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

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.