1) that they have approval right; that is, that the amendment is not within one of the exceptions that do not require purchaser approval; and (2) that “the amendment affects materially and adversely the rights of the purchaser.

Written By rburke Comments (0) Categories: Individual Unit Owners, Residential Condominiums, Statutes, Uncategorized

Legislature Passes Measure Authorizing Condominiums to Require Unit Owner Insurance

April 25, 2011

The Maryland General Assembly passed House Bill 679, which permits condominiums to adopt a requirement that  unit owners maintain insurance on their units.  The bill was signed into law by the Governor on April 12, 2011, and takes effect October 1, 2011.   The law adds new Section 11-114.2 to the Maryland Condominium Act to provide that condominium bylaws may include a provision requiring that all unit owners maintain insurance on their units, and that unit owners provide evidence of such insurance to the council of unit owners on an annual basis.  The measure further amends Section 11-104 to specifically authorize a condominium’s council of unit owners to amend the community’s bylaws to require unit owner insurance.   Significantly, the law provides that such amendments require the affirmative vote of only 51% of the unit owner votes.  This is an express exception to the requirement contained in Section 11-104(e)(2), which mandates that amendments to a condominium’s delclaration or bylaws have the support of at least two-thirds of the unit owner votes, and permits the governing documents to provide for a higher, but not lower, percentage.  The new law permits an amendment to require unit owner insurance by a simple majority.

Written By rburke Comments (0) Categories: Councils of Unit Owners, Individual Unit Owners, Residential Condominiums, Statutes