A bill proposed in the Maryland House of Delegates would make significant changes to the Maryland Condominium Act that relate to the period during which the developer is in control of the council of unit owners. House Bill 352 would require that the developer hold at least two meeting per year, rather than the current one annual meeting, and that the unit owners have an opportunity to comment on condominium matters during those meetings. Additionally the bill would require that, if the condominium has a board of directors, within 30 days after 25% of the units have been titled to unit owners, the developer must appoint a board member who is a unit owner and not otherwise affiliated with the developer; and that, if there is no board at that time, a board must then be established The bill would further require the developer to disclose any governmental bonds affecting the project, and provide notice in advance of requesting release of any such bonds. Also, it would be required that the maintenance of the condominium’s books and records begin on the date that the council of unit owners is established, and that the condominium’s books and records be kept separate and apart from those of the developer. The bill proposes similar changes to the Maryland Homeowner Association Act.
Compliance with Section 10-702 of the Maryland Real Property Code has been a source of some considerable discussion. It requires that a home seller provide the buyer with a either a “disclosure statement,” by which information is provided relating to the seller’s knowledge of defects, or a “disclaimer statement,” which applies to “as is” sales, but still requires disclosure of “latent defects.” It should be noted, however, that neither statement is required in connection with the sale of a unit in a property containing five or more units, because the statute expressly applies “only to single family residential property improved by four or fewer units.” In the sale of a condominium unit, disclosure requirements are governed by Section 11-135 of the Maryland Condominium Act, which requires certain disclosures by both the council of unit owners and the selling unit owner.
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In a newly issued opinion, the Court of Appeals of Maryland has clarified existing law and expressly recognized an independent cause of action for breach of fiduciary duty. In William H. Plank, II, et al. v. James P. Cherneski, et al., Misc. No. 3, September Term, 2019. the Court observed that whether Maryland recognizes an independent cause of action for breach of fiduciary duty is a question that “Courts and commentators have been asking … for 23 years since this Court articulated its holding in Kann v. Kann, 344 Md. 689 (1997).” In Kahn, the Court declared that there was “no universal omnibus tort for the redress of breach of fiduciary duty,” but noted that “[t]his does not mean that there is no claim or cause of action available for breach of fiduciary duty.” 344 Md. at 713. In its new decision, the “Court recognizes an independent cause of action for breach of fiduciary duty. To establish a breach of fiduciary duty, a plaintiff must demonstrate: (1) the existence of a fiduciary relationship; (2) breach of the duty owed by the fiduciary to the beneficiary; and (3) harm to the beneficiary. The recognition of an independent cause of action for breach of fiduciary duty is pertinent to the operations of condominium and homeowner associations, and, in particular, may impact the potential liability of developers during the period of time when they are in control of an association’s board.