by Raymond Daniel Burke | Jun 29, 2011
Unlike the Title 10 warranties that are applicable to the sales of all new homes in Maryland, including condominiums, the Title 11 condominium warranties “may not be excluded or modified” by any action or written document. In other words, the purchaser cannot be required to agree to eliminate these statutory warranties, or change the terms of the warranties as required by the statute. Any such agreement, written or otherwise, is invalid. This recognizes that a condominium purchaser is buying an interest in the common elements of a building, or perhaps a number of buildings, and is not have the same ability as a purchaser of an individual home to inspect the entire premises. It includes both the warranty on components of the common elements that is given by the developer to the council of unit owners, and the warranty on components of the individual units that is given by the developer to each individual unit owner purchaser. Therefore, the condominium warranties apply regardless of any agreement to exclude them or modify the content. However, the Title 11 condominium warranties are expressly limited so as not to apply “to any defects caused through the abuse or failure to perform maintenance by a unit owner or the council of unit owners,” and are also inapplicable to non-residential condominium regimes.
by Raymond Daniel Burke | Jun 6, 2011
Section 11-131 of the Maryland Condominium Act provides significant warranty protections for the purchasers for new condominium units. Section 11-131 (a) codified the ruling in Starfish, and established that new home warranties under Section 10-203 “apply to all sales by developers” of condominiums, and that “a newly constructed private dwelling unit means a newly constructed or newly converted condominium unit and its appurtenant undivided fee simple interest in the common areas.” Specific warranties are applicable to certain specified components of both individual units and the common elements, and they are the obligation of the condominium’s developer.
Section 11-131(c) of the Condominium Act provides “an implied warranty on an individual unit from a developer to a unit owner” that is expressly in addition to the warranties provided by Section 10-203. Indeed, the Court of Appeals has held that the Title 10 warranties and the condominium warranties under Title 11 run concurrently, and aggrieved purchasers may proceed under either or both. This additional implied warranty is limited to specifically identified components, commences with the transfer of title to that particular unit, and extends for a period of one year. The warranty makes the developer “responsible for correcting any defects in materials or workmanship in the construction of walls, ceilings, floors, and heating and air conditioning systems in the unit,” and further warrants that “the heating and air conditioning systems have been installed in accordance with acceptable industry standards.” The stated standards are “[t]hat the heating system is warranted to maintain a 70°F temperature inside” and “[t]hat the air conditioning system is warranted to maintain a 78°F temperature inside” when the outdoor temperature and winds are “at design conditions established by the Energy Conservation Standards Act … or those established by the political subdivision” in which the condominium is located. This establishes what is, essentially, a strict liability standard; i.e., if the existence of a defect is proven, the developer is responsible for damages consisting of the cost of correction.
Section 11-131(d) provides for “an implied warranty on the common elements from developer to the council of unit owners,” that is also expressly in addition to the implied warranties provided in Section 10-203. Like the warranty on the units, this common element warranty is also applicable only to specific components, consisting of “the roof, foundation, external and supporting walls, mechanical, electrical, and plumbing systems, and other structural components.” The reference to “external and supporting walls” encompasses not only the wall framing members, but cladding systems as well. The inclusion of “structural components” broadens the application of the warranty to any common element component that is part of the building’s structure and framing, as well as community amenities that have a structural capacity, such as paving, pools, sport courts, curbs, steps and sidewalks, and drainage areas. (more…)
by Raymond Daniel Burke | Apr 25, 2011
The Maryland General Assembly passed House Bill 679, which permits condominiums to adopt a requirement that unit owners maintain insurance on their units. The bill was signed into law by the Governor on April 12, 2011, and takes effect October 1, 2011. The law adds new Section 11-114.2 to the Maryland Condominium Act to provide that condominium bylaws may include a provision requiring that all unit owners maintain insurance on their units, and that unit owners provide evidence of such insurance to the council of unit owners on an annual basis. The measure further amends Section 11-104 to specifically authorize a condominium’s council of unit owners to amend the community’s bylaws to require unit owner insurance. Significantly, the law provides that such amendments require the affirmative vote of only 51% of the unit owner votes. This is an express exception to the requirement contained in Section 11-104(e)(2), which mandates that amendments to a condominium’s delclaration or bylaws have the support of at least two-thirds of the unit owner votes, and permits the governing documents to provide for a higher, but not lower, percentage. The new law permits an amendment to require unit owner insurance by a simple majority.
