Minimum Visitability Features for New Home Sales. A national study estimated that up to 60 percent of new homes would, at some point, have a resident with severe, long-term mobility impairment. A new Maryland law requires a homebuilder who constructs 11 or more new homes in a subdivision, and receives preliminary plan approval on or after October 1, 2012, to offer minimum visitability features as an option for purchase. The minimum visitability features are not a requirement; rather, only the option of purchasing certain minimum visitability features must be made available. These features are defined as (1) a ground-level entrance that meets specified height, width, and accessibility characteristics, and (2) a circulation route from the ground-level entrance to an unattached garage, parking space, or public right of way that is free of specified impediments or vertical changes in levels greater than 1.5 inches. The builder must provide (1) a point of sale document describing the minimum visitability features available for purchase, and (2) a drawing or photograph showing the features, as well as the lots and new home types that are conducive to the construction of these features.
H.B. 437, amending Maryland Code §10-801.

Limited Lien Priority for Community Associations. Under an amendment to current law, in the case of a foreclosure on a mortgage or deed of trust on a condominium unit or home in a homeowners association (HOA), the condominium or HOA lien has priority over the holder of the first mortgage or first deed of trust in the amount of not more than four months of unpaid regular assessments, up to a maximum of $1,200. This lien may not include interest, attorney’s fees, or other costs or sums due. The HOA or condominium must provide the holder of the first mortgage or deed of trust with notice of the portion of the lien that has priority. If the governing body fails to provide written information within 30 days of filing the lien, the association forfeits its priority under the statute. This bill does not affect or limit the priority of any lien or encumbrance with priority that is held by the State or any county or municipal corporation in the State. House Bill 1246 will be effective on October 1, 2011, but will apply only to mortgages or deeds of trust that are recorded on or after the effective date.
H.B. 1246 (S.B. 946), amending Maryland Code §§11-110, 11B-117, and 14-203.

Individual Insurance Coverage for Condominium Units. A condominium may require that all unit owners maintain individual condominium insurance on their units. House Bill 679 amended the Maryland Condominium Act to allow a condominium to amend its bylaws to require individual insurance if at least 51 percent of unit owners agree. If the bylaws of the condominium association require each unit owner to maintain individual insurance, the Act now requires that each unit owner provide evidence of such insurance. This law goes into effect October 1, 2011.
H.B. 679, amending Maryland Code §§11-104 and 11-114.2.

Procedure To Challenge Election Procedures of an HOA. A unit owner who believes that the governing body of an HOA has failed to comply with the election procedures under the association’s governing documents may submit his or her dispute to the Division of Consumer Protection of the Office of the Attorney General. This provision is limited to disputes that concern: (1) notice about the date, time, and place for the election; (2) the manner in which a call for nominations for the board was made; (3) the format of the election ballot; (4) the format, provision, and use of proxies during the election process; or (5) the manner in which a quorum is determined for election purposes. These new rights will be effective October 1, 2011.
S.B. 532, amending Maryland Code §11B-115.

Return of Deposits after Rescission of a Sales Contract. House Bill 1109, effective October 1, 2011, clarifies that the procedures and standards for the maintenance and disposition of a trust account held by a licensed real estate broker for a purpose relating to a real estate transaction (established in the Business Occupations and Professions Article) also applies to deposits held by a licensed real estate broker on behalf of a purchaser of a residential dwelling, cooperative interest, condominium unit, or a lot in a homeowners association. 
H.B. 1109, amending Maryland Code §§10-702, 11-126, 11-135, and 11B-108.

Update of MPDU Sales Prices.  Montgomery County Executive Order Number 131-11 updated the pricing standards and minimum specifications under the MPDU program. These standards were effective June 14, 2011, and reflect an increase of 18.2 percent from the previously adopted standards. Click here for a pdf of the new standards and specifications.

Charges for Access to Association Books and Records. The Virginia Code has permitted the unit owners association to pass on the costs of providing copies of association books and records to owners who request them. However, under newly enacted legislation, such charges may be imposed only in accordance with a cost schedule adopted by the association. The cost schedule must specify the charges for materials and labor, apply them equally to all unit owners in good standing, and be provided to the unit owner at the time of a request. The law does not go into effect until July 1, 2012.
H.B. 1741, amending Virginia Code §§55-79.74:1 and 55-510.

Payment of Resale Certificate and Disclosure Packet Fees. The Virginia Code provision authorizing a condominium unit owners association to charge fees for preparing a resale certificate has been amended. It now provides that if payment of the resale certificate fee does not occur within 45 days of delivery of the resale certificate (rather than the 90 days under the prior law), then the resale certificate fee may be assessed against the unit owner within one year after delivery of the resale certificate. The same change was made with respect to the disclosure packet fee for property owners associations. This law goes into effect July 1, 2011.
H.B. 2188 & H.B. 1674, amending Virginia Code §§55-79.97:1 and 55-509.6.

