House Bill 069 and Senate Bill 379, now pending in the Maryland General Assembly, would apply the condominium implied warranty from a developer to all common elements, and not just those enumerated in the statute, along with any component that the council of unit owners is required to maintain, repair or replace, regardless of whether it is defined as a common element in the governing documents. Under the current provisions of Section 11-131(d) of the Maryland Condominium Act, there is an implied warranty from a condominium developer to a council of unit owners, which applies to “the roof, foundation, external and supporting walls, mechanical, electrical, and plumbing systems, and other structural elements.” The proposed law would establish that the implied warranty applies “to all common elements, including” those listed in the current law. Additionally, the bills propose that the implied warranty is applicable “to any portion of the condominium that the council of unit owners is required to maintain, repair, or replace under the [governing documents] regardless of whether the portion of the condominium is designated as a unit or a common element.” (more…)
A bill introduced in the Maryland House of Delegates would increase the number of months of unpaid condominium assessments that have a priority over mortgages in the event of foreclosure. HB 250 would amend Section 11-110(f) of the Maryland Condominium Act to provide that six months of unpaid assessments for common expenses have a priority over a first mortgage or first deed of trust. The current law provides that four months of unpaid assessments have priority. The proposed law would also significantly expend the charges that can be included in the priority lien. Under the existing provisions, the priority portion of a condominium’s lien may not include (1) interest; (2) costs of collection; (3) late charges; (4) fines; (5) attorney’s fees; (6) special assessments; and (7) any other costs or sums due under the declaration or bylaws, or as provided by any contract, law or court order. HB 250 would entirely reverse this limitation, and provide that all seven of these items may be included in the portion of a condominium’s lien that has a priority.
The bill has been assigned to the Environmental and Transportation Committee, and will have its first hearing on February 12, 2019 at 1:00 pm.
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.