Select Page

Maryland House of Delegates Passes Legislation That Would Drastically Limit The Liability Of Condo Councils In Claims For Fraudulent Or Inaccurate Resale Certificates

By a vote of 140-0, the Maryland House of Delegates passed an amended version of HB1007, which, as discussed in my prior post, was intended to limit the fee charged by condominium councils of unit owners for providing required information in connection with the resale of a unit.   Most significantly, the amended version limits the liability of a council of unit owners for errors and omissions in the content of the resale certificate to the amount of the fees paid for the certificate.  It makes not distinction as to whether such errors or omissions are intentional.  This is contrary to, and is seemingly in response to, a ruling of the Maryland Court of Appeals.  In a unanimous opinion filed on April 30, 2012, the  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 the House would abrogate this ruling, and limit the council’s liability to “the amount paid for the certificate.”  This would leave defrauded purchasers with recourse only against a management company.

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.  The original bill set the had set the limit at $250, but the figure was amended before adoption.

An amendment also added language providing that, in addition to this fee, a condominium council is entitled to “a reasonable fee not to exceed $100 for an inspection of the unit owner’s unit,” and another fee, also not to exceed $100 “for ensuring completion of the inspection of the unit owner’s unit and preparation and delivery of the certificate” where delivery is made “within 14 days after a written request by a unit owner.”

But the most significant amendment by far is the inclusion of language providing 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.”  The language clearly would insulate the council from claims of negligence or negligent misrepresentation.  Moreover, it does not differentiate between an intentional or accidental omissions, thereby indicating that it is excusing fraud and unfair and deceptive trade practices as well.

As discussed in my prior blog post, the bill included similar provisions for homeowner associations, and similar amendments were included in the approved version.