Rescission of Contract. Section 55-79.97 of the Condominium Act includes a new requirement that a sales contract contain language providing that the purchaser may cancel the contract within three days after being informed that the resale certificate is not available. For purposes of determining whether the purchaser may exercise the right to cancel based on this clause, the resale certificate shall be deemed unavailable if: (a) a current annual report has not been filed by the association with either the State Corporation Commission or the Common Interest Community Board, (b) the seller has made a written request to the association that the resale certificate be provided and no such resale certificate/packet has been received within 14 days, or (c) written notice has been provided by the association that a resale certificate is not available.  This law goes into effect July 1, 2011.
H.B. 1674, amending Virginia Code §55-79.97.

Notice of Pesticide Use. The Virginia legislature adopted a law requiring that at least 48 hours before applying any pesticide, a property owners association post notice in common areas announcing the application. This law takes effect July 1, 2011.
H.B. 2290, amending Virginia Code §55-510.3.

Transfer Fee Covenants. A transfer fee covenant recorded in Virginia on or after July 1, 2011, may not run with title to real property and not be binding on, or enforceable against, any subsequent owner, purchaser, or mortgagee of any interest in real property. A “transfer fee” is defined in the new law as a fee or charge payable to a nongovernmental person or entity upon transfer or for the right to make or accept such transfer, not including consideration, broker commissions, payments by a borrower to a lender, and other fees or payments specified in the new law.
S.B. 931, amending Virginia Code §55-70.2.

D.C. Lead Hazard Prevention and Elimination Amendment Act of 2010. Effective March 31, 2011, D.C. Law 18-348 amended the disclosure requirements under the Lead Hazard Prevention and Elimination Act of 2008. Owners of residences built before 1978 that will be occupied or regularly visited by a “person at risk” (defined as pregnant women and children younger than 6) must provide the tenant with a fully completed lead disclosure form and a clearance report issued within the previous 12 months. In addition, a residence may not be entered or inspected without the occupant’s permission unless a warrant has been obtained authorizing entry and inspection to determine compliance with the Lead Hazard Prevention and Elimination Act.
L 18-0348, amending D.C. Code §8-231.01 et al.

Recent Case Law Developments Concerning D.C.’s Tenant Opportunity to Purchase Act.  Waterside Towers Resident Association Inc. v. Trilon Plaza Company, 2 A.3d 1084 (D.C. Cir. 2010). The D.C. Circuit held that a “transaction that transfers a 100% interest in a property from one party to a wholly-owned subsidiary is a sale under [TOPA] if the transfer is required by a contract with a third-party following arms-length bargaining, as a result of which the third party acquires an ownership interest in the property.” 2 A.3d at 1092. The court reiterated that a “sale” under the Tenant Opportunity to Purchase Act requires a transaction that (1) involves arms-length bargaining with a third party, and (2) changes the substance, not merely the form, of the ownership.

Trilon Plaza Company (TPC) owned an apartment complex consisting of the Townhouses and the Towers. In 1998, TPC restructured its ownership of the Towers by creating the Towers Trust and deeding the Towers to it. TPC then created the Towers Holding Company, wholly owned by TPC, and assigned all of its beneficial interest in the Towers Trust to the Towers Holding Company. Several years later, TPC entered into a contract to transfer ownership of the entire apartment complex. In order to address TOPA’s right of first refusal requirements, TPC created the Townhouses Trust, modeled on the Towers restructuring. TPC then sold 95 percent of its interest in both the Townhouses and Towers Holding companies. The transaction also included a “put and call” provision that allowed either party to force the sale of the remaining 5 percent ownership interest in the holding companies to the buyer 366 days after closing. The court held that TPC’s original restructuring did not constitute a sale because the initial restructuring was not a sale and TPC did not transfer the remaining 5 percent of its interest in the Towers Holding Company within one year (per §42-3404.02(c)). However, the conveyance of the Townhouses was held to be a “sale” under TOPA because TPC transferred absolute title in the Townhouses as part of an agreement in which a third party, the buyer, would gain an interest in the property.

Announcements

Roger D. Winston, Managing Partner of Ballard Spahr’s Bethesda office, has been named the “Distinguished Maryland Real Property Practitioner” for 2010-2011 by the Maryland State Bar Association’s Real Property Section. Mr. Winston received the award at the MSBA annual meeting in Ocean City on June 10, 2011. This annual award honors a Maryland attorney practicing real property law for personal and professional accomplishments, integrity, and contributions to improving the practice of real estate law. Mr. Winston is the second Ballard Spahr partner to receive this award.

Lila Shapiro-Cyr, a partner in our Baltimore office, has been elected Chair of the MSBA Real Property Section. “It is a true honor to become Chair of the Real Property Section,” Ms. Shapiro-Cyr said. “Our Section supports its members with educational programming, engages people with monthly real estate discussion lunches, provides an active LISTSERV and webcasts, and mentors law students interested in real estate law. I look forward to helping further the practices and education of our members and seeking out new ways to support our members.”

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Copyright 2011 by Ballard Spahr LLP. This alert aims to notify recipients about legal developments. The content is intended for general information purposes only. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. You are advised to consult your Ballard Spahr or other attorney regarding your specific legal situation. This alert is available online at www.ballardspahr.com.