Senate Bill 374 and House Bill 250, pending in the Maryland General Assembly, would expand the portion of a condominium’s lien that has a priority over a first mortgage or first deed of trust. Under the current provisions of Section 11-110 of the Maryland Condominium Act, a portion of a condominium’s lien for delinquent assessments has a priority consisting of four months of assessments limited to a maximum of $1,200. Additionally, it is limited to regular assessments only, and my not include (1) interest; (2) costs of collection; (3) late charges; (4) fines; (5) attorney’s fees; (6) special assessments; or (7) “any other costs or sums due under the declaration or bylaws of the condominium or as provided under any contract, law or court order.” The proposed law would expand the priority to six months of assessments, eliminate the maximum limitation, and allow inclusion of the list of seven items that are now expressly precluded.
By a vote of 139 – 0, the Maryland House of Delegates has passed legislation that would make condominium unit owners responsible for a larger amount of the insurance deductible when the condominium’s policy pays for damage from an issue that originates in the owner’s unit. Under Section 11-114, a condominium must maintain property insurance on the entire property, including the common elements and the units, except for improvements and betterments installed in the units by the owners. Where damage originates from a component of a unit, the liability of the unit owner is limited to the insurance deductible under the condominium’s policy up to a maximum of $5,000. HB 249 would double the unit owner responsibility to $10,000. The bill also adds clarifying language with regard to damage that is a common expense. The current law provides that any damage originating from the common elements is a common expense. HB 249 provides that this also would include damage originating from “an event outside of the condominium units and the common elements.” The bill now moves onto the Senate Judiciary Committee.
Legislation pending in the Maryland House of Delegates seeks to supplement a prior revision that applied the percentage required for approval of amendments of condominium bylaws to only the number of unit owners “in good standing” — meaning unit owners not more than 90 days in arrears in payment of assessments of other charges. — rather than to the total number of owners. A change to the Section 11-104 of the Maryland Condominium Act adopted during 2017 provides that, notwithstanding what the bylaws themselves require, the bylaws may be amended by the affirmative vote of 60% of the unit owners in good standing, “or a lower percentage if required by the bylaws.” This had the effect of reducing the number of votes required to the extent that some unit owners were not “in good standing.” House Bill 207 would go further and provide that any lower percentage contained in the bylaws would also be applied only to “unit owners in good standing.” In other words, if the bylaws call for a percentage lower than 60%, that lower percentage requirement would also be determined only by the number of “unit owners in good standing” and not to the entire number of owners. The bill also would affect homeowners associations by making the same amendment Section 11B-116 of the Maryland Homeowners Association Act.
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…)
House Bill 68 and Senate Bill 379, now pending in the Maryland General Assembly, would prohibit condominium developers from including language in the governing documents that would limit the power of a council of unit owners to bring suit. Section 11-109(d)(4) of the Maryland Condominium Act presently gives a council of unit owners authority “[t]o sue and be sued, complain and defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more unit owners on matters affecting the condominium.” The proposed legislation would confirm this authority “notwithstanding any provision in the declaration, bylaws, ,or other instrument made by a developer in accordance with this title.” The pending bills would, however, permit the developer to include a requirement for mediation or arbitration of any claims brought by the council against the developer. Similarly with regard to the authority of a council of unit owners under Section 11-109(d)(19) to enforce the Section 11-131 implied warranties, the proposed legislation would preclude limits on this power, while permitting the governing documents to provide for mediation or arbitration of such warranty claims.
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.
Governor Larry Hogan has signed into law House Bill 575, which permits a condominium declaration to provide for the suspension of the use of parking or recreational facility common elements by a unit owner who is more that sixty (60) days in arrears in the payment of assessments. The new law, which takes effect on October 1, 2018, will add new Section 11-103(d) to the Maryland Condominium Act, requiring that, prior to any suspension of privileges, the council of unit owners must first send a demand letter giving the unit owner ten (10) days in which to pay the arrearage, or request a hearing to contest the suspension. If a hearing is requested, the council must provide notice and hold the hearing before a suspension of privileges may be implemented. The new law further provides that a condominium declaration may be amended to add or repeal such a provision for suspension of privileges by the affirmative vote of sixty percent (60%) of the unit owners. House Bill 575 was passed unanimously by both the House of Delegates and State Senate.
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.
Both houses of the Maryland General Assembly have passed legislation that would prevent condominium developers from including provisions in the project’s governing documents that limit the ability of unit owners to bring claims for construction defects. Senate Bill 258 and House Bill 77 would protect 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.
There has been a trend among condominium developers to include language in the governing documents and sales contracts that changes the laws that are normally applicable as to when a claim accrues and when it must be brought. The identical bills passed by the General Assembly would counter this trend by adding new Section 11-134.1 to the Maryland Condominium Act. The House vote was 137-0, and the Senate vote was 43-2.