by Raymond Daniel Burke | Nov 3, 2011
In its recent decsion in MRA Property Management, Inc., et al. v. Armstrong, No. 93, Sept. Term 2007, filed on October 25, 2011, a majority of the Maryland Court of Appeals held that the Maryland Consumer Protection Act applies to purchases of condominium units with respect to the information required to be provided by a council of unit owners in the resale certificate. The Court ruled that, where a council of unit owners and its property management company violate the resale certificate disclosure obligations imposed by Md. Real. Prop. Code Ann. Sec. 11-135, “they engage in unfair and deceptive trade practices ‘in the sale of consumer realty.'” Such a violation occurs where the resale certificate states that there are no known violations of the building code if there is information establishing knowledge of building defects. The Court specifically held that such a violation of the Consumer Protection Act can occur even though the defendants were not parties to the sale of the unit, were not “merchants,” and where there had been no code violation citations issued by the county. (more…)
by Raymond Daniel Burke | Aug 30, 2011
I obtained a noteworthy ruling this morning in the Circuit Court for Montgomery County while representing a condominium unit owner in a construction defect suit. The sales agreement provided for arbitration of claims, and contained a provision that precludes the arbitration panel from awarding attorney’s fees. Under Md. Cts. & Jud. Proc Code Ann. Sec. 3-221, an arbitration award cannot include attorney’s fees unless provided for in the arbitration agreement.
The complaint filed on behalf of the unit owner included a cause of action under the Maryland Consumer Protection Act, which provides for the award of attorney’s fees. The Court accepted our argument that, because the damages that can be awarded under the Consumer Protection Act could not be awarded in arbitration, the Consumer Protection Act claim was not subject to the arbitration agreement, and can proceed in Court before a jury.
by Raymond Daniel Burke | Jul 12, 2011
The Maryland General Assembly enacted new legislation aimed at helping to resolve disputes concerning the election of officers and board members of a homeowners association. Senate Bill 532 amends Section 11B-115 of the Maryland Homeowners Association Act to give the Consumer Protection Division of the Attorney General’s Office authority to resolve election disputs. A lot owner who believes that the governing body of an HOA has failed to comply with the election procedures under the association’s governing documents can submit their dispute to the Division for resolution if any one of five specific matters are at issue: (1) Notice about the date, time, and place for the election; (2) the manner in which a call for nominations for the board was made; (3) the format of the election ballot; (4) the format, provision, and use of proxies during the election process; or (5) the manner in which a quorum is determined for election purposes. The new law take effect on October 1, 2011.
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 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.
