Councils of Unit Owners

As I have previously written, the information contained in condominium resale disclosure certificates must be carefully reviewed for accuracy, so as to avoid exposing the community to liability for misleading information that does not present a clear picture of the financial obligations that may await a prospective purchaser.  Indeed, in MRA Property Management, Inc., et al. v. Armstrong, the Maryland Court of Appeals established that provisions of the Maryland Consumer Protection Act apply to the information contained in a condominium resale certificate, and a council of unit owners and property manager can be liable for unfair and deceptive trade practices if the information has a tendency to mislead the purchaser, even though they are not party to the sales contract, and even if they have otherwise complied with the condominium resale disclosure requirements contained in Section 11-135 of the Maryland Condominium Act.  In light of amendments to Section 11-135 enacted after the Court decision during the 2016 legislative session, it is important that councils of unit owners have the most recent version available.  Be certain that the version you are using refers to the inclusion of the amendments enacted under Chapter 735, Acts 2016 that were effective as of October 1, 2016.

    

 

Maryland Governor Larry Hogan has approved a new law intended to prevent condominium developers from including provisions in the project’s governing documents and sales contracts that limit the ability of the unit owners to bring claims for construction defects.  The provisions of Senate Bill 258 and House Bill 77 will now become law as of October 1, 2018.  New Section 11-134.1 of the Maryland Condominium Act protects claims relating to the developer’s failure to comply with applicable building codes; approved plans and specifications; product manufacturer’s installation instructions; or the implied warranties provided under Maryland law.  The new law prohibits a developer from including language in the condominium’s governing documents or in the purchase agreements that (1) shortens the applicable statute of limitations; (2) waives the application of the discovery rule or other means of determining the claim’s accrual date; (3) requires that the claim be submitted to arbitration within a period shorter than the applicable statute of limitations; or (4) operates to prevent the assertion of a claim within the applicable statute of limitations.  The new law expressly only applies prospectively, and does not affect any governing documents recorded or contracts executed prior to October 1, 2018.

 

House Bill 997 in the Maryland General Assembly would require a developer, upon transfer of control of the project, to provide the council of unit owners with a reserve study prepared by a “certified” engineer.  The bill would amend Section11-132 of the Maryland Condominium Act to also require that the developer provide “a reserve account containing funds equal to at least five times the annual funding amount recommended in the current reserve study report.”

The House of Delegates of the Maryland General Assembly has passed legislation that authorizes a condominium declaration to provide for the suspension of  the use of parking or recreational facility common elements by a unit owner that is more than 60 days in arrears in the payment of assessments.  House Bill 575 would amend Section 11-103 of the Maryland Condominium Act by adding new subsection (d).  The measure would require the condominium to provide the delinquent unit owner with 10 days notice, within which the unit owner may pay the delinquent assessment or request a hearing to contest the suspension.  The proposed law also allows an amendment to a declaration to add such a suspension provision with the approval of only 60% of the unit owners, regardless of what super majority is otherwise called for in the governing documents.  The bill is now under consideration in the Senate.

House Bill 564 in the Maryland General Assembly would require a developer, upon the conveyance of 25% of the units or lots, to appoint at least one board member to the association’s governing body who is a unit owner or lot owner, and not affiliated with the developer.  The bill would also require the association’s governing body to meet at least two times each year, and would require the developer to provide the members of the board with certain information relating to any bond provided to a governmental authority in connection with the project.  The legislation would also require that the books and records of the association be kept separate and apart from those of the developer.

House Bill 179 filed in the Maryland General Assembly would reduce the percentage of votes required to amend a condominium declaration.  Under current law, as provided in Section 11-103(c) of the Maryland Condominium Act, “80 percent of the unit owners listed on the current roster” must consent to an amendment of the declaration.  The proposed bill would reduce the required percentage to 60 percent.  Moreover, it would potentially have the effect of further reducing the number of affirmative votes needed by changing the voting pool from including “the unit owners listed on the current roster” to including only “unit owners in good standing.”  “Good standing” is defined in the bill as “not being more than 90 days in arrears in the payment of any assessment or charge due to the condominium.”  Accordingly, unit owners who do not qualify as being in “good standing” would be excluded from the pool of voters, of which 60 percent would be need to approve an amendment.

Both the Senate and House of Delegates are considering legislation that would preclude a condominium developer from including provisions in the community’s governing documents or the sales contracts that limit the ability of the council of unit owners or individual unit owners to bring claims against the developer for construction defects.  Senate Bill 258 and House Bill 77 are similar to legislation that was introduced and passed in the House during the 2017 legislative session.  The proposed new law would cover claims relating to the developer’s failure to comply with applicable building codes; approved plans and specifications; product manufacturer’s installation instructions; or the implied warranties provided under Maryland law.  The legislation would prevent a developer from including language in the condominium’s governing documents or in the purchase agreements that (1) shortens the applicable statute of limitations; (2) waives the application of the discovery rule or other means of determining the claim’s accrual date; (3) requires that the claim be submitted to arbitration within a period shorter than the applicable statute of limitations; or (4) operates to prevent the assertion of a claim within the applicable statute of limitations. (more…)

Section 11-133 of the Maryland Condominium Act gives a council of unit owners the right to terminate leases, management contracts, employment contracts, and other contracts entered into by the developer during the period that the developer had control of a majority of the votes in the council.  However, that right of termination must be exercised within three (3) years from the date on which majority control of the council passed from the developer to the unit owners.  Termination of such contracts, if timely exercised, is effective upon thirty (30) days written notice of termination.  Grants to any governmental entity or public utility are not subject to termination.  Also, the right of termination exists only for residential, and not commercial, condominiums.

The Maryland Court of Appeals has invalidated a rule adopted by a condominium to suspend access to common elements for unit owners who are delinquent in paying assessments.  In an opinion issued on June 23, 2017 in the case of Elvation Towne Condominium Regime II, Inc. v. Rose, No. 33, Sept. 2016, the Court held that, in order to restrict access to the common elements as a means of enforcing payment of condominium assessments, such a restriction must be provided in the condominium’s declaration.  It may not be adopted by rule promulgated by the board of directors.  The ruling affirmed prior rulings in the case by the Circuit Court for Anne Arundel County and the Maryland Court of Special Appeals. (more…)

Maryland Governor, Larry Hogan, has signed into law legislation passed in the General Assembly that requires a condominium council of unit owners or a homeowners association to provide at least 30-days notice to all owners of any sale, including a tax sale, of a common element in the condominium or common area in the HOA.  What had been Senate Bill 809 and House Bill 1369 in the 2017 session will add new Subsection 11-108(d) to the Maryland Condominium Act, and new Section 11B-106.2 to the Maryland Homeowner Association Act.  The notice required to be given must include written notice to every homeowner; posting of a sign on the property; and, if the association has a website, a notice on the home page.