Md. SC sends case over condo repairs back to lower court

Jessica M. Karmasek May 3, 2012, 2:30pm


ANNAPOLIS, Md. (Legal Newsline) - Maryland's high court ruled this week that the state's Consumer Protection Act could apply to disclosures made in a resale certificate by a condominium association and its management company during the sale of a unit.

The Maryland Court of Appeals filed its 34-page opinion Monday, reversing a grant of summary judgment to a group of 25 former and current condo unit purchasers and remanding the case to the Cecil County Circuit Court.

The case involves a long-standing dispute between Tomes Landing Condominium Association Inc., located in Port Deposit, Md., and MRA Property Management Inc. and the group of purchasers.

The unit purchasers had been granted partial summary judgment in the amount of $1 million against the association and the MRA in Cecil Circuit Court, on the ground that the operating budgets that the MRA and the association supplied as part of a "resale package" provided to the purchasers violated sections of the Maryland Consumer Protection Act.

The circuit court ruled the budgets had the "capacity, tendency and effect of misleading the movants in connection with their purchases of the condominiums" in Tomes Landing.

The MRA and the association appealed the grant of partial summary judgment to the Court of Special Appeals, but, while that appeal was pending, both the MRA and the association, as well as the unit purchasers, filed petitions for review with the state's high court.

The Court vacated the grant of summary judgment and opined that the Consumer Protection Act does apply, but that the MRA and the association were required to disclose only approved, not proposed or contemplated, capital expenditures in the operating budgets they provided to prospective buyers.

The Court remanded the case to consider whether the MRA and the association violated a section of the Maryland Condominium Act by not disclosing conditions that could constitute building or health code violations.

Both the MRA and the association, as well as the unit purchasers, then filed motions for reconsideration with the Court.

The push to file the lawsuit was a special assessment that was imposed on all unit owners in December 2004.

The assessment required them to pay for water damage to the buildings allegedly resulting from improper construction and flashing, which caused water to seep behind the building facades and threaten the structural integrity of the buildings.

The owners, most of whom were forced to pay an additional $30,000 to $40,000 because of the repairs, argued that the extent of the water damage had been known to the MRA and the association since 1996.

"Analyzing the actions of MRA and the Association under the principle from Hoffman, the operating budgets provided by MRA and the Association could have sufficiently implicated them in the entire transaction so as to impose liability under the Consumer Protection Act, given that every plaintiff averred in his or her affidavit that he or she would not have purchased a unit if the budget provided by MRA and the Association had disclosed the expenses necessary to correct the problems with the condominium buildings," Judge Lynne A. Battaglia wrote in the Court's opinion this week.

"Moreover, the statutory obligation to provide materials to prospective buyers injects MRA and the Association into the sales transaction as central participants because, were they to have failed to provide these materials, the contract for sale would not have been enforceable."

However, the Court said there exists a "dispute of material facts" as to whether the operating budgets provided by the MRA and the association to the unit purchasers constituted unfair and deceptive trade practices under the Consumer Protection Act.

"Although the unit purchasers assert that there is no dispute as to any material facts because the record shows that MRA and the Association knew of the problems with water leakage as early as 1996 from a memorandum from the developer regarding leaks and knew of the widespread nature of the problem and the potential cost of repairs as early as 2000, MRA and the Association argue that the record indicates that they only became aware of the full extent of the damage, and the massive repairs that were required, when a consulting firm delivered its report of major structural damage in August 2004," Battaglia wrote.

"Additionally, MRA and the Association contend that the record reflects that, because they had been seeking financing from a private lender to cover the repair cost, they were not aware until November 2004, when they exhausted the options for private financing, that they would need to implement a special assessment."

The per se deception found by the circuit court was in error, the Court said, because an inference could be drawn from a declining repair budget either that the property was in good condition, because not much money needed to be spent on it, or that the property was in poor condition, because not much money was being spent on it.

"Therefore, the entry of summary judgment as a matter of law was inappropriate," Battaglia concluded.

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