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.
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.
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…)