by Raymond Daniel Burke | Apr 27, 2011
The recent session of the Maryland General Assembly passed House Bill 887, which limits the right of recission belonging to purchasers of a new condominium units. The measure, which takes effect October 1, 2011, amends Section 11-126(e) of the Maryland Condominium Act. That statute gives new condominium purchasers the right to rescind their contracts after receiving certain condominium documents, or if the documents are amended after execution of the sales contract. The new law requires purchasers who receive amended condominium documents to demonstrate that they have a right to approve the amendment, and that the amendment “materially and adversely” affects their rights. The purchaser’s reasons must be stated in writing.
Under current law, a purchaser of a new condominium unit has an absolute right to rescind their sales contract within 15 days after receiving the documents and information required to be provided to all new condominium purchasers. The purchaser is not required to state any reasons for the rescission. Section 11-126(b) contains the long list of materials that must be furnished to a new condominium purchaser, which are normally part of the Public Offering Statement for the condominium. Under Section 11-126(d), the material provided cannot be amended “without the approval of the purchaser if the amendment would affect materially the rights of purchaser. There is are exceptions for amendments required by a governmental authority or public utility, or “if the amendment is made as result of actions beyond the control of the vendor or in the ordinary course of affairs of the council of unit owners.” In the event of an amendment, the purchaser has a right to rescind the contract with 5 days of receipt of the amendment.
Under the new law, purchaser maintain their right to rescind after receiving the required documents, and may still do so without stating a reason. However, a purchaser seeking to rescind after an amendment of the documents must state reasons in writing showing that (1) that they have approval right; that is, that the amendment is not within one of the exceptions that do not require purchaser approval; and (2) that “the amendment affects materially and adversely the rights of the purchaser.
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 | Apr 11, 2011
Condominiums have previously been disqualified from FHA financing as a result of leasing restrictions contained in the community’s governing documents. FHA regulations have provided that a mortgatge is not eligible for FHA insurance if the mortgaged property is subject to legal restrictions on conveyance, which includes a restrtiction on leasing found in many condominium declarations or by-laws. 24 CFR 203.41(a)(3). The intent is to promote housing opportunities without undue restrictions. Condominium governing documents often permit leasing of units, but prohibit short term leases of less than six months. Such provisions, which are intended to protect marketability and stability, have run afoul of the FHA requirement that there be no legal restriction on conveyance.
Recognizing that restrictions on leasing are common in condominium communities, and are intended to promote stable property values, on March 18, 2011, the FHA issued a waiver. The waiver, which runs for a period of one year, removes “lease” from the definition of conveyance contained in the regulation. Accordingly, mortgages on condominiums with lease restrictions will qualify for FHA financing until March 18, 2012. The following requirements are applicable:
All leases must be in writing and subject to the declaration and by-laws of the condominium project.
The condominium association may request and receive a copy of the sublease or rental agreement.
The condominium association may not require that a prospective tenant be approved by the condominium association and/or its agent(s), including, but not limited to, meeting creditworthy standards.
The condominium association may request the name(s) of all tenants, including the tenant’s family members who will occupy the unit.
Unit owners are prohibited from leasing their units for an initial period of less than 30 days.
The condominium association may establish a maximum allowable lease term, e.g., six months, twelve months, etc.
The condominium association may establish a maximum number of rental units within the project; however, the percentage of rental units may not exceed the current FHA condominium project owner-occupancy requirement. (The FHA requires that at least 50% of units be owner-occupied).
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…)
