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Bill In Maryland General Assembly Would Preclude Lien Foreclosures From Including Amounts Due For Fines and Related Fees

A bill now pending in the Maryland Legislature would prevent condominium’s, cooperative housing corporations, and homeowner associations from including in a lien foreclosure action  amounts due for fines and attorney’s fees incurred in recovering fines.  Instead, under House Bill 286,  foreclosure of a lien could only involve delinquent monthly or special assessments.   The bill proposes to amend Section 14-204 of the Maryland Contract Lien Act as it relates to common ownership communities.  Specifically, the proposed legislation provides that a condominium, cooperative housing corporation, or a homeowners association may foreclose on a lien against a unit owner, coop member, or lot owner only if the damages secured by the lien (1) “consist solely of delinquent monthly or special assessments;” and (2) “do not include fines imposed by the governing body or attorney’s fees related to recovering the fines.” It is expressly provided that this provision “does not preclude a governing body from using any other means to enforce a lien against a unit owner, member, or lot owner for delinquent monthly or special assessments.”  In other words, fines and related attorney’s fees could still be pursued, for example in a suit for damages, but could not be included as part of a lien foreclosure.

It appears that the intent of the bill is to prevent foreclosure on liens that arise entirely from failure to pay fines that have been imposed by the community.  However, the failure to define the term “fine” may leave it open to broader interpretation.   For example, in the absence of a definition of fine, it could be asserted that late charges that are added for unpaid assessments constitute a form of “fine,” and, therefore, may not be included in the lien foreclosure amount.  Such an argument is strengthened by the fact that the bill also does not define delinquent monthly or special assessments as including any interest and late charges incurred.

Additionally, the attorney’s fees that are precluded are only those that are “related to recovering the fines.”  Accordingly,the inclusion of attorney’s fees arising from recovering assessments would continue to be permitted.  But, if it is argued that  late charges are fines that are added to delinquent assessments are “fines” that may not be included, some related attorney’s fees would be precluded as well.