Opinion
No. 93
10-25-2011
MRA PROPERTY MANAGEMENT, INC. et al. v. SUSAN ARMSTRONG, et al.
HEADNOTE: MRA Property Management, Inc., et al. v. Armstrong, et al., No. 93, September Term, 2007
THE MARYLAND CONSUMER PROTECTION ACT; THE MARYLAND CONDOMINIUM ACT: A false and misleading Certificate of Resale that violates the Maryland Condominium Act also violates the Maryland Consumer Protection Act.
THE MARYLAND CONDOMINIUM ACT; DISCLOSURE OBLIGATIONS IMPOSED ON COUNCIL OF UNIT OWNERS BY SECTION 11-135: Section 11-135(a)(4)(iv) requires that a resale certificate include a "statement of any capital expenditures approved by the council of unit owners planned at the time of the conveyance which are not reflected in the current operating budget disclosed under subparagraph (vi) of this paragraph," but this disclosure obligation does not extend to contemplated and/or proposed expenditures. Section 11-135(a)(4)(x), which requires that a Council of Unit Owners disclose "knowledge of any violation of the health or building code" is not limited to charged violations.
Bell, C.J.
Harrell
Battaglia
Greene
Murphy, J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution, Article IV, Section 3A, he also participated in the decision and adoption of this opinion.
Eldridge, John C., (Retired, specially
assigned)
Cathell, Dale R., (Retired, specially
assigned)
JJ.
Opinion by Murphy, J.
Harrell and Battaglia, JJ., dissent.
Eldridge, J., joins in judgment only.
In the Circuit Court for Cecil County, a one million dollar summary judgment was entered against the Association of Unit Owners of Tomes Landing Condominiums, Inc. (the Association), and MRA Property Management, Inc. (MRA), Appellants, on the ground that they violated the Maryland Consumer Protection Act (CPA) when they provided misleading "resale certificates" to persons who ultimately purchased condominium units at the Tomes Landing Condominiums. The Circuit Court found from the undisputed facts "that the operating budgets which were provided to the [appellees] prior to their purchases of their condos had the capacity, tendency and effect of misleading the [appellees] in connection with their purchases of the condominiums[,]" and that "the furnishing of these materially misleading budgets to the [appellees] constituted an unfair or deceptive trade practice in violation of [the CPA]." Appellants present four questions for our review:
Because no prior appellate decision has been rendered in the case at bar, the designation of the parties is controlled by Md. Rule 8-111(a)(1).
1. Whether the trial court erred in finding as a matter of law that the Association and MRA had a further duty to Appellees under the Consumer Protection Act to disclose information beyond that required by §11-135 of the Maryland Condominium Act, despite this Court's holding in Swinson v. Lords Landing Village Condominium [360 Md. 462, 758 A.2d 1008 (2000)] that the MCA's disclosure provisions were definite and limited and required no disclosures beyond those items specifically delineated in §11-135[?]
2. Whether the trial court erred in holding that the operating budgets provided by the Association and MRA pursuant to §11-135 were misleading as a matter of law, when the preparation and disclosure of the operating budgets complied fully with the requirements of §§ 11-109.2 and 11-135 of the
Maryland Condominium Act[?]
3. Whether the trial court erred in holding, as a matter of law, despite the existence of genuine issues of material fact, that the Association and MRA knew at the time of the sale of the units to Appellees that existing construction issues would necessitate major structural repairs to buildings and an assessment of costs to unit owners, when there was evidence that the severity of the construction issues become evidence after most, if not all, of the sales had taken place[?]
4. Whether the trial court erred in finding that the Association and MRA were "merchants" involved "in the sale of consumer realty" within the meaning of the Consumer Protection Act, when neither the Association nor MRA sold or offered for sale consumer realty, and neither was involved in the sale of any condominium unit[?]
For the reasons that follow, we hold that Appellees are not entitled to summary judgment on the ground that the resale certificates at issue failed to comply with the requirements of § 11-135(a)(4)(iv). From our review of the record, however, it is clear that the evidence available to Appellees is sufficient to generate a jury question on the issue of whether Appellants knowingly violated their duty to comply with the requirements of § 11-135(a)(4)(x). We shall therefore vacate the summary judgment, and remand for further proceedings not inconsistent with this opinion.
Background
Appellees are the purchasers of 23 condominium units in the Tomes Landing Condominiums, a complex comprised of four buildings with a total of 93 units. Appellees purchased their individual units on resale between January 5, 2000 and October 8, 2004. The Association is a nonprofit corporation consisting of all unit owners at Tomes Landing, including appellees. Its board of directors ("board") is composed of volunteers elected by their fellow unit owners. The unit owners are responsible for paying to the Association a monthly fee for operating expenses, maintenance, and repair, related to their percentage ownership interest.
Among other duties, the board is responsible for estimating total operating expenses for the Condominium Association and for raising funds to provide for the care and maintenance of the condominium for the ensuing year. MRA is a property management company which has managed the property at Tomes Landing pursuant to a contract with the Association dated May 1, 1993. Appellants were required by § 11-135 to prepare "resale certificates" for delivery to Appellees. That statute, in pertinent part, provides:
§ 11-135. Resale of unitMd. REAL PROPERTY Code Ann. § 11-135 (2010). (Emphasis supplied).
(a) Documents to be delivered by unit owner to purchaser. -- Except as provided in subsection (b) of this section, a contract for the resale of a unit by a unit owner other than a developer is not enforceable unless the contract of sale contains in conspicuous type a notice in the form specified in subsection (g)(1) of this section, and the unit owner furnishes to the purchaser not later than 15 days prior to closing:
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(4) A certificate containing:
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(i) A statement disclosing the effect on the proposed conveyance of any right of first refusal or other restraint on the free alienability of the unit other than any restraint created by
the unit owner;
(ii) A statement setting forth the amount of the monthly common expense assessment and any unpaid common expense or special assessment currently due and payable from the selling unit owner;
(iii) A statement of any other fees payable by the unit owners to the council of unit owners;
(iv) A statement of any capital expenditures approved by the council of unit owners planned at the time of the conveyance which are not reflected in the current operating budget disclosed under subparagraph (vi) of this paragraph;
(v) The most recent regularly prepared balance sheet and income expense statement, if any, of the condominium;
(vi) The current operating budget of the condominium including details concerning the reserve fund for repair and replacement and its intended use, or a statement that there is no reserve fund;
(vii) A statement of any judgments against the condominium and the existence of any pending suits to which the council of unit owners is a party;
(viii) A statement generally describing any insurance policies provided for the benefit of unit owners, a notice that copies of the policies are available for inspection, stating the location at which the copies are available, and a notice that the terms of the policy prevail over the description;
(ix) A statement as to whether the council of unit owners has knowledge that any alteration or improvement to the unit or to the limited common elements assigned to the unit violates any provision of the declaration, bylaws, or rules or regulations;
(x) A statement as to whether the council of unit
owners has knowledge of any violation of the health or building codes with respect to the unit, the limited common elements assigned to the unit, or any other portion of the condominium;
(xi) A statement of the remaining term of any leasehold estate affecting the condominium and the provisions governing any extension or renewal thereof; and
(xii) A description of any recreational or other facilities which are to be used by the unit owners or maintained by them or the council of unit owners, and a statement as to whether or not they are to be a part of the common elements;
Each of the Appellees received a resale certificate that, in pertinent part, stated:
To Whom It May Concern.. .pursuant to Maryland Real Property Act 11-135... There are no known violations on the property at this time... There are no known violations of health or building codes to the unit. (Emphasis supplied).
The record includes the actual Resale Certificates issued to 19 of the Appellees.
In a "special assessment" dated December 22, 2004, MRA notified appellees that the assessment was needed "to correct building issues which, if not corrected, would create additional structural problems caused by water and moisture penetration," and that the "[t]otal cash needed for [this] project [was] $3,921,838[.]" The record includes an August 13, 1999 Replacement Reserve Study With List of Recommended Repairs prepared by U.S. Inspect, Inc., notifying MRA that many of the condominium's "retaining walls are improperly constructed." Those "building issues" were not disclosed to appellants before they purchased their condominiums.
Although the record on appeal is voluminous, not even one witness testified at a trial on the merits. The final judgments that are before us are the result of (1) a summary judgment that (in the words of the Circuit Court) "the [appellees] are entitled as a matter of law to a judgment of liability against the Association and MRA for violations of the Consumer Protection Act," and (2) a stipulation "that [appellees'] damages . . . are $1,000,000." To provide an accurate and complete factual background, we shall quote -rather than paraphrase -- what the parties submitted to the Circuit Court. Appellees' Second Amended Complaint, which also included counts alleging fraud and violations of the Maryland Condominium Act, contained the following assertions:
The judgment entered against MRA is on page 4535 of the record on appeal. The judgment entered against the Association is on page 4536 of the record on appeal.
This appeal does not present any questions about how the proceeds of the judgment will be distributed among the appellees.
8. The [appellees] are members of the Association who currently own one or more Tomes Landing condominium units. The [appellees] purchased their units upon resale between the years 2000 and 2004.
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18. MRA and the Association knew, or should have known, from approximately August of 1999, if not earlier, of serious construction defects and deficiencies in the Tomes Landing Condominiums, including but not limited to severe and widespread water and moisture penetration problems. Condominium owners consistently complained to MRA from approximately 1995 onward of water leaks and rotting wood, among other things.
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25. [An agent] of MRA prepared the Certificates of Resale ("Certificates") provided to the [appellees] prior to their purchases of units in Tomes Landing. . . .
