Maryland’s High Court strikes Condominium’s Rule Restricting Access to Common Areas
By Anthony Clark
On June 23, 2017, the Maryland Court of Appeals, Maryland's highest court, ruled against a condominium association in the case of Elvaton Towne Condominium Regime II, Inc. v. Rose, No. 33, Sept. 2016 in its attempt to enforce a rule that restricted an owner's privileges in the condominium and right to access to their interest in the condominium property due to their failure to pay delinquent assessments. The subject rule was promulgated by the condominium's board through its rulemaking authority.
The Court reviewed the rule under the Maryland Condominium Act (the “Act”) and provided “[r]estricting a condominium unit owner's access to communally-held property is a significant infringement of the owner's property rights—so significant that the General Assembly found it appropriate to require that such a restriction may be authorized only through a provision in the declaration, as evinced by the text of §11-108(a)” of the Act.
Here, the Court affirmed both lower courts' (the Circuit Court for Anne Arundel County and the Maryland Court of Special Appeals) rulings that the restriction of access to communal property was a indeed a taking by confirming that the condominium's “restriction imposed upon” the owners “adversely affected their property interests in two of the common elements of Elvaton that other residents of Elvaton continued to enjoy: the parking lot and the pool.”
The Opinion further provides that the Board exceeded its authority under §11-108(a) of the Act and the Declaration in stating that the “Declaration does not provide for an exception that would restrict access to the common elements due to an alleged failure to pay fees. Thus, the “suspension-of-privileges” Rule is invalid as beyond the Council's power.”
Impact for Associations:
The Court made it clear that condominiums may still enact reasonable rules and regulations in accordance with the Declaration and Bylaws, and applicable statutes (the Maryland Condominium Act and Maryland HOA Act). However, the Elvaton case makes it more difficult for condominiums to use rule making authority to restrict of privileges and access to community property as an enforcement tool for collection of delinquent assessments and deterrent for future violations and non-payment of assessments.
How then do associations protect themselves from liability under this new case? A strategy to avoid this conundrum is to review and possibly amend governing documents , collection, parking and enforcement policies and proceed cautiously in making sure that an Association's day-to-day enforcement mechanisms are in line with its governing documents and applicable statutes. We also recommend educating board members and management about this case law.
If you would like our office to review your governing documents and policies or schedule a conference to discuss these issues for your association, please feel free to contact any of our Maryland community association attorneys.
How does this decision affect neighboring jurisdictions?
Maryland law is persuasive in these neighboring jurisdictions. Currently, the authority to restrict privileges and access to communal property due to non-payment of assessments in these jurisdictions is as follows.
Delaware: by Chad J. Toms
Under 25 Del. C. § 81-302(a)(11), which is applicable to many but not all* common interest communities in Delaware, an Association may:
“…suspend any privileges of unit owners, other than the right of a unit owner to vote on any matter submitted to a vote of unit owners, or services provided to unit owners by the association (other than those necessary for the habitability of the owner's unit) for non-payment of assessments; may impose charges for late payment of assessments; and, after notice and an opportunity to be heard, may levy reasonable fines for violations of the declaration, bylaws and rules of the association.”
This statutory provision provides an Association with broad powers to suspend privileges for unpaid assessments so long as the suspended privilege is not related to a unit owner vote or a service necessary for the habitability of a unit. *The application of this section of the code requires an in-depth analysis, so if you have questions please contact your attorney.
District of Columbia: by Roberto Montesinos
While § 42-1903.08(11) of District of Columbia Condominium Act (“D.C. Condominium Act”) and the D.C. Condominium Act as a whole do not speak directly on the issue of suspension of privileges, it does seem that the intent of the statute is to impose some form of due process on condominium associations prior to the imposition of a sanction. For that reason, we find it advisable for condominium and homeowners associations in the District to adopt and maintain enforcement policies that specifically set forth the potential for suspension of an owner's privileges in the event of a violation of the governing documents.
Collections policies may also be amended to include provisions regarding the suspension of privileges in the case of a unit owner delinquency. Any policies that are adopted by a board should be regularly disseminated to the membership so that owners are aware of the potential sanctions they face in the event of a violation and/or delinquency. For a more thorough discussion of restriction of privileges in DC, see: http://www.wtplaw.com/newsletters/2014/04/community-associations-update-april-2014.
Virginia: by Kathleen Panagis
Associations previously interpreted the Virginia Property Owners' Association Act and Condominium Acts to mean that an association could suspend privileges if it had that authority under its rules and regulations. However, two cases tend to suggest that an association is not permitted to suspend an owner's privileges simply by passing rules and regulations.
Farran v. Olde Belhaven Towne Owners Association and Shadowood Condominium Association, et al. v. Fairfax County Redevelopment and Housing Authority opinions are not directly on point as these cases deal with covenant charges and not suspensions. Nevertheless, these cases tend to support the conclusion that an association can only take actions that are specifically allowed to it by its Governing Documents. Before suspending an owner's privileges, associations should scrutinize their Governing Documents to verify they have the requisite authority to do so. Without the presence of such authority, associations face potential risk.
Should an association be in the fortunate position of having Governing Documents that do contain express language allowing it to suspend an owner's privileges, the association, at a minimum, must follow the statutory due process procedures that are imposed by the current versions of the Virginia Property Owners' Act and Condominium Act.