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Both Houses of the Maryland General Assembly Pass Versions Of Bill Affecting Resale Disclosures

Versions of a bill that was originally intended to limit fees charged by condominium associations for providing resale certificates has passed both houses of the Maryland General Assembly with amendments that limit the association’s liability for inaccurate information contained in those certificates.  The Maryland Senate has joined the House of Delegates in passing an amended version of House Bill 1007, which limits the liability of a council of unit owners or a homeowners association for errors and omissions in the content of the resale certificate to the amount of the fees paid for the certificate.  As originally proposed, HB 1007 would have limited the fee charged by condominium councils of unit owners for providing required information in connection with the resale of a unit.  It also provided that required resale disclosure information to be furnished by a homeowners association as part of the sale of a home in the community.  These requirements were retained in the amended bill passed by both houses, with an amendment that limits the fees charged to “the lesser of $175 or the actual cost.”  But the amended version goes much further.  In addition to providing for two additional fees associated with the resale process, the approved version of the bill provides that “[a]ny liability of the council of unit owners for an error or omission in the certificate shall be limited to the amount of the fees paid for the certificate.”  This same limit on liability applies to the certificates now required to be furnished by homeowner associations. 

Under Section 11-135(c) of the Maryland Condominium Act, within 20 days after receiving a written request from a unit owner, the council of unit owners is required to provide a certificate containing information concerning the community that is required to be disclosed to a potential purchaser under that section of the statute.  The law presently provides that the council may charge the unit owner for its costs in furnishing the material.  The proposed legislation would limit this charge to the lesser of $175 or the actual costs.  Under Section 11B-106(b) of the Maryland Homeowners Association Act, a homeowner who is selling their property is required to furnish the potential purchaser with certain information about the community.  The proposed legislation would add a new subsection (c) to the statute that would require the homeowners association to provide that information upon request of the selling homeowner.  It would impose the same limit of the fee charged for providing required disclosure material.

The approved bill also provides for two additional fees, not to exceed $100, for an inspection of the unit, and “for ensuring completion of the inspection of the unit owner’s unit and preparation and delivery of the certificate.”  How the additional fee charged for  “the preparation and delivery of the certificate” differs from the original fee related the obligation to “furnish a certificate necessary to enable the unit owner to comply with” the disclosure requirements is somewhat of a mystery.  These same additional fees may also be charged by homeowner associations.

The big news, however, is the inclusion of the limit on liability of both councils of unit owners and homeowner associations.  As discussed in prior posts, in a unanimous opinion filed on April 30, 2012, the Maryland Court of Appeals, in the case of MRA Property Management, Inc., et al. v. Armstrong, established that provisions the Maryland Consumer Protection Act apply to the information contained in a condominium resale certificate, and a council of unit owners and property manager can be liable for unfair and deceptive trade practices if the information has a tendency to mislead the purchaser, even though they are not party to the sales contract, and even if they have otherwise complied with the condominium resale disclosure requirements contained in Section 11-135 of the Maryland Condominium Act.  The bill passed by both houses, if signed into law by the Governor, would modify this ruling, and significantly limit the council’s liability to “the amount paid for the certificate.”

The proposed legislation makes no distinction for “error and omissions” that are intentional or merely negligent.  That issue will likely have to be fought out in the courts.  The proposed new law would not, however, limit the liability of a management company for erroneous information in a resale certificate.  The versions of the bills need to be reconciled before a final approved version is produced.