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32. In addition, MRA prepared, and included within the resale package that it furnished to the [appellees] or their agents prior to the settlements, a copy of the current operating budget for the Tomes Landing Condominiums. The operating budgets prepared by MRA and, in particular, the portion of these budgets allocating funds for repairs and maintenance, misleadingly omitted any reference to the enormous cost of the substantial project-wide repairs that the board of directors and MRA knew were required at the time. The fact that as of the date of some of the [appellees]' purchases, the full nature and extent of the defective conditions may not yet have been known, the precise cost of the required repairs may not yet have been known, and/or that the special assessment to fund these repairs may not yet formally have been approved by the Association, did not vitiate the affirmative obligation of the Association and MRA to make truthful, complete and non-misleading disclosures in the Certificates and operating budgets provided to the [appellees] prior to their purchases.
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89. At all times relent hereto, MRA was subject to the provisions of the Maryland Consumer Protection Act (the "Act"), Md. Comm. Law Code Ann., §13-101 et seq., in that it directly or indirectly sold, made available and/or or [sic] offered consumer realty to consumers at the Tomes Landing Condominiums. Although not the seller of the consumer realty, MRA's false, misleading and incomplete representations, non-disclosures and conduct so infected the sales to the [appellees] of units in the Tomes Landing Condominiums that the practice is deemed under Maryland law to have been committed "in" the sale of consumer realty. MRA's false and/or misleading representations and acts
contaminated the sales to the [appellees], who would not have proceeded to closing absent MRA's false and/or misleading statements, concealments and non-disclosure of material facts. MRA was an integral part of the scheme of deceptive trade practices committed in the sale of consumer realty.
90. MRA was prohibited by the Act from engaging in unfair or deceptive trade practices in the sale of consumer realty. These prohibited practices include, among others, the issuance of false and/or misleading statements or representations that had the capacity, tendency, or effect of deceiving or misleading the purchasers at the Tomes Landing Condominiums; failure to state material facts if such failure deceived or tended to deceive a purchaser; and deception, fraud, false pretenses, false promises, misrepresentation, knowing concealment, suppression, or omission of any material fact with the intent that a purchaser rely thereon in connection with the promotion or sale of consumer realty.
91. At all relevant times hereto, MRA knew that Tomes Landing Condominiums were defective and deficient. It knew that there was a need for extensive repairs and knew the cost of these repairs far exceeded the amounts set for repairs in the operating budgets. It knew or should have known that there were building and/or health code violations. MRA further knew that one or more substantial special assessments would be necessary, had been approved by the board of directors, was soon to be approved by the board, or was anticipated. MRA knew that if a substantial special assessment had not yet been imposed, one or more substantial special assessments would be imposed in the near future by the board to fund the extensive repairs needed to remedy the serious and pervasive construction defects in the Tomes Landing Condominiums. MRA knew that the [appellees], as purchasers of units in the Tomes Landing Condominiums, would be required to incur the expense of paying for the extensive repairs and renovations of the Tomes Landing Condominiums. MRA further knew that the line items for repair and maintenance in the Tomes Landing operating budgets did not accurately reflect the nature, scope or cost of the repairs and maintenance required or expected to be made
at the condominiums, and that, absent additional disclosure regarding the true condition of the condominiums, the required repairs, the Association's lack of adequate funds to make these repairs, and the fact that the operating budgets materially understated the cost of anticipated and/or required repairs, the [appellees] would be misled by these budgets.
92. Nevertheless, in complete disregard of the [appellees's] rights, MRA engaged in practices that were unfair and deceived, or tended to deceive, the [appellees]. More particularly, MRA deceived or tended to deceive the [appellees] by concealing and misrepresenting the existing physical condition, state of repair, cost of repair, and dire need for repair at the Tomes Landing Condominiums, and by knowingly concealing, suppressing, and omitting material facts with respect thereto.
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94. MRA knew that the [appellees] would and did rely upon the truth of the statements and representations made to them, as well as its concealment and non-disclosure of material facts, before they purchased their units.
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96. These statements and representations had the capacity or tendency of deceiving or misleading consumers because MRA used such statements in connection with the sale of units at the Tomes Landing Condominiums. These statements and representations, although untrue and inaccurate, had the ability to affect a purchasing decision and thus the capacity or tendency to deceive or mislead consumers. Additionally, these statements and representations had the capacity, tendency or effect of deceiving or misleading consumers because consumers would be led to believe that the structural elements at the Tomes Landing Condominiums complied with applicable health and building code requirements, that the condominiums were in satisfactory condition, that the operating budget accurately and in good faith projected the cost of the required repairs
and/or maintenance to the condominiums in the upcoming year, that no major capital expenditures were anticipated or planned, that no special assessments were pending, anticipated or planned, and that the financial information and/or other written materials provided to the [appellees] in connection with their purchases accurately disclosed the known and/or anticipated cost of purchasing and owning a unit in the Tomes Landing Condominiums.
Appellees moved for summary judgment in their favor on the CPA claims only. Their motion was accompanied by a memorandum that included the following arguments:
[Appellees], as prospective purchasers of condominiums in Tomes Lansing, were "consumers" under the CPA. Further, because the [appellees] acquired the condominiums for personal, household or family use, they were prospective purchasers of "consumer realty" at the time that MRA furnished them with Certificates of Resale and copies of the Tomes Landing operating budget.
Although neither the Association nor MRA directly sold or offered to sell to the [appellees] their condominiums, their false and misleading representations in the operating budgets that they provided to the [appellees] nevertheless constituted unfair or deceptive trade practices "in the sale of consumer realty" under the CPA because the information in the resale packages that they provided to the [appellees] was an integral part of these consumer transactions. Both the Association and MRA knew that the resale packages, including a current copy of the operating budget, were being provided to prospective buyers pursuant to the requirements of the Maryland Condominium Act, and accordingly, that they would likely be relied upon by these buyers in making their purchasing decision.
In Hoffman v. Stamper, 385 Md. 1, 867 A.2d 276 (2005), the Maryland Court of Appeals addressed the legal issue of whether the alleged deceptive trade practice of an appraiser who furnished erroneous and misleading appraisals in connection with the plaintiffs' purchases of consumer
realty occurred "in the sale of offer for sale to consumers", thereby bringing the practice within the purview of the CPA. The appraiser argued that because he did not sell, or offer to sell, any consumer realty to the plaintiffs, but provided appraisals to the lender for the lender's benefit only, his conduct fell outside the scope of the CPA. The appraiser further argued that since there was no evidence that the plaintiffs had read his appraisals, these appraisals could not have influenced their purchase decisions.
In rejecting this argument, the Court distinguished the facts of Hoffman from the facts in its earlier decision of Morris v. Osmose Wood Preserving, 340 Md. 519, 541, 667 A.2d 624, 635 (1995), a homeowners' action against the manufacturer of defective plywood that the builder used to construct the roofs of the plaintiffs' townhouses. In Morris, the Court of Appeals affirmed the dismissal of the plaintiffs' CPA claims against the manufacturer of the plywood on the ground that any misrepresentations by the plywood manufacturer were made to the builder, not to the homeowners. The plywood manufacturer made no representations to, and had no contact of any kind with, the plaintiffs prior to their purchases. For this reason, the Court concluded that the plywood manufacturers were not involved in the selling or offering to sell to the Plaintiffs consumer realty, and that any wrongdoing by the plywood manufacturer fell outside the scope of the CPA. Morris v. Osmose Wood Preserving, 340 Md. at 542, 667 A.2d at 636.
In contrast, the appraiser in Hoffman was actively involved in the plaintiffs' sales transactions. Although he did not have any direct dealings with the plaintiffs, he prepared allegedly phony appraisals showing the values of the homes of equal or [that] exceed the inflated contract prices. The Plaintiffs did not read the appraisals, but were aware that they had a right to cancel their contracts and obtain the return of their deposits if the bank's appraisal failed to show that the property being purchased was worth at least the contract price. However, because of the appraisers' alleged deceptive practices, the plaintiffs were not given this option and instead proceeded to closing based on the false assumption that the
properties were worth what they were paying for them. The Plaintiffs testified that had they known the truth, they would not have purchased these properties at the prices they paid.
Based on the forgoing, the Court of Appeals in Hoffman concluded that the appraisals sufficiently affected the Plaintiffs' decisions to enter into their purchase contracts [and] that they occurred in the sale or offer for sale to consumers of consumer realty. The Court aptly explained the difference between its conclusion in Morris that the CPA was inapplicable to the practices of the plywood manufacturer and its contrary conclusion in Hoffman that the CPA applied to the alleged deceptive acts of the appraiser:
In holding [in Morris] that the deceptive practice must occur in the sale to consumers, we were careful to point out that we did not mean 'that the only entity that can engage in a deceptive practice is one who directly sells or offers to sell to consumers' and that '[i]t is quite possible that a deceptive trade practice committed by someone who is not the seller would so infect the sale or offer for sale to a consumer that the law would deem the practice to have been committed 'in' the sale or offer for sale.' Id. at 541, 667 A.2d at 635. For the reasons noted above, the evidence more than sufficed to show that Hoffman's erroneous and misleading appraisals directly 'infected' the sales at issue here. They would not have proceeded to closing absent those appraisals. He was an integral part of the entire scheme of deceptive trade practices committed in the sale of consumer realty.Hoffman v. Stamper, 385 Md. at 32, 867 A.2d at 294-95.
Here, the Association, through its property manager, furnished Certificates of Resale to prospective purchasers, with the knowledge and expectation that these interested purchasers would review and rely upon the information
provided to them concerning the Tomes Landing Condominiums in making a purchase decision. Unlike the home buyers in Hoffman who did not review the appraisals, but rather, indirectly relied upon them in proceeding to settlement, the [appellees] in the present case all affirm in their Affidavits that they received, reviewed and relied upon the Certificates of Resale, including the operating budgets, prior to settlement.
