The Maryland Real Estate Commission, in the first case of its kind, has been asked to investigate an Ocean City developer who allegedly is refusing to pay more than $75,000 in fees and assessments on time-sharing units he owns in three resort-condominium projects.
The investigation is being sought by Maryland Secretary of State Lorraine Sheehan, whose office administers the state Time Sharing Act, a new law designed to regulate one of the fastest-growing trends in resort housing.
Under the statute, developers who offer time-sharing units for sale in condominium projects must register with the commission and file "a statement of public offering" disclosing details about the project to potential buyers.
The investigation request, however, centers on another provision of the law that requires unit owners to pay a proportion of the operating and maintenance expenses based on their ownership interest.
In a March 1 letter to the commission, Sheehan claimed the provision also applies to developers.
If the commission upholds her interpretation of the law, developers would be responsible for all fees and assessments on unsold units.
Individual unit owners, who would foot the bill for repairs and services otherwise, would save money, said Thomas C. Kimmel, executive legal assistant to the secretary.
The properties in question, the Ocean Time, Ocean High and St. Tropez condominiums in Ocean City, contain a total of 84 units.
Each condominium unit can be divided into as many as 51 time-sharing units, which are sold individually just like condominium shares, Kimmel said.
Each unit represents one week of the year, which can be bought, sold or traded for time-sharing units in other resort cities.
Developer H. Lloyd Hensley owns hundreds of unsold time-sharing units in the three projects, but is refusing to pay for maid and linen service and is refusing to make contributions to each project's reserve fund, according to Sheehan.
In his statement of public offering for the units, Hensley claimed that he was not liable for the costs.
"They feel by disclosing it, they've met the requirements of the law," Kimmel said.
"We feel the developer should pay them; that's why we've asked for the investigation," he added.
Martin M. Kandal, a lawyer representing Hensley, denied the allegations, but declined further comment.
The state's real estate commission has the power to issue "cease and desist" orders and can take "affirmative action" to correct conditions that violate the law, Kimmel said.
In this case, it could hold a hearing before reaching a determination. The commission has the power to subpoena witnesses and documents, Kimmel said.
Sheehan also has asked the state attorney general's office to investigate Hensley for possible violations of Maryland's condominium law.
Hensley had first registered the three projects as condominiums before turning them into time-sharing units.
The Maryland General Assembly passed the Time Sharing Act last year in response to a scandal involving the sale of time-sharing units at the Sea Time condominium project in Ocean City.
Since January, when the law went into effect, five projects have been registered in Maryland, including one out-of-state resort condominium.
Out-of-state projects also must be registered if time-sharing units are offered for sale in Maryland.
A spokesman for the real estate commission declined to comment on the request, and no hearing date has been set.