New Law in Maryland Limiting Homeowners Associations’ Condominium Associations’ Right to Foreclose and Attorney’s Fees

New Law in Maryland Limiting Homeowners Associations’ Condominium Associations’ Right to Foreclose and Attorney’s Fees

| Oct 6, 2013 | Blog |


In an excellent development for Maryland homeowners, effective October 1, 2013, homeowners and condominium associations in Maryland cannot foreclose upon liens based upon anything other than delinquent periodic assessments or special assessments. In addition, all attorney’s fees and costs must be “reasonable;” directly related to the filing of the lien; and cannot exceed the amount of the delinquent assessments.

This new law was designed to stop the abusive practice of some associations, which ran up bills for large amounts of legal fees over relatively trivial matters in order to pass those fees on to unit owners who would then be targeted for foreclosure. This should put a stop to the practice of some associations charging $250.00 in legal fees to send a collection notice to the homeowner that he or she did not pay the $50.00 fee that month. Our office has seen instances where the homeowner owned the association $1,000 in back dues, and another $3,000 in attorney collection costs. This practice should now stop.

The amendments are reflected in Md. Real Property Code Ann. § 14-204 (2013), commonly referred to as the “Maryland Contract Lien Act.” Under the new law, and notwithstanding any existing bylaws or regulations of an association, an association can foreclose upon the lien of a unit owner only if the damages secured by the lien consist solely of: (1) delinquent periodic assessments or special assessments; and (2) reasonable costs and attorney’s fees directly related to the filing of the lien and not exceeding the amount of the delinquent assessments.

The law further specifies that these sums do not include fines imposed by the governing body or attorney’s fees related to recovering the fines. Fines can still be imposed for violation of the governing body’s laws, for example, letting the grass grow too high may be a violation and the homeowner may be subject to fines. The law also allows the association to use other means to enforce a lien against a unit owner, such as suits for money judgments, which could lead to garnishment of wages and bank accounts. The law was meant to curb abuses in collection, but not to eliminate a homeowner’s obligation to pay the association’s dues.

Fredrick Nix is an associate in the firm of Laura Margulies & Associates, LLC. We represent consumers in bankruptcy and litigation matters in Maryland and the District of Columbia. Please visit our web site at www.law-margulies.com for more information about the firm.