Appellants filed a Cross Motion for Summary Judgment as to all counts, arguing that they were entitled to summary judgment on the grounds that (1) "absent privity or other intimate nexus, [appellants] owe no duty of care to [appellees] where the risk of loss is economic only;" (2) "Maryland law does not impose a duty to disclose in the context of a real estate transaction;" (3) "the only duty of disclosure required of [appellants] is specific and limited by Section 11-135 of the Real Property Article;" (4) "Maryland's Consumer Protection Act is inapplicable and does not operate to broaden the statutory disclosure requirements limited by section 11-135 of the Real Property Article;"and (5) "even if the Consumer Protection Act were applicable, [appellees] failed to state a claim against [appellants under the CPA]." That motion was accompanied by a memorandum that included the following arguments:
[Appellants] were not parties to the real estate sales transactions. There was no privity between [appellees] and [appellants].(Emphasis in original).
Under Maryland law, [Appellants] owe [appellees] no duty of disclosure other than that specifically provided for in Section 11-135 of the Real Property Article of the Annotated Code of Maryland. Section 11-135 sets forth with specificity the disclosures to be made. Section 11-135 also limits [Appellant]s' duty of disclosure to those specific disclosures
identified in Section 11-135. In this lawsuit, [appellees] seek to expand the disclosure obligations of [appellants] beyond the narrow scope of Section 11-135. They seek to hold [appellants] to a higher duty of disclosure than they do those actually in privity with the [appellees].
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[Appellees] attempt to bootstrap the intentionally broad standards outlined in the CPA through a hybridization of the CPA and Maryland's Condominium Act. The [appellants]' argument requires two separate steps. First, pursuant to § 11-135 of the Real Property Article, the council unit of owners is required to provide a unit owner with a resale certificate containing specific, but limited, information. Md. Code Ann., Real Prop. §11-135 (2002 Repl. Vol.). Absent this statutory obligation, the council of unit owners would have no duty to provide any information in connection with the resale of the unit. Second, [appellees] contend that a broader disclosure requirement should be imposed on [appellants] by attempting to stretch the specific and limited obligations imposed by section 11-135 through application of the Consumer Protection Act. Through the attempted hybridization of the two statutes, the [appellees] endeavor to impose upon the association a duty to provide information that is not included within the finite list outlined in §11-135. Because the standards outlined in the CPA conflict with the more specific standard outlined in the Maryland Condominium Act and because applying the CPA to the facts of this case would contravene the legislature's intention, the CPA is not applicable.
Whether the CPA applies is a question of legislative intent, and the courts "have long followed the rule that when there is a conflict between a general statute and one dealing specifically with the issue at hand, the specific statute controls." Massey v. Sec'y, Dep't of Pub. Safety & Corr. Servs., 389 Md. 496, 511 n.4, 886 A.2d 585 (2005); cf. Richwind Joint Venture 4 v. Brunson, 335 Md. 661, 684, 645 A.2d 1147 (1994) ("A number of decisions from other jurisdictions have refused to apply broad consumer protection
acts . . . in light of more specific statutes with respect to that area."). The General Assembly included this maxim within the Maryland Condominium Act. As the statute exhorts, "If the application of the provisions of this title conflict with the application of other provisions of the public general laws . . . in the State, the provisions of this title shall prevail." Md. Code Ann., Real Prop. §11-141(c) (2002 Repl. Vol.). In drafting the Maryland Condominium Act, the Legislature incorporated, where appropriate, consumer protection principles. The Maryland Condominium Act outlines the specific obligations of the council of unit owners in providing the unit owners with certificates of resale, and the Maryland Condominium Act takes precedence over the conflicting
CPA.
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Within the broad net of the CPA, one could include transactions involving condominiums.
Section 11-135 of the Maryland Condominium Act, however, also deals with consumer protection and is entitled "Consumer Protection Standard; Enforcement." Md. Code Ann., Real Prop. § 11-130 (2002 Repl. Vol.). The Maryland Condominium Act was "intended to provide minimum standards for the protection of consumers in the State," and the statute defines "consumer" as "an actual or prospective purchaser, lessee, assignee or recipient of a condominium unit." Md. Code Ann., Real Prop. § 11-103(a), (b)(1) (2002 Repl. Vol.) (emphasis added). The definition of "consumer" in the Maryland Condominium Act, which specifically deals with condominium purchasers, is more narrowly drawn than the definition outlined in the CPA and distinctly identifies the [appellees] in this case.
A reading of the Maryland Condominium Act reveals that the legislature considered the interests of a variety of different parties including developers, the council of unit owners, managing agents, unit owners, occupants, and purchasers. In drafting the statute, the legislature struck a reasonable balance among the positions of the various parties
in delineating the obligations, rights, and remedies of each. Comparing the section describing the obligations of a developer or vendor of the initial sale of a unit with the section outlining the obligations of the council of unit owners to provide a certificate of resale demonstrates that the legislature knew how to draft language that imposes more exacting obligations in protection of the "consumer", but chose not to impose that higher standard upon the council of unit owners.
Section 11-126 of the Real Property Article requires the vendor, in connection with the initial sale of a unit, to provide a public offering statement that contains similar, but more detailed information than a resale certificate required by section 11-135. . .
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Section 11-135 does not impose upon the council of unit owners, in preparing a resale certificate, a similar obligation to provide a statement of the physical condition and state of repair of the common elements.
Section 11-126 also imposes upon a vendor, in connection with the initial sale of a unit, a duty to ensure that any omissions of fact are not misleading. Although the legislature imposed a heightened burden on the vendors in connection with the public offering statement, the legislature also provided for a one-year statute of limitations.
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Thus, in drafting the Maryland Condominium Act, the legislature was aware of, and incorporated where appropriate, elements found in the Consumer Protection Act.
Section 11-135, which outlines the obligations of the council of unit owners in relation to resale certificates, does not impose upon the council of unit owners an obligation similar to that included in § 11-126(f). Instead, the statute places a limited burden upon the unit owner. On the other
hand, section 11-135 does impose consequences upon the council of unit owners if it does not provide accurate information. For example, the resale certificate must include a statement setting forth "any unpaid common expense or special assessment currently due and payable from the selling unit owner." If the council of unit owners fails to provide an accurate statement, "[a] purchaser is not liable for any unpaid assessment or fee great[er] than the amount set forth in the certificate prepared by the council of unit owners."
The only reference that the Maryland Condominium Act makes to the Consumer Protection Act is in section 11-130, which states:
(d) A county or incorporated municipality, or an agency of any of those jurisdictions, may adopt laws or ordinances for the protection of a consumer to the extent and in the manner provided for under § 13-103 of the [Consumer Protection Act].Md. Code Ann., Real Prop. § 11-130(d) (2002 Repl. Vol.). Section 13-103 of the Consumer Protection Act provides in relevant part:
(b) A county, Baltimore City, municipality, or agency of either may adopt, within the scope of its authority, more stringent provisions not inconsistent with the provisions of this title.Md. Code Ann., Coml. § 13-103(b) (2005 Repl. Vol). Thus, the Maryland Condominium Act allows a county or a municipality to draft provisions that may augment those found in the Maryland Condominium Act, but the statute does not incorporate the provisions of the Consumer Protection Act.
Significantly, the General Assembly has included under the definition of "unfair or deceptive trade practices" in the Consumer Protection Act a violation of any of a list of twenty-two different Acts and/or statutes . . . The Maryland
Condominium Act is not included within the enumeration.
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The Maryland Condominium Act describes the exclusive obligations of the council of unit owners in preparing the resale certificates. Nothing within the plain language of the Maryland Condominium Act suggests that the CPA should be applied to its terms. If this court were to apply the CPA to the obligations of the council of unit owners in issuing the resale certificates, it would upset the balance reached by the General Assembly among the council of unit owners, unit owners, and purchasers.
The Motions and Cross Motions for Summary Judgment were heard on two separate dates. The first hearing, which took place on December 16, 2006, involved Appellees who had purchased their units in 2003 and 2004. The second hearing, which took place on April 26, 2007, involved Appellees who had purchased their units between 2000 and 2002. At the conclusion of the December 16, 2006 hearing, the Circuit Court ruled as follows:
One Appellee, who had purchased her unit in 2003 and 2004, was not included in the earlier motion.
All right. You've all done a lot of work on this case, and I certainly appreciate it. But I find from the undisputed facts in the case that the operating budgets which were provided to the [appellees] prior to their purchases of their condos had the capacity, tendency and effect of misleading the [appellees] in connection with their purchases of the condominiums in Tomes Landing Condominiums.
And further, as the result, the furnishing of these
materially misleading budgets to the [appellees] constituted an unfair or deceptive trade practice in violation of Sections 13-301(1), 13-301(3), and 13-303 of the Maryland Consumer Protection Act. And Based on the factual evidence attached to this motion I conclude that no reasonable fact finder could conclude otherwise. And for these reasons the [appellees] are entitled to summary judgment of liability against the Association and MRA for violations of the Consumer Protection Act under counts 2, 4, 6, 10, 12 and 13 of the Second Amended Complaint.
And for much the same reason I find that the operating budgets provided to the [appellees] prior to their purchases had the capacity, tendency and effect of misleading the [appellees] in connection with their purchases of condominiums in Tomes Landing. Therefore, I will deny [appellants] motions for summary judgment, and permit those remaining counts which means, 1, 3, 5, 6 - ah - 7, 8, 9, 11 - and 11 in the Second Amended Complaint to be given to the jury for their decision.
At the conclusion of the April 27, 2007 hearing, the Circuit Court ruled as follows:
I just see this as a rerun of the first motion for Partial Summary Judgment, which I granted way back on December 16th. I think that there is ample evidence that the [appellants] participated by acquiesc[ing] in misleading the [appellees] when they allowed this - resale certificate to be published to the sellers, for their publication of it to the buyers. But the fact is they knew it; and it was patently deceiving to the purchasers; and whereas, here the publishers of this incorrect information knew that this resale certificate was going to be furnished to a prospective buyer and knew it was patently, patently deceiving.