by Raymond Daniel Burke | Apr 13, 2011
Pursuant to legislation passed in the closing hours of this year’s session of the Maryland General Assembly, four (4) months of unpaid assessments due to condominiums and homeowner associations, up to a maximum of $1,200, will now receive priority over mortgages, but only those recorded after October 1, 2011. As reported in my post of March 18, legislation was pending in the General Assembly that would afford some limited relief to condominiums in the case of unpaid assessments for units that become lender-owned as a result of foreclosure. House Bill 1246 passed both houses on Monday, April 11, 2011, and once signed by the Governor, will take effect on October 1, 2011. The new law amends Section 11-110 of the Condominium Act to provide that four (4) months of unpaid assessments shall receive a priority over a first mortgage or deed of trust in a foreclosure action. However, there are significant limitations attached to the provision. Only the principal amount of regular assessments are given a priority. It does not extend to interest, costs of collection, late charges, fines, attorney’s fees, special assessments, or other charges that are normally considered part of the delinquency under the Contract Lien Act. Additionally, the Legislature imposed a $1,200 cap on assessments receiving a priority. Moreover, the priority only applies against mortgages and deeds of trust recorded after October 1, 2011. Lenders holding liens are also entitled to request written information from the condominium concerning the unpaid assessments, and, if the information is not provided, the priority is voided. (more…)
by Raymond Daniel Burke | Mar 18, 2011
Associations continue to suffer from an epidemic of unpaid assessments. Such delinquent owners are often also behind in their mortgage payments, which can lead to the lender foreclosing. Once the lender forecloses and takes title, it becomes responsible for assessments going forward, but not for past due assessments. As in last year’s session, the legislature is again considering a means of providing some relief to associations in these circumstances. The Residential Association Sustainability Act of 2011 is pending as Senate Bill 946 and House Bill 1246. It would provide that, in the case of a foreclosure on a mortgage or deed of trust on a condominium unit, the portion of a lien on the condominium unit that represents up to six months of specified unpaid assessments, including specified fees and costs, has priority over a first mortgage or deed of trust under specified circumstances. Accordingly, if the condominium has obtained a lien on the unit for unpaid assessments, six months of those assessments would constitute a priority over the mortgage or deed of trust. In other words, six months of assessment would be paid first out of a foreclosure sale before payment of the mortgage debt. (more…)
by Raymond Daniel Burke | Feb 16, 2011
When a lender fails to move forward with foreclosure on a delinquint unit, the association can be left with both a vacant property and no means to collect its assessements. However, the law may give condominiums and homeowner associations a way to fight back against lenders that have liens on delinquent properties in their communities, but refuse to take title and assume responsibility for unit owner oblgations to the association. A “quiet title” action may be the answer.
Condominium and homeowner associations continue to be impacted by the recession and depressed real estate values. Unit owners who are unable to keep up with their mortgage payments often become delinquent in their fee assessment payments as well. This, of course, damages the association, whose ability to operate is entirely dependent upon timely payment of assessments by all unit owners. And even when an association pursues all of it available statutory remedies, including placing a lien on the unit, the properties are usually subject to a mortgages, home equity lines, and other secured loans from banks and lending institutions that have first priority. This prevents the association from foreclosing and taking ownership for purposes of selling the unit. But a further complication arises when the lender holding the superior lien fails to move forward with it own foreclosure on such properties. (more…)
