|November 3, 2011|
Previously published on October 2011
Condominium regimes in Maryland are generally governed by a council of unit owners, which manages the operation and business affairs of the condominium. Most condominium declarations provide the council of unit owners with exclusive authority over the common elements of a condominium, usually defined as all of the portions of a condominium except the individual condominium units.
Recently, the Court of Special Appeals in Greenstein v. Council of Unit Owners of Avalon Court Six Condominium, Inc., No. 485, Sept. Term 2009 (September 29, 2011), decided a case of first impression concerning the duties of a council of unit owners of a condominium when confronted with construction defects within the common elements of a condominium. The court held that a council of unit owners has a duty to initiate litigation arising out of construction defects within the common elements of a condominium, and that its failure to do so in a timely manner could result in liability to the council of unit owners.
The Greenstein case arises out a condominium constructed in Pikesville, Maryland. Shortly after the developer of the condominium turned over operational control to the Council of Unit Owners (the “Council”), several leaks became evident in the windows and other areas of the condominium. The Council filed suit against the developer several years later, but that suit was dismissed because the suit was not filed within the applicable three-year statute of limitations.
After the suit against the developer was dismissed, several unit owners sued the Council, contending that the Council had a duty to maintain the common elements and that it breached that duty when it failed to file suit against the developer in a timely manner. Summary judgment was granted in favor of the Council, and the plaintiff unit owners appealed. On appeal, the Court of Special Appeals held that “the duty to maintain, repair and replace the Common Elements, creates a concomitant obligation on the part of the Council to pursue recovery from [the Developer] on behalf of [the unit owners] for damage to the Common Elements caused by [the Developer’s] negligence, breach of contract, or violation of any applicable law.” The Court went on to conclude that “the Council had a duty to [the unit owners] to properly pursue any claims against [the Developer] arising out of defects in design and/or construction of the Common Elements, and a breach of that duty gave rise to a cause of action for negligence.”
This decision may have wide ranging implications for both contractors and condominium associations. The case will likely result in councils of unit owns of condominium associations deciding to file suit against developers and/or contractors more promptly after construction defects are discovered. The case may also have an impact on the costs associated with insuring condominiums and their councils of unit owners. Although not addressed by the Court of Special Appeals, these types of suits may be barred if the condominium declaration contains an appropriate waiver of liability that protects the council of unit owners. See e.g., Cornell v. Council of Unit Owners Hawaiian Village Condominiums, Inc., 983 F. Supp. 640 (D. Md. 1997).