They can't escape liability by saying it was not specifically referred to or whatever. The fact is they had a big problem; they knew they had a big problem; they knew what they had done up to that point was not solving the problem; they had statements - at least one statement of the cost of this thing being for in excess of three million dollars. So I am
going to grant the Motion for Partial Summary Judgment on behalf of the [appellees] here.
Before the scheduled trial date, the parties stipulated that Appellees had suffered a total of one million dollars in damages, the Circuit Court entered judgment in that amount, Appellants noted an appeal to the Court of Special Appeals, and this Court issued a writ of certiorari before the case was considered by a panel of the Court of Special Appeals. 402 Md. 352, 936 A.2d 850 (2007).
Discussion
I., II., and III.
We reject Appellants' argument that they had no duty to comply with the requirements of the CPA. As Appellants conceded in the memorandum presented to the Circuit Court, the CPA expressly protects consumers of "consumer realty," and expressly applies to the sale of "real property." In Raymond Daniel Burke, Kathleen M. Elmore, and Cynthia Hitt Kent, Developing and Managing Condominium and Homeowners' Associations, National Business Institute (2007), the authors state:
Maryland Consumer Protection Act: Md. Com. Law Code Ann. §13-408(a) establishes a private cause of action for damages sustained as a result of an act prohibited by the Consumer Protection Act. The Act is specifically applicable to "consumer realty," and, accordingly, representations made in connection with the sale of real property may constitute unfair and deceptive trade practices where they are misleading.Id. at 31.
In Jeffrey H. Scherr & Herbert Burgunder, III, Real Estate Transactions in Maryland, Practice Manual for the Maryland Lawyer (MICPEL 3d ed. 2003), the authors state:
The Consumer Protection Act ("CPA"), applies to real property and to people who sell real property. The CPA prohibits unfair or deceptive trade practices in the sale, lease, or rental of consumer realty or in the offer of sale, lease, or rental of consumer realty. The CPA also covers representations that real property has a characteristic that the real property does not in actuality possess. The Court of Special Appeals held in Hartford Accident & Indem. Co. v. Scarlett Harbor Assocs. [109 Md. App. 217, 674 A.2d 106 (1996), aff'd. 346 Md. 122, 695 A.2d 153 (1997)] that the CPA applied to sales of condominium units that did not comply with the project's plans and specifications.§ 12.61 (footnotes omitted).
In Hartford Accident, while reversing a summary judgment entered in favor of the developer of a condominium on a CPA claim asserted by the condominium's counsel of unit owners, the Court of Special Appeals stated:
The CPA was enacted, in part, because of the General Assembly's determination "that consumer protection is one of the major issues confronting all levels of government, and [due to] mounting concern over the increase of deceptive practices in connection with sales of merchandise, real property, and services and the extension of credit." C.L. § 13-102(a)(1) (emphasis added). Consequently, the Legislature sought to "take strong protective and preventive steps to investigate unlawful consumer practices, to assist the public in obtaining relief from those practices, and to prevent these practices from occurring in Maryland." C.L. § 13-102(b)(3). Further, C.L. § 13-105 provides that the Act "shall be construed and applied liberally to promote its purpose."Hartford, 109 Md. App. at 241-244, 674 A.2d at 117-119. We agree with that analysis, which is consistent with the conclusion reached by an overwhelming percentage of appellate courts that have considered the issue of whether a Consumer Protection Act applies to the purchase of a condominium unit, as well as with Hoffman v. Stamper, 385 Md. 1, 867 A.2d 276 (2005), in which this Court stated:
* * *
A misrepresentation is within the purview of C.L. § 13-301(1) if it is "false" or "misleading" and "has the capacity, tendency, or effect of deceiving or misleading consumers." The Council alleged that the Purchase
Agreements falsely stated that the Condominium would conform to plans and specifications. We cannot say, as a matter of undisputed, material fact, that the alleged misrepresentation does not have the capacity to mislead consumers. Therefore, the Council alleged a misrepresentation within the purview of C.L. § 13-301(1).
Moreover, C.L. § 13-301[2] (i) prohibits a representation that "consumer realty ... [has] a ... characteristic ... which [it] does not have." We disagree with the circuit court's view that conformity to plans and specifications does not constitute a "characteristic" of the Condominium.
* * *
Since conformity to plans and specifications is an attribute or descriptive aspect of a condominium, a seller's statement that the building or unit so conforms is a representation that the condominium has a particular "characteristic."
* * *
In this case, conformity to plans and specifications is as much a "characteristic" of real property as the possession of a valid license or construction with the "best materials available." To conclude otherwise would subvert the CPA's remedial policy of protecting the public against deceptive commercial practices.
Maryland Code, § 13-303 of the Commercial Law Article, which is part of the State CPA, prohibits a person from engaging in an unfair or deceptive trade practice in the sale ofId. at 31, 867 A2d. at 294.
consumer realty. An "unfair or deceptive trade practice" includes any false or misleading statement or representation which has the capacity, tendency, or effect of deceiving or misleading consumers and encompasses a representation that consumer realty has a characteristic that it does not have or is of a particular standard or quality that is not the case. Commercial Law Art. § 13-301. Section 13-408 of that article provides for a private cause of action to recover for loss or injury sustained as the result of a practice forbidden by the CPA.
See, e.g., Fort Lincoln Civic Ass'n, Inc. v. Fort Lincoln New Town Corp., 944 A.2d 1055, 1059, 1071, 1073, 1075 (D.C. Cir. 2008); 2200 M Street L.L.C. v. Mackell, 940 A.2d 143, 146-47 (D.C. Cir. 2007); Zlotnick v. Premier Sales Group, Inc., 431 F. Supp. 2d 1290, 1294 (D. Fla. 2006), aff'd, 480 F.3d 1281 (11th Cir. 2007) (stating that since 1993 when the legislature amended the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) to include the broader language "trade or commerce" and "any property," the FDUTPA applied to real estate transactions (citing Williams v. Edelman, 408 F. Supp. 2d 1261, 1272-74 (S.D.Fla.2005); Beacon Prop. Mgmt., Inc. v. PNR, Inc., 890 So.2d 274, 277-78 (Fla. Dist. Ct. App. 2004); Fendrich v. RBF, L.L.C., 842 So.2d 1076, 1079-80, n.2. (Fla. Dist. Ct. App. 2003)); Klotz v. Underwood, 563 F.Supp 335, 338-9 (E.D. Tenn. 1982), aff'd without op. 709 F.2d 1504 (6th Cir. 1983) (applying Tennessee law). Accord Hoang v. Arbess, 80 P.3d 863, 870 (Colo. Ct. App. 2003); Tanpiengco v. Tasto, 806 A.2d 1080 (Conn. App. Ct. 2002); Williams, supra, at 1272-74 (holding that "as the [FDUTPA] is currently worded, the purchase of a condominium constitutes a 'consumer transaction.'"); Langton v. LaBrecque, 519 N.E.2d 1361, 1362 (Mass. App. Ct. 1988); Marina Bay Condos., Inc. v. Schlegel, 423 N.W.2d 284, 286-87 (Mich. Ct. App. 1988); Kowalski v. Cedars of Portsmouth Condo. Ass'n, 769 A.2d 344, 349 (N.H. 2001); Thompson v. H.W.G. Group, Inc., 664 A.2d 489, 48990 (N.H. 1995) (stating that condominium purchasers are protected against sellers' fraudulent misrepresentations by both the state Condominium Registration Act and Consumer Protection Act); Nobrega v. Edison Glen Assocs., 772 A.2d 368, 371, 375-76 (N.J. 2001); Cohen v. W.B. Assocs., Inc., 882 A.2d 456 (N.J. Super. Ct. Law Div. 2005); Karlin v. IVF America, Inc., 712 N.E.2d 662, 665 (N.Y. 1999); Bd. of Managers of Bayberry Greens Condo. v. Bayberry Greens Assocs., 571 N.Y.S.2d 496, 497 (N.Y. App. Div. 1991); Valley Forge Towers S. Condo. v. Ron-Ike Foam Insulators, Inc., 574 A.2d 641, 646, 648 (Pa. Super. Ct. 1990); Gabriel v. O'Hara, 534 A.2d 488, 491-93 (Pa. Super. Ct. 1987); Payne v. Holiday Towers, Inc., 321 S.E.2d 179, 180 (S.C. Ct. App. 1984); Miller v. Keyser, 90 S.W.3d 712, 715-16 (Tex. 2002) (sales agent for corporate home builder constitutes "person" subject to Texas Deceptive Trade Practices Consumer Protection Act); Russell v. Atkins, 679 A.2d 333 (Vt. 1996); Eagle Point Condo. Owners Ass'n v. Coy, 9 P.3d 898, 905 (Wash. Ct. App. 2000); Southcenter View Condo. Owners' Ass'n v. Condo. Builders, Inc., 736 P.2d 1075, 1076 (Wash. Ct. App. 1986).
In light of the statutory duties imposed upon them, it is of no consequence that Appellants were not "parties" to the real estate transactions in which Appellees purchased their units. In Swinson v. Lords Landing Village Condominium, 360 Md. 462, 758 A.2d 1008 (2000), while rejecting the argument that a Council of Unit Owners is not liable under § 11-135 for concealing information or misrepresenting facts on the Certificate it is required to provide to the seller of a unit, this Court stated:
LLVC supplied the information concerning code violations and pending litigation for the guidance of others in their business transactions. Indeed, it was under a public duty, imposed by statute, to provide that information to a unit owner for the express purpose of allowing that unit owner to transmit the information to a prospective buyer. As a prospective buyer, petitioner was clearly within the class of persons for whose benefit the duty was created. The duty to provide accurate and non-misleading information extended to petitioner.Id. at 478, 758 A.2d at 1016-17. It is therefore clear that, if Appellants violated the disclosure obligations imposed upon them by § 11-135, they engaged in unfair and deceptive trade practices "in the sale of consumer realty." Appellants argue in the alternative that they are entitled to entry of summary judgment in their favor on the ground that their disclosure of the operating budgets in the "resale packages" (in the words of their brief) "complied fully with the requirements of §§ 11-109.2 and 11-135 of the Maryland Condominium Act." We agree, in part, with this argument. Because the resale certificates included the disclosures required by § 11-109.2 and § 11-135(a)(4)(iv), we conclude that the Circuit Court erred in entering summary judgment on the ground that Appellants provided "misleading" operating budgets. Section 11-135(a)(4)(iv) requires that a resale certificate include a "statement of any capital expenditures approved by the council of unit owners planned at the time of the conveyance which are not reflected in the current operating budget disclosed under subparagraph (vi) of this paragraph." The legislative history makes it clear that this disclosure obligation does not extend to contemplated and/or proposed expenditures.
