Residential Condominiums

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.

By a vote of 136-0, the Maryland House of Delegates approved a bill to protect condominium owners’ rights with regard to bringing construction defect claims against the project’s developer.  House Bill 676 would prevent condominium developers from limiting the ability of the council of unit owners and individual unit owners to bring claims for building issues.  The proposed law would prevent developers from including certain provisions in condominium governing documents or contracts of sale that act as an impediment to claims alleging the failure of the developer to comply with (1) applicable building codes; (2) plans and specifications for the project approved by the local governing authority; (3) manufacturer’s installation instructions for building products used the condominium; and (4) warranty provisions under Sections 10-203 and 11-131 of the Real Property Article.

As to such claims, under the proposed law, the developer would be precluded from including provisions that:  (a) shorten the statute of limitations for filing claims; (b) waive application of the “discovery rule” for purposes of determining when a claim accrued; (c) require the council or a unit owner in an arbitration proceeding to assert a claim within a period shorter than the applicable statute of limitations; or (d) operate to prevent a council or unit owner from filing a law suit, initiating arbitration proceedings, or otherwise asserting a claim within the applicable statute of limitations.

A companion bill is pending in the Maryland Senate (SB 670).

The Maryland House of Delegates, by a vote of 99- 39, has passed House Bill 41, which would require residential  condominiums, homeowner associations and cooperative housing corporations to register annually with the Maryland Department of Assessments and Taxation. The proposed law would require registration information that includes the name and contact information for the property manager, or, if the community does not employ a property manager, a person designated to answer inquiries on behalf of the community.  Original language requiring the names and contact information for each officer and board member was removed in the final version of the bill.  Also deleted from the final version was a provision that would have permitted the Department to require additional information.  The final version of bill gives the Department authority to establish a registration fee not to exceed $10 per year. The bill proposes a$50 fine for failing to register.

House Bill 789, now pending in the Maryland General Assembly, would reduce the percentage of affirmative votes required to amend condominium bylaws.  Under Section 11-104(e) of the Maryland Condominium Act, condominium bylaws may only be amended upon a vote of two-thirds (66 2/3 percent) of the unit owners.  The proposed legislation would reduce this to 55 percent.  Significantly, it would also permit the bylaws themselves to establish an even lower percentage.  Additionally, the bill would limit the voting to members in “good standing, ” which is defined as not being more than 90 days in arrears as to assessments, and not in violation of any provision of the declaration, bylaws or rules and regulations.  This, of course, could have the affect of further reducing the number of votes required for a bylaw amendment.

The proposed legislation contains similar provisions to reduce the percentage vote required for bylaw amendments under Section 11B-116 of the Maryland Homeowners Association Act.

I will be speaking today (March 9) at the Maryland Construction Law Institute seminar at the Ecker Business Training Center, 6751 Columbia Gateway Drive, Columbia, Maryland 21046.  My subject we be “Condominium and New Home Warranties and Rights of Action.”

House Bill 500, now pending the Maryland General Assembly, provides for a proposed amendment to Section 11-104 of the Maryland Condominium Act that would allow a condominium’s bylaws to include “a restriction or prohibition on smoking tobacco products within the units or in the common elements.”  The proposed legislation would also amend Section 11-111 to authorize a council of unit owners to adopt a rule imposing such a restriction or prohibition.

The bill also would also add new Section 11B-111.7 to the Maryland Homeowners Association Act, which would permit a homeowner association to “include in its declaration, bylaws, rules, or recorded covenants and restrictions a provision that restricts or prohibits the smoking of tobacco products in any multi-unit dwelling or in the common areas.  A “multi-unit dwelling” is defined in the bill as “a town house, a row house, or any other individually owned dwelling unit that shares a common wall, floor, or ceiling with another individually owned dwelling unit.”

The proposed legislation would also amend Maryland Real Property Code Section 8-208 to permit landlords to include in written residential leases “a restriction or prohibition on smoking tobacco products within the dwelling unit or elsewhere on the premises.”

 

Proposed legislation now pending in the Maryland General Assembly would prevent condominium developers from limiting the ability of the council of unit owners and individual unit owners to bring construction defect claims for issues affecting the condominium.  Senate Bill 670 and House Bill 676 would prevent developers from including certain provisions in condominium governing documents or contracts of sale that act as an impediment to claims.  Specifically, the proposed legislation relates to claims alleging the failure of the developer to comply with (1) applicable building codes; (2) plans and specifications for the project approved by the local governing authority; (3) manufacturer’s installation instructions for building products used the condominium; and (4) warranty provisions under Sections 10-203 and 11-131 of the Real Property Article.

As to such claims, the developer may not include provisions that:

(a) Shorten the statute of limitations for filing claims;

(b) Waives application of the “discovery rule” for purposes of determining when a claim accrued;

(c) Requires the council or a unit owner in an arbitration proceeding to assert a claim within a period shorter than the applicable statute of limitations; and

(d) operates to prevent a council or unit owner from filing a law suit, initiating arbitration proceedings, or otherwise asserting a claim within the applicable statute of limitations. (more…)

House Bill 41 now pending in the Maryland General Assembly would require condominiums, homeowner associations and cooperative housing corporations to register annually with the Maryland Department of Assessments and Taxation. Similar to a bill that was filed during the 2016 session but did not pass, the proposed law would require registration information that includes the name and contact information for each officer, board member, and property manager. along with such other information as the Department might require.  The bill proposes a $3 registration fee, and a $50 fine for failing to register.

The Maryland Condominium Act, at Section 11‑109.2, makes mandatory an annual budget, and requires that the proposed budget be submitted to the unit owner membership at least 30 days before it is adopted.  It is also required that the budget contain seven specific line items.  These line items — income, administration, maintenance, utilities, general expenses, reserves, and capital items — must be set forth in the budget without exception and without to regard to any other line items that may be included.  The adoption of the budget is required to take place at an open meeting of the owners.  Here is the complete test of Section 11-109.2:

(a)        Preparation and submission.—The council of unit owners shall cause to be prepared and submitted to the unit owners an annual proposed budget at least 30 days before its adoption.

(b)        Items required to be included. – The annual budget shall provide for at least the following items:

(1)  Income;

(2)  Administration;

(3)  Maintenance;

(4)  Utilities;

(5)  General expenses;

(6)  Reserves; and

(7)  Capitol items.

(c)        Adoption. – The budget shall be adopted at an open meeting of the council of unit owners or any other body to which the council of unit owners delegates responsibility for preparing and adopting the budget.  (more…)

Legislation introduced in the Maryland General Assembly that would have prevented developers from including provisions in condominium governing documents that limit the developer’s liability for construction defects failed to reach a floor vote during the 2016 session. Senate Bill 250 and House Bill 1170 proposed to prohibit provisions in the declaration, bylaws or rules and regulations that limit the ability of a council of unit owners to file suit on behalf of itself or the unit owners or enforce warranty claims. The proposed new law would also have precluded limits on the rights of condominium councils or individual unit owners to bring claims relating to an alleged failure of the developer to comply with building codes, county approved plans and specifications, product manufacturer’s installation instructions, and other construction industry standards. Proposed new Section 11-134.1 of the Maryland Condominium Act would have prohibited provisions designed to prevent the filing of a claim within the applicable period of limitations or prevent claims from accruing pursuant to the “discovery rule.” The new law would also have precluded provisions requiring a vote of the unit owners approving the initiation of a claim, unless such a requirement is adopted after the unit owners assume control of the community from the developer.