On June 23, 2017, the Court of Appeals of Maryland issued the long awaited decision in Elvaton Towne Condominium Regime II, Inc., et al. v. William Rose, et ux, 217 Md. Lexis 449 (2017), which prohibits any Maryland Condominium from restricting a unit owners’ right to park in the community in order to enforce its collection policy. This case was originally heard by the Court of Special Appeals, which issued a decision on April 21, 2016; however, because it was unreported, that decision only applied to the parties involved and did not apply to every condominium in the State of Maryland. Now that Maryland’s highest court has spoken, all condominiums in the State must comply with the decision or risk being sued by a condominium owner who is denied access to the parking areas in her community.
HISTORY OF THE ELVATON CASE
The Elvaton case originated from a dispute between property owners in the Elvaton Towne Condominium, located in Glen Burnie, who were denied use of the parking areas and pool because they were delinquent in paying their condominium fees. The Condominium recorded a statement of lien and filed suit in the District Court against the Roses, who were notified that they were prohibited from use of the common area pursuant to a “suspension of privileges” rule adopted by the Condominium. Before the case was heard in District Court, the Roses filed a declaratory judgment action in the Circuit Court, asking that the court declare the “suspension of privileges” rule invalid. Ultimately, the Circuit Court, the Court of Special Appeals, and now the Court of Appeals agreed with the Roses and invalidated the policy.
REASONS FOR THE COURT’S DECISION
The reason why the policy is invalid is because every unit owner in a condominium has an undivided interest in the common areas of the condominium. This means that each of them own a share of these areas and can use then in common with all of the other owners in the condominium. The right to use the common areas may be restricted, but only by language in the condominium’s declaration. In support, the Court relied primarily on Section 11-108(a) of the Condominium Act, which states that common elements may be used only for the purposes for which they were intended and, “except as provided in the declaration, the common elements shall be subject to mutual rights of support, access, use, and enjoyment by all unit owners.”
HOW TO LEGALLY ADOPT A SUSPENSION OF PRIVILEGES RULE
The Court further noted that a suspension of privileges rule could be effective, but only if it was authorized by a condominium’s declaration. Since most condominium declarations do not have such a policy, the only way to legally enforce such a policy is to amend your declaration to include such language. However, because most declarations require the approval of 80 or 90 percent of the total members of the condominium to amend the document, in 2018 the Maryland Legislature amended Section 11-103 of the Real Property Article to allow 60% of the members to amend the declaration to allow a suspension of privileges rule, provided it is adopted by 60% of the “total eligible voters of the condominium.” This is still very difficult to approve, and should only be attempted after meeting with legal counsel to review the process and ensure that it is followed.
CONSEQUENCES OF NON-COMPLIANCE
Because Elvaton is a reported decision by Maryland’s highest court, it must be followed by all Maryland condominium associations. If you do not comply, you risk legal action being filed against your association under Section 13-301 of the Maryland Commercial Law Article, known as the Consumer Protection Act. Under that section, anyone who engages in an unfair and deceptive trade practice in the collection of a debt by making false or misleading statements that have the effect of misleading or deceiving consumers may be sued for damages by either the attorney general for the State of Maryland, or by private counsel. In any such action, damages for the loss of use of the parking lot might be awarded, along with reimbursement of any towing fees incurred, and reasonable attorney fees will be awarded to the unit owner. These fees could be many thousands of dollars. Furthermore, it is conceivable that a mini-class action could be brought on behalf of a group of unit owners in your condominium and substantial damages could be awarded as a result.
APPLICATION TO HOMEOWNER’S ASSOCIATIONS
Because Elvaton was based on Section 11-108(a) of the Condominium Act, it does not apply to a Maryland Homeowners Association. In the case of an HOA, the common areas are owned by the association itself. Unlike a condominium, the owners do not hold an “undivided interest” in the common areas along with every other owner in the association. Therefore, use of them can be restricted without amending the declaration of covenants, which is a difficult (almost impossible) thing to do. However, before enforcing such a policy, I recommend that you carefully review your HOA documents and consult with legal counsel to ensure that the policy can be legally adopted and enforced.
WHAT TO DO IF YOU HAVE A SUSPENSION OF PRIVILEGES RULE
My advice to any condominium association that still has a suspension of privileges rule is to immediately suspend the rule. You need to find other ways to collect delinquent assessments, which include filing liens, suspending voting privileges (which is still valid), and filing District Court collection actions. There are ways to enforce your fees that do not require the suspension of parking or of use of the common areas, and those must be explored and utilized.
Written by: David C. Gardner