In 1981, when the General Assembly amended the MCA to add § 11-135, the disclosure obligations imposed by that statute included the obligation to provide "a statement of any capital expenditures proposed by the council of unit owners." (1981 Md. Laws, Ch 246) (emphasis supplied). In 1982, however, § 11-135 was amended, with the term "approved" replacing the term "proposed." In light of that legislative history, we conclude that Appellees were not entitled to summary judgment on the ground relied upon by the Circuit Court.
From our review of the record, however, we also conclude that Appellants are not entitled to summary judgment in their favor merely because they complied with the disclosure obligation. As the Code Revision Committee Chairman of the Maryland State Bar Association stated in a 1986 letter to the Chairman of the Senate Judicial Proceedings Committee, "these resale certificates do expose the council to significant additional liabilities which, in the absence of resale certificates, they would not have[.]" One of those additional liabilities results from the failure to comply with the requirement imposed by § 11-135(a)(4)(x). As this Court stated in Swinson, supra:
Maryland Code, § 11-135(a) of the Real Property Article, which is part of the Maryland Condominium Act, provides that a contract for the resale of a condominium unit by a unit owner other than the developer is not enforceable unless the unit owner furnishes certain documents to the purchaser. One of the documents required to be provided is a certificate disclosing, among other things, "the existence of any pending suits to which the council of unit owners is a party" and whether the Council of Unit Owners "has knowledge of any violation of the health or building codes with respect to the unit, the limited common elements assigned to the unit, or any other portion of the condominium." (Emphasis added). Some of that information may not be known to the unit owner. Accordingly, § 11-135(c) requires the Council of Unit Owners to "furnish a certificate containing the information necessary to enable the unit owner to comply with subsection (a) of this section."360 Md. at 466, 758 A.2d at 1010.
Appellants filed a motion in limine in which they requested that the Circuit Court "[p]reclude evidence relating to any violation of the building or health code." Although the Circuit Court did not rule on this motion, Appellants were not entitled to a summary judgment in their favor on the ground that "[t]here is no dispute of fact that Tomes Landing received no notices of health or building code violations."
Attached to that motion was an affidavit of the Director of Cecil County Department of Permits and Inspections in which he states:
2. My Department performs code inspections during initial construction, when there are alterations or additional work being done to a structure, or when there is a complaint filed.
4. If the building passes all of the code inspections during its initial construction, my Department will issue a Certificate of Occupancy. Those certificates show that the work was approved by my Department, along with a few other departments, and that there are no code violations.
5. There could be differences of opinion on code conformance, but there is no Building Code Violation until my Department issues a code violation notice.
6. My department, along with a few other departments, performed code inspections at Tomes Landing when the buildings were first built. We also performed several code inspections through the years for additional work performed on the buildings.
7. To my knowledge, certificates of occupancy have been issued for Tomes Landing and, to my knowledge, the units are in fact occupied. If there had been building code violations during initial construction, the contractors would have been required to make additional repairs before anyone could move into the units and before certificates of occupancy would have been issued.
8. To my knowledge, my Department has never received any complaints from any of the unit owners, Tomes Landing Condominium Association, or anyone else regarding potential code violations.
9. To my knowledge, there have never been any building code violations issued by my department for Tomes Landing at any time.
In Glickman v. Brown, 486 N.E. 2d 737 (Mass. App. Ct. 1985), while affirming a judgment entered against a developer on the ground that he had falsely represented to prospective condominium purchasers that the building's heating system "was in good repair, or that problems would be resolved," the Massachusetts Court of Appeals stated:
Although a negligent act, standing by itself, does not amount to a violation of § 2, a deceptive act which is the result of a defendant's negligence is actionable without more. Linthicum v. Archambault, 379 Mass. 381, 388 (1979). Swanson v. Bankers Life Co., 389 Mass. at 349. MacGillivary v. W. Dana Bartlett Ins. Agency of Lexington, Inc., 14 Mass. App. Ct. 52, 58-61 (1982). The circumstances of this case fall within the ambit of the question left open in Nei v. Burley, 388 Mass. 307, 315-316 (1983), namely whether a person in a trade or business violates c. 93A, § 2(a), by misrepresenting a material fact when he has made no effort to determine the truth.Id. at 741. In Glickman, no evidence was presented on the issue of whether a "code violation" had been issued to the developer. We hold that Appellants' duty to disclose their "knowledge of any violation of the health or building code" is not limited to charged violations. Merely because the County issued the Certificate of Occupancy does not mean that there was code conformance for the ensuing eleven years. Moreover, the record contains substantial evidence that the opposite was true.
* * *
Sellers are obviously in a better position to evaluate the truth of their advertising than are consumers or other purchasers. While sellers may expound upon the virtues of their products, hoping to deemphasize their disadvantages, they may not affirmatively misrepresent the truth if they know it.
We think it follows that sellers should not be allowed to misrepresent the truth simply because they have not made reasonable efforts to ascertain it. We hold (if there were any doubt about it) that a negligent misrepresentation of fact the truth of which is reasonably capable of ascertainment is an unfair and deceptive act or practice.
The record includes the deposition testimony of Appellees' expert witness who opined that, although no building code violations had been "technically cited[,] I don't know that they had anybody look." While discussing "what reasonable management companies do in similar circumstances," and the "shameful" failure of Appellants to comply with the industry standard of care in the case at bar, this witness stated:
[Appellants] had information that the siding was put on wrong. There was no flashing behind the siding. There was probability of interior structural damage very early on. They have the report from US Inspect where [it] says that the situation of the water infiltration is problematic and he can't put a value on that. There was [ASG]'s report where he comes in the beginning to give them a list of repairs [and] his second report where he comes back with an extraordinary amount of money. There was [] Ford who said that the repairs would be a couple hundred thousand to maybe millions.. .Because they're not cited doesn't mean they aren't.
There is no need to include in this opinion every item of evidence that - - if accepted as true by the trier of fact - - is sufficient to establish that Appellants utterly failed to comply with the disclosure obligation imposed upon them by § 11-135(a)(4)(x). Appellees were entitled by law to receive as part of their resale certificate "[a] statement as to whether the council of unit owners has knowledge of any violation of the health or building codes," and are entitled to present evidence that Appellants' "no known violations" representation was made with either (1) actual knowledge of its falsity, or (2) wilful blindness as to its truth.
IV.
There is no merit in the argument that the Circuit Court erroneously found that Appellants are "merchants" involved "in the sale of consumer realty." In Hoffman v. Stamper, supra, this Court held that a cause of action for damages suffered as a result of a practice forbidden by the CPA may be asserted against anyone who "was an integral part of the entire scheme of deceptive trade practices committed in the sale of consumer realty." 385 Md. at 32, 867 A.2d at 295. In Swinson v. Lords Landing Village Condominium, supra, this Court held that the "public duty" imposed by § 11-135 extends from a Council of Unit Owners to a prospective condominium purchaser. As the Circuit Court stated:
[Appellants] just can't say we're not involved. That doesn't make any sense. If you really wanted to pay attention to the purpose of the statute, which is to protect the consumer, I think you have to realize that the consumer, being an uninitiated condominium buyer, is going to look to that resale certificate and give it a lot of weight.For the reasons stated above, Appellees are entitled to a trial on the merits on the issue of whether Appellants violated § 11-135(a)(4)(x) when preparing the resale certificates that were furnished to Appellees.
SUMMARY JUDGMENTS ENTERED IN FAVOR
OF APPELLEES VACATED; CASES REMANDED
TO THE CIRCUIT COURT FOR CECIL COUNTY
FOR TRIAL; APPELLANTS TO PAY 50% OF THE
COSTS; 50% OF THE COSTS TO BE PAID BY
APPELLEES.
Judge Eldridge joins in the judgment only.
IN THE COURT OF APPEALS OF
MARYLAND
No. 93
MRA PROPERTY MANAGEMENT, INC., et al.
v.
SUSAN ARMSTRONG, et al.
Bell, C.J.
Harrell
Battaglia
Greene
Murphy, J., now retired, participated in the hearing and conference of this case while an active member of this Court; after being recalled pursuant to the Constitution, Article IV, Section 3A, he also participated in the decision and adoption of this opinion.
Eldridge, John C., (Retired,
specially assigned)
Cathell, Dale R., (Retired,
specially assigned)
JJ.
Dissenting Opinion by Battaglia, J.,
which Harrell, J., joins.
I respectfully dissent. The majority's opinion completely misses the boat, which is particularly interesting in a case involving water damage. Although I agree with the majority's holding that the Consumer Protection Act (hereinafter "CPA") applies to the sale of a condominium unit, that is not the issue. The gravamen of this case is whether a condominium association or council of unit owners, the Tomes Landing Condominium Association, Inc., is involved "in the sale of consumer realty," such that the CPA applies. I would hold that the council of unit owners in the present case was not involved "in the sale" of the condominium unit, so the CPA does not apply.
The Consumer Protection Act is set forth in Title 13 of the Commercial Law Article, Maryland Code (1975, 2005 Repl. Vol). The 2005 Replacement Volume contains, without significant alteration, the language of the CPA in effect during the relevant time period in this case.
