The Maryland General Assembly is again considering legislation that would prevent residential condominium developers from including certain provisions in the project’s governing documents or sales contracts that limit the developer’s liability for construction defects. Senate Bill 570 and House Bill 829 would 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 preclude 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 prohibit 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 preclude 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.
The proposed amendment to Section 11-109(d)(4) of the Maryland Condominium Act would make clear that the right of a condominium council to sue on behalf of itself or two or more unit owners on matters affecting the condominium shall be preserved “notwithstanding any provision in the declaration, bylaws, or rules and regulations.” In other words, a developer cannot limit the council’s right to sue by including a provision in the governing documents, and any such provisions are void unenforceable.
Similarly, the proposed amendment to Section 11-109(d)(19) would establish that the right of a council of unit owners to enforce the implied warranties under Section 11-131 remains “notwithstanding any provision in the declaration, bylaws, or rules and regulations.” Accordingly, a provision in the governing documents that limits the council’s right to enforce the statutory warranties are, likewise, void and unenforceable.
Proposed new Section 11-134.1(b) would provide that any provision in the declaration, bylaws or initial contract of sale or other conveyance document shall be unenforceable if the provision (1) purports to shorten the statute of limitations applicable to any claim; (2) purports to waive the application of the “discovery rule” or other accrual date applicable to the claim; (3) requires that a claim be submitted to arbitration within a period shorter than the statute of limitations applicable to the claim; or (4) operates to prevent a unit owner or the council from asserting a claim within the applicable statute of limitations. The “discovery rule” is the rule of law that provides that a claim accrues, and the statute of limitations begins to run, when it is discovered or should have been discovered in the exercise of reasonable diligence. This prohibition would be applicable to any claim by the council or individual unit owners that alleges a failure to comply with (a) applicable building codes; (b) county-approved plans and specifications; (c) manufacturer’s installation instructions; or (d) other applicable construction industry standards.
Finally, proposed new Section 11-134.1(c) would provide that any provision of a declaration, a bylaw, or initial contract of sale or other instrument of conveyance “that requires the council of unit owners to obtain a vote of unit owners as a precondition to the institution or maintenance of a lawsuit, an arbitration, a mediation, or a simialr proceeding shall be unenforceable unless the council of unit owners adopts the provision on a date following the date on which the unit owners, other than the developer and its affiliates, first elect a controlling majority of the members of the board of directors.” Such a provision adopted by the unit owners shall be accomplished pursuant to a procedure that is in accordance with the requirements for amending the declaration or bylaws.
A similar bill passed the Maryland Senate during the 2014 legislative session, but never made it out of committee for a vote in the House.
All of these proprosed provisions apply only to residential condominiums.