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Bills Proposed In Maryland General Assembly To Limit Restrictions Imposed By Condominium Developers On The Ability Of The Council And Unit Owners To Assert Construction Defect Claims

Proposed legislation now pending in the Maryland General Assembly would prevent condominium developers from limiting the ability of the council of unit owners and individual unit owners to bring construction defect claims for issues affecting the condominium.  Senate Bill 670 and House Bill 676 would prevent developers from including certain provisions in condominium governing documents or contracts of sale that act as an impediment to claims.  Specifically, the proposed legislation relates to claims alleging the failure of the developer to comply with (1) applicable building codes; (2) plans and specifications for the project approved by the local governing authority; (3) manufacturer’s installation instructions for building products used the condominium; and (4) warranty provisions under Sections 10-203 and 11-131 of the Real Property Article.

As to such claims, the developer may not include provisions that:

(a) Shorten the statute of limitations for filing claims;

(b) Waives application of the “discovery rule” for purposes of determining when a claim accrued;

(c) Requires the council or a unit owner in an arbitration proceeding to assert a claim within a period shorter than the applicable statute of limitations; and

(d) operates to prevent a council or unit owner from filing a law suit, initiating arbitration proceedings, or otherwise asserting a claim within the applicable statute of limitations.

The statute of limitations is the period in which are party is required to assert a claim after it accrues.  Maryland’s general period of limitations is three (3) years.  Statutory warranties applicable to condominium projects  have shorter periods of limitations as provided in each statute.

The “discovery rule” provides that a claim accrues, for limitations purposes, at the time it was discovered or should have been discovered in the exercise of reasonable diligence.  The proposed legislation is concerned with provisions that may result in the time in which a claim must be filed expiring before it is even discovered.

Where arbitration of claims is required by the condominium governing documents or the contract of sale, the proposed legislation would ensure that the normal period of limitations applies for asserting such claims.

The warranties under Section 10-203 are applicable to all new home sales, including condominiums.  They require that the project be free from faulty materials; constructed according to sound engineering standards; constructed in a workmanlike manner; and fit for habitation.  The warranties under Section 11-131 are applicable only to condominiums.  They require that the developer be responsible for the correction of defects in certain components of the common elements and the individual units.