Furthermore, even assuming, arguendo, that the CPA applies, the majority has not articulated a basis for relief that would allow the buyers to survive a grant of summary judgment to the council of unit owners. Although the majority assumes that a cause of action exists under the CPA for an uncharged health or building code violation, the council of unit owners had no duty under Section 11-135 of the Maryland Condominium Act (hereinafter the "Condominium Act") to disclose potential health or building code violations. Thus, the council of unit owners's statement in the resale certificate was not an unfair trade practice under the CPA, and summary judgment should have been granted in favor of the council of unit owners and its co-appellant, MRA.
All references hereinafter to the Condominium Act are to Title 11 of the Real Property Article, Maryland Code (1974, 2010 Repl. Vol.). The 2010 Replacement Volume contains, without significant alteration pertinent to this case, the language of the Condominium Act in effect during the relevant time period in this case.
Because this case implicates the role of a council of unit owners or a condominium association in the sale of a condominium unit, it is helpful, from the outset, to set forth the distinctions between a condominium, a condominium unit, and a council of unit owners. In Ridgely Condominium Association, Inc. v. Smyrnioudis, 343 Md. 357, 681 A.2d 494 (1996), we had an opportunity to discuss the relationship between condominiums and condominium units and explained the unit owner's "hybrid property interest":
A condominium is a "communal form of estate in property consisting of individually owned units which are supported by collectively held facilities and areas." Andrews v. City of Greenbelt, 293 Md. 69, 71, 441 A.2d 1064 (1982).Ridgely Condominium Ass'n, 343 Md. at 358-59, 681 A.2d at 495. The creation and responsibilities of the council of unit owners of a condominium is set forth, in part, by Section 11-109 of the Condominium Act, which explicates the largely maintenance and fee- collection roles of the entity. Section 11-108.1 of the Condominium Act also charges the council of unit owners with the responsibilities of repair and maintenance of the common elements:
The term condominium may be defined generally as a system for providing separate ownership of individual units in multiple-unit developments. In addition to the interest acquired in a particular apartment, each unit owner also is a tenant in common in the underlying fee and in the spaces and building parts used in common by all the unit owners.4B Richard R. Powell, Powell on Real Property ¶ 632.1[4] (1996). A condominium owner, therefore, holds a hybrid property interest consisting of an exclusive ownership of a particular unit or apartment and a tenancy in common with the other co-owners in the common elements.
Except to the extent otherwise provided by the declaration or bylaws, and subject to § 11-114 of this title, the council of unit owners is responsible for maintenance, repair, and replacement of the common elements, and each unit owner is responsible for maintenance, repair, and replacement of his unit.Section 11-108.1 of the Real Property Article.
Section 11-109 of the Condominium Act, discussing the roles of condominium associations, provides:
(a) Legal entity; composition.The affairs of the condominium shall be governed by a council of unit owners which, even if unincorporated, is constituted a legal entity for all purposes. The council of unit owners shall be comprised of all unit owners.
(b) Delegation of powers.The bylaws may authorize or provide for the delegation of any power of the council of unit owners to a board of directors, officers, managing agent, or other person for the purpose of carrying out the responsibilities of the council of unit owners.
* * *
(d) Council - Incorporation and powers.The council of unit owners may be either incorporated as a nonstock corporation or unincorporated and it is subject to those provisions of Title 5, Subtitle 2 of the Corporations and Associations Article which are not inconsistent with this title. The council of unit owners has, subject to any provision of this title, and except as provided in paragraph (22) of this subsection, the declaration, and bylaws, the following powers:
(1) To have perpetual existence, subject to the right of the unit owners to terminate the condominium regime as provided in § 11-123 of this title;
(2) To adopt and amend reasonable rules and regulations;
(3) To adopt and amend budgets for revenues, expenditures, and reserves and collect assessments for common expenses from unit owners;
(4) To sue and be sued, complain and defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more unit owners on matters affecting the condominium;
(5) To transact its business, carry on its operations and exercise the powers provided in this subsection in any state, territory, district, or possession of the United States and in any foreign country;
(6) To make contracts and guarantees, incur liabilities and borrow money, sell, mortgage, lease, pledge, exchange, convey, transfer, and otherwise dispose of any part of its property and assets;
(7) To issue bonds, notes, and other obligations and secure the same by mortgage or deed of trust of any part of its property, franchises, and income;
(8) To acquire by purchase or in any other manner, to take, receive, own, hold, use, employ, improve, and otherwise deal with any property, real or personal, or any interest therein, wherever located;
(9) To hire and terminate managing agents and other employees, agents, and independent contractors;
(10) To purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, loan, pledge or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in, or obligation of corporations of the State, or foreign corporations, and of associations, partnerships, and individuals;
(11) To invest its funds and to lend money in any manner appropriate to enable it to carry on the operations or to fulfill the purposes named in the declaration or bylaws, and to take and to hold real and personal property as security for the payment of funds so invested or loaned;
(12) To regulate the use, maintenance, repair, replacement, and modification of common elements;
(13) To cause additional improvements to be made as a part of the general common elements;
(14) To grant easements, rights-of-way, licenses, leases in excess of 1 year, or similar interests through or over the common elements in accordance with § 11-125(f) of this title;
(15) To impose and receive any payments, fees, or charges for the use, rental, or operation of the common elements other than limited common elements;
(16) To impose charges for late payment of assessments and, after notice and an opportunity to be heard, levy reasonable fines for violations of the declaration, bylaws, and rules and regulations of the council of unit owners, under § 11-113 of this title;
(17) To impose reasonable charges for the preparation and recordation of amendments to the declaration, bylaws, rules, regulations, or resolutions, resale certificates, or statements of unpaid assessments;
(18) To provide for the indemnification of and maintain liability insurance for officers, directors, and any managing agent or other employee charged with the operation or maintenance of the condominium;
(19) To enforce the implied warranties made to the council of unit owners by the developer under § 11-131 of this title;
(20) To enforce the provisions of this title, the declaration, bylaws, and rules and regulations of the council of unit owners against any unit owner or occupant;
(21) Generally, to exercise the powers set forth in this title and the declaration or bylaws and to do every other act not inconsistent with law, which may be appropriate to promote and attain the purposes set forth in this title, the declaration or bylaws; and
(22) To designate parking for individuals with disabilities, notwithstanding any provision in the declaration, bylaws, or rules and regulations.
(e) Unit owner's interest in council's property.A unit owner may not have any right, title, or interest in any property owned by the council of unit owners other than as holder of a percentage interest in common expenses and common profits appurtenant to his unit.
(f) Unit owner's rights as holder of percentage interest. - A unit owner's rights as holder of a percentage interest in common expenses and common profits are such that:
(1) A unit owner's right to possess, use, or enjoy property of the council of unit owners shall be as provided in the bylaws; and
(2) A unit owner's interest in the property is not assignable or attachable separate from his unit except as provided in §§ 11-107(d) and 11-112(g) of this title.
A condominium association generally is created through the adoption of bylaws, which impose numerous contractual obligations on the unit owners and the condominium association. The applicable bylaws governing the Tomes Landing Condominium Association provide that the Council of Unit Owners will be responsible for estimating total operating expenses for the Condominium Association and for raising funds to provide for the care and maintenance of the condominium for the ensuing year; the unit owners, in return, are responsible for paying to the association a monthly fee for operating expenses, maintenance and repair, related to their percentage ownership interest:
ARTICLE III
ADMINISTRATION
Section 1. Council Responsibilities. The Council of the Unit Owners will be comprised of every person, firm or corporation which owns, severally or with others, any Unit and will constitute "Tome's Landing Condominium Association, Incorporated" (hereinafter referred to as "Council" or "Council of Unit Owners") who will have responsibility for administering the project, electing members of the Board of Directors, establishing and collecting monthly assessments and arranging for the management of the project. Except as otherwise provided, decisions and resolutions of the Council shall require approval by a majority of Unit Owners present and voting, in person or by proxy.
* * *
ARTICLE VII
OBLIGATIONS OF THE OWNERS
Section 1. Assessments: Liens; Furnishing of Certificates
(a) The fiscal year of the Council shall consist of twelve (12) calender months, commencing on January 1. Not later than sixty (60) days prior to the commencement of each fiscal year, the Board of Directors shall estimate the total common expenses required for the operation and maintenance of the Condominium during the ensuing year, including particularly, but not by way of limitations, all sums required for the items set for in Section 11-109.2 of the Condominium Act and all sums required to provide labor, materials, services, utilities and insurance for the operation, maintenance and care of the Condominium and the conveniences deemed desirable to the use and enjoyment thereof, together with a reasonable amount deemed necessary by the Board of Directors as an operating reserve for contingencies and an adequate reserve for repair and replacement of the Common Elements. Within fifteen (15) days thereafter, the Board of Directors shall notify each Unit Owner, in writing, of the proposed budget listing each expense for the coming fiscal year and such Unit Owner's proportionate share of the aggregate estimated common expenses, based on his percentage interest in the common profits and expenses. . . .
(b) The Board of Directors shall establish and maintain a reasonable reserve operating fund and an adequate reserve repair and replacement fund. . . .
(c) If the Board of Directors at any time determines that the common expenses assessed under paragraph (a) of this Section 1, or the reserve funds established under paragraph (b) of this Section 1, are inadequate, or that additional funds are otherwise required for the operation and maintenance of the Condominium, it may assess such further sums, as common expenses, as it may deem necessary and levy the same against each Unit Owner in accordance with his percentage interest in the common profits and expenses. However, any expenditure made, other than those made because of conditions which, if not corrected, could reasonably result in a threat to the health or safety of the Unit Owners or a significant risk of damage to the Condominium, that would result in an increase in an amount of assessments for the current fiscal year of the Condominium in
excess of fifteen percent (15%) of the budgeted amount previously adopted, shall have the assent of Unit Owners representing fifty-one percent (51%) of the total votes in the Condominium, at a special meeting of the Council called for this purpose . . . .
