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.
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 time that a claim accrues establishes the commencement of the running of the applicable statute of limitations, within which a claim must be instituted.
In Maryland, the accrual of a cause of action is generally governed by the “discovery rule,” which provides that a claim accrues when the party discovers or knows of the cause of action, or should have discovered or known of it in the exercise of reasonable diligence. Theoretically, this means that a cause of action for construction defects could be “discovered” many years after the project was built; including up to the 20-year statute of repose, after which claims are precluded. As a result, the discovery rule is often a target for revision in condominium documents.
The general statute of limitations in Maryland for common law claims is three-years from accrual of the claim. The statutory warranties have shorter limitations periods, and contractual warranties and guarantees may contain a different period of limitations. Provisions in governing documents and sales contracts are sometimes used to create a shortened period of limitations for all causes of action, regardless of origin.