(d) Each Unit Owner shall be personally obligated to pay to the Board of Directors, or its designee, the common expenses or other expenses levied against him by the Board of Directors under any of the provisions of the Declaration or these By-Laws.
Although the bylaws create contractual duties among the council of unit owners and the unit owners, the duties do not extend to a prospective buyer; there simply does not exist a privity between the council of unit owners and the buyer of a unit. See Swinson v. Lords Landing Village Condominium, 360 Md. 462, 477, 758 A.2d 1008, 1016 (2000) (noting the lack of contractual privity between a condominium association and the buyer of a resold condominium unit under similar circumstances). Section 11-135 of the Condominium Act, however, imposes a statutory or public duty upon councils of unit owners to provide buyers with a "resale certificate" when a unit is resold. Id. at 477-78, 758 A.2d at 1016, citing Maryland Code (1973, 2003 Repl. Vol.), Section 11-135 of the Real Property Article. The resale certificate provided by the council of unit owners is to contain:
Section 11-135(a) of the Condominium Act states that, except for condominiums containing less than seven units, the applicable rules for which are outlined in subsection (b), "a contract for the resale of a unit by a unit owner other than a developer is not enforceable unless . . . the unit owner furnishes to the purchaser not later than 15 days prior to closing: (1) A copy of the declaration (other than plats); (2) The bylaws; (3) The rules or regulations of the condominium; (4) A [resale] certificate containing . . . ."
(i) A statement disclosing the effect on the proposed conveyance of any right of first refusal or other restraint on the free alienability of the unit other than any restraint created by theSection 11-135 of the Real Property Article (emphasis added). This resale certificate is the crux of the issue that we confront in the present case.
unit owner;
(ii) A statement setting forth the amount of the monthly common expense assessment and any unpaid common expense or special assessment currently due and payable from the selling unit owner;
(iii) A statement of any other fees payable by the unit owners to the council of unit owners;
(iv) A statement of any capital expenditures approved by the council of unit owners planned at the time of the conveyance which are not reflected in the current operating budget disclosed under subparagraph (vi) of this paragraph;
(v) The most recent regularly prepared balance sheet and income expense statement, if any, of the condominium;
(vi) The current operating budget of the condominium including details concerning the reserve fund for repair and replacement and its intended use, or a statement that there is no reserve fund;
(vii) A statement of any judgments against the condominium and the existence of any pending suits to which the council of unit owners is a party;
(viii) A statement generally describing any insurance policies provided for the benefit of unit owners, a notice that copies of the policies are available for inspection, stating the location at which the copies are available, and a notice that the terms of the policy prevail over the description;
(ix) A statement as to whether the council of unit owners has knowledge that any alteration or improvement to the unit or to the limited common elements assigned to the unit violates any provision of the declaration, bylaws, or rules or regulations;
(x) A statement as to whether the council of unit owners has knowledge of any violation of the health or building codes with respect to the unit, the limited common elements assigned to the unit, or any other portion of the condominium;
(xi) A statement of the remaining term of any leasehold estate affecting the condominium and the provisions governing any extension or renewal thereof; and
(xii) A description of any recreational or other facilities which are to be used by the unit owners or maintained by them or the council of unit owners, and a statement as to whether or not they are to be a part of the common elements[.]
The trial judge granted summary judgment to the buyers under the CPA, stating that the disclosures made to the buyers of various units constituted unfair trade practices, because the knowledge of moisture penetration and rotting wood in the Tomes Landing Condominiums, and the potential for costly repair, was not disclosed to buyers in the resale certificate nor was it reflected in the operating budget provided. In affirming, the majority accepts that because the CPA applies to the sale of condominium units generally, the CPA then applies to an entity who is neither the seller nor an agent of the seller, but rather, who is charged primarily with the maintenance of the condominium facilities.
The CPA, with respect to real property, among other provisions, proscribes "unfair or deceptive trade practice . . . in: (1) [t]he sale, lease, rental, loan, or bailment of any consumer goods, consumer realty, or consumer services." Maryland Code (1975, 2005 Repl. Vol), Section 13-303 of the Commercial Law Article. The Act defines a "sale" as including any "(1) [s]ale of or offer or attempt to sell . . . real property . . . ," a "[c]onsumer" as "an actual or prospective purchaser, lessee, or recipient of . . . consumer realty," and an unfair or deceptive trade practice as including any:
(1) False, falsely disparaging, or misleading oral or written statement, visual description, or other representation of any kind which has the capacity, tendency, or effect of deceiving or misleading consumers;Sections 13-101 and 13-301 of the Commercial Law Article.
(2) Representation that:
(i) Consumer goods, consumer realty, or consumer services have a sponsorship, approval, accessory, characteristic, ingredient, use, benefit, or quantity which they do not have;
* * *
(iv) Consumer goods, consumer realty, or consumer services are of a particular standard, quality, grade, style, or model which they are not;
(3) Failure to state a material fact if the failure deceives or tends to deceive;
* * *
(9) Deception, fraud, false pretense, false premise, misrepresentation, or knowing concealment, suppression, or omission of any material fact with the intent that a consumer rely on the same in connection with:
(i) The promotion or sale of any consumer goods, consumer realty, or consumer service;
(ii) A contract or other agreement for the evaluation, perfection, marketing, brokering or promotion of an invention; or
(iii) The subsequent performance of a merchant with respect to an agreement of sale, lease, or rental;
* * *
(13) Use by a seller, who is in the business of selling consumer realty, of a contract related to the sale of single family residential consumer realty, including condominiums and town houses, that contains a clause limiting or precluding the buyer's right to obtain consequential damages as a result of the seller's breach or cancellation of the contract[.]
We have previously held that a council of unit owners is not the direct seller of a condominium unit -the unit owner is. Swinson v. Lords Landing Village Condominium, 360 Md. 462, 758 A.2d 1008 (2000). In Swinson, a condominium association, Lords Landing Village Condominium (hereinafter "LLVC"), brought an action against Swinson, a condominium unit owner, for an unpaid special assessment of $2,727, which was imposed to defray the costs of repairing or replacing rotted and exposed wood and flaking paint on the exterior of the building. Swinson counterclaimed, alleging that at the time of purchase, LLVC had violated Section 13-103 of the Prince George's County Housing Code, which stated that a "seller . . . shall be responsible for compliance with all issued notices of violations . . . against or affecting the property at the date of execution . . . ." Specifically, Swinson argued that LLVC was financially responsible for making necessary repairs to the condominium under Section 13-103, because at the time she bought her condominium unit, the council of unit owners had already received a violation notice and was seeking a special assessment on her unit to bring the condominium into compliance.
Section 13-103 of the Prince George's County Housing Code provided:
The seller of a dwelling structure and premises shall be responsible for compliance with all issued notices of violations of this Subtitle or other laws of the County, or actions in any court on account of such violations, against or affecting the property at the date of execution of any agreement of sale or transfer of ownership of such dwelling structure and premises. Nothing contained in his Subtitle shall affect the validity of any sale, transfer or disposition of any interest in real estate.Section 13-103 of the Prince George's County Code (1999), cited in Swinson v. Lords Landing Village Condominium, 360 Md. 462, 472-73, 758 A.2d 1008, 1014 (2000).
The district court judge rejected Swinson's counterclaim premised on Section 13-103 of the Prince George's County Code, holding that LLVC was not the seller of the unit, as required under the ordinance. Id. at 472, 758 A.2d at 1013. Swinson appealed to the circuit court, which affirmed, holding again that Section 13-103 of the Prince George's County Code was inapplicable because LLVC was not the "seller." We granted certiorari and agreed that LLVC was not the seller; in so doing, Judge Alan M. Wilner, speaking on behalf of this Court, aptly distinguished a council of unit owners from a seller of an individual unit:
[T]he Council of Unit Owners is responsible for the maintenance, repair, and replacement of the common elements, and, although the LLVC condominium declaration is not in evidence, Article III of the LLVC Council of Unit Owners by-laws charges the Board of Directors of the council with the responsibility for making repairs, additions, replacements, and improvements to the common elements. In such a situation, § 13-103 can have no application. It allocates responsibility between a seller and a buyer when the Violation Notice concerns the property being sold, and thus necessarily assumes that the seller is legally, even if not financially, able to correct the deficiencies. Here, Ms. Dickison, not LLVC, was the seller, but the Violation Notice did not concern her unit, and she had no legal ability to comply with it. The two lower courts were correct in finding no liability on the part of LLVC under § 13-103.Id. at 474-75, 758 A.2d at 1015 (emphasis added).
The majority maintains that Swinson stands for the proposition that the Consumer Protection Act applies where the condominium association violates the disclosure obligations of Section 11-135. Swinson, however, did not address a condominium association's liability under the CPA, but observed that Section 11-135 furnishes the condominium association a duty to purchasers to supply information regarding issued notices of housing and building code violations and pending litigation for the purposes of furnishing a prima facie case of negligent misrepresentation.
Appellees argue, nevertheless, that even if a council of unit owners is not the direct seller of a condominium unit, the CPA should apply, because any fraud or misrepresentation made in a resale certificate, upon which a buyer relies, so infects the real estate transaction that the certificate becomes an unfair trade practice "in" the sale or offer of sale of realty to a consumer. Specifically, appellees rely on Hoffman v. Stamper, 385 Md. 1, 867 A.2d 276 (2005), in which we affirmed a jury award against an appraiser under the CPA for fraudulent and deceptive trade practices based on fraudulent appraisals in the sale of real estate. In that case, Hoffman, the appraiser, was a participant in a scheme in which a coconspirator, Beeman
(1) bought dilapidated houses in Baltimore City at low prices, (2) then searched for an unsophisticated, low-income buyers with poor credit histories, (3) promised them that he could sell them a renovated home for a down payment of only $500, (4) got those buyers to sign contracts of sale at significancy inflated prices upon a promise to make extensive repairs, many of which were never made, (5) arranged for the buyers to finance the purchases with 100% FHA loans obtained through Wood, and (6) obtained those loans for the buyers in part by conspiring with Wood to have Hoffman prepare erroneous appraisals showing the value of the homes to be at or above the grossly inflated contract price and in part by engaging in practices that clearly violated Department of Housing and Urban Development (HUD) regulations and requirements regarding the FHA program in order to consummate the transactions.Id. at 9, 867 A.2d at 281. At trial, the jury awarded an aggregate judgment of $1,434,020 against all defendants. Before this Court, Hoffman asserted, among other things, that the evidence was insufficient to establish a violation of the CPA on his part. Specifically, Hoffman argued that for the CPA to apply, the deceptive practice "must occur in the sale or offer for sale to consumers," and that he did not sell any consumer realty or offer any consumer services to any of the plaintiffs; he merely provided appraisals. Id. at 31, 867 A.2d at 294.
We agreed with Hoffman's argument that he was not a direct seller, but nevertheless noted that in limited circumstances liability under the CPA may extend to one who is not the direct seller: "[i]t is quite possible that a deceptive trade practice committed by someone who is not the seller would so infect the sale or offer for sale to a consumer that the law would deem the practice to have been committed 'in' the sale or offer for sale." Hoffman, 385 Md. 32, 867 A.2d at 294, quoting Morris v. Osmose Wood Preserving, 340 Md. 519, 541, 667 A.2d 624, 635 (1995). Based, in part, on this dicta, and, in part, on the fact that Hoffman was a coconspirator in the scheme to defraud, we affirmed the jury's verdict imposing liability on the appraiser under the CPA:
For the reasons noted above, the evidence more than sufficed to show that Hoffman's erroneous and misleading appraisals directly "infected" the sales at issue here. They would not have proceeded to closing absent those appraisals. He was an integral part of the entire scheme of deceptive trade practices committed in the sale of consumer realty.Id. at 32, 867 A.2d at 294-95 (emphasis added).
Contrary to the integral involvement that Hoffman presented, the council of unit owners herein was only tangentially involved. Hoffman fraudulently misrepresented real estate appraisals as a part of a unfair or deceptive "flipping" scheme, where Hoffman and the seller were working together to defraud real estate consumers. The Tomes Landing Condominium Association, unlike Hoffman, had an informational role for which it received no financial benefit at all-either from full and accurate disclosure or otherwise.
In our sister states with analogous consumer protection statutes, judges have explicitly held that the state's CPA does not apply to condominium associations providing resale certificates. In Ward v. Glover, 2006 Me. Super. LEXIS 227, at *7-8 (Me. Super. Oct. 25, 2006), a judge of the Superior Court of Maine explained that because a council of unit owners' primary responsibility is maintenance and upkeep of a condominium, and the council's duty to provide resale certificates is only tangentially related to the sale, the council is not subject to the Maine Unfair Trade Practices Act ("UPTA"):
Under the Maine Unfair Trade Practices Act ("UTPA"),(emphasis added). See also Rafalowski v. Old Country Road, Inc., 714 A.2d 675, 676-77 (Conn. 1998) (per curiam) (refusing to apply the Connecticut Unfair Trade Practices Act to a Condominium Association's imposition of a special assessment). Because the Tomes Landing Condominium Association is a group of unit-owner volunteers, charged primarily with addressing the maintenance needs of the condominium association and only tangentially with providing resale certificates to buyers, the Condominium Association is not "in" the sale of real estate, when it provides resale certificates, and the CPA does not apply.
"[u]nfair or deceptive acts or practices in the conduct of any trade or commerce are declared unlawful." 5 M.R.S.A. § 207. As a threshold matter, the Association denies that UTPA applies because it was never engaged in "trade or commerce" in relation to Plaintiffs. UTPA defines "trade or commerce" as including the "offering for sale, sale or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity or thing of value wherever situate, and shall include any trade or commerce directly or indirectly affecting the people of this State." 5 M.R.S.A. § 206(3). Defendant asserts that the Association does not provide any property, service or commodity in any kind of exchange and therefore is not engaged in trade or commerce. Plaintiff argues that, because the Association handles all financial and property issues for owners of the condominiums for a fee, and because the Association is involved in the sale of units due to its responsibility for providing a resale certificate, it is engaged in trade or commerce.
While UTPA's definition of trade and commerce is broad, it does not cover the actions of the Association. In a Connecticut Supreme Court case involving an unfair trade practices statute virtually identical to UTPA, the court held that managing a condominium association does not constitute trade or commerce. Rafalowski v. Old Country Rd., 714 A.2d. 675, 676-77 (Conn.1998). UTPA is focused on preventing entities that sell products and services from dealing with purchasers in an unfair or deceptive way. The Association does not provide products or services. It is a non-profit organization that runs a condominium. To the extent its activities touch on anything related to the act of selling to a purchaser, it is only tangentially as a result of its statutory duty to provide resale certificates to unit sellers. This does not transform the Association into an organization engaged
in trade or commerce.
Even if we assume for the purposes of argument that the CPA applied to the council of unit owners in this case, the majority states that summary judgment should not have been granted in favor of the condominium association because it should have disclosed in the resale certificate uncharged conduct that potentially could have resulted in a health or building code violation. The majority opinion has not articulated a basis of relief for the buyers.
Our review of the grants for summary judgment is limited to the grounds that the circuit court had relied, which were solely related to the operating budget. On December 18, 2006, the trial judge granted partial summary judgment in favor of a group of buyers who had purchased their units between 2003 and 2004 and held that the council of unit owners and MRA were liable under the CPA for omitting contemplated capital expenditures from the operating budget in the resale certificate:
But I find from the undisputed facts in the case that the operating budgets which were provided to the movants prior to their purchases of their condos had the capacity, tendency and effect of misleading the movants in connection with their purchases of the condominiums in Tomes Landing Condominiums. And further, as the result, the furnishing of these materially misleading budgets to the movants constituted an unfair or deceptive trade practice in violation of Sections 13-301(1), 13-301(3), and 13-303 of the Maryland Consumer Protection Act.
On April 26, 2007, the circuit court granted another partial summary judgment in favor of another group of buyers who had purchased their units between 2000 and 2003 and held that the council of unit owners and MRA were liable under the CPA for the same reason as the court's earlier December 18, 2006 judgment: "I just see this as a rerun of the first motion for Partial Summary Judgment, which I granted way back on December 16th."
Because the majority holds that excluding the potential capital expenditures, not approved by the council, did not violate the Condominium Act or CPA, summary judgment should be entered on behalf of the council of unit owners and the MRA because there was no dispute of material fact as to those issues and they are entitled to judgment as a matter of law.
The majority view that the council of unit owners must disclose to purchasers that there are uncharged building violations is not in accord with our jurisprudence. In Swinson v. Lords Landing Village Condominium, 360 Md. 462, 758 A.2d 1008 (2000), we held that Section 11-135(a)(4)(x) did not require a council of unit owners to disclose a Violation Notice pursuant to the Prince George's County Housing Code in the resale certificate. 360 Md. at 481, 758 A.2d at 1018. Under a plain reading of the statute, we held that the omission of the Violation Notice from the resale certificate did not provide the buyer, Swinson, with a basis for relief, because Section 11-135(a)(4)(x) involves known violations of health or building codes. In so holding, we observed an overlap in the provisions of the housing, building and health codes and, nonetheless, maintained that because the violation was issued under housing code, there was no violation of Section 11-135. Id. at 480-81, 758 A.2d at 1018. Thus, it is the health and building code itself, and knowledge of a charged violation thereof, rather than the conduct underlying the violation, that requires disclosure under Section 11-135(a)(4)(x).
In her own hypothetical during oral argument, counsel for the buyers did conclude that a condominium association's omission of uncharged conduct amounting to a potential, but not charged, building code violation would not violate the Condominium Act:
Another example, how about a building code violation. There's no building code violation that's been issued to the condominium association, so technically you can comply with 11-135, not disclose, you can say "There are no known building code violations" 'cause there's no formal issued violation. But how about if a week earlier, or a month earlier, an engineer said, "You have a major problem. You've got multiple building code violations with this home." Ok, you might technically comply with 11-135 by saying "No, there are no building code violations."In their brief, counsel for the buyers also asserted that "Appellees do not contend, as MRA and the Association mistakenly argue, that Appellants were obligated under §11-135 to disclose construction defects . . . ."
The majority's holding, moreover, fails to provide clear guidance to condominium associations regarding when disclosure of a potential, not charged, housing or building code violation is necessary in a resale certificate to comply with the Condominium Act or, according to the majority's opinion, the CPA. As early as 1997, Tomes Landing Condominium Association was aware of problems with moisture seepage behind wood paneling. In 1999, U.S. Inspect, Inc. reported moisture problems to the wood trim, vinyl siding, roofs, decks and windows, but indicated there was no evidence of structural deterioration. In 2000 to 2002, MRA made repairs and fewer leaks were reported. From 2003 through 2004, the council and MRA employed Architectural Structural Group, Inc. to address repairs and investigate damage. At no time did the council receive any building or health code violations.
Under these circumstances and without issued violations to the council of unit owners, what would have triggered the duty to disclose the potential for a code violation to the buyers? Under the majority's opinion, condominium associations will not know whether disclosure was required in 1997, when the first instances of moisture seepage were reported, or in 2004, when ASG reported widespread damage to the concealed structural components. A bright line standard, such as that of known charged housing or building code violations, is necessary to guide condominium associations.
To conclude, because the council of unit owners is not a seller of a condominium unit, implicating the CPA, and because even if the CPA applies, there was no unfair trade practice because there was no duty to disclose in the present case under Section 11-135 of the Condominium Act, I respectfully dissent.
Judge Harrell has authorized me to state that he joins this dissenting opinion.