That’s the decision of the high court in Maryland.
When you are considering buying an older unit, the condo association is required to prepare a resale package. This contains lots of material about the association, including declaration, bylaws, rules, and plats and plans as well as financial data and insurance information.
Maryland’s law is based on a case called MRA Property Management v. Armstrong. In that case, a number of buyers alleged that a property manager and the Tomes Landing Condominium Association in Port Deposit provided resale packages that failed to disclose major defects in the condominium buildings — defects that were known at the time of the disclosure.
The Maryland Court of Appeals decided that the manager and association violated the Maryland Consumer Protection Act, despite not being the units’ actual sellers. In this case, the plaintiffs reviewed the resale package (which ended up being misleading) and based their purchase decision at least in part on that information.
In the District, prospective new condo buyers receive a public offering statement, which contains a lot of information on improvements the developer made, such as the installation of a new roof or replacement of outdated plumbing and wiring.
A dispute between condo buyers and developers is playing out in a suit in the District filed by Adam Wetzel and Jonathan Rushbrook, who signed a contract to buy a new condo unit. Before they took title, they were living abroad and did not see the property. According to papers filed in the case, Wetzel and Rushbrook “had relied on the pictures on the developer’s Web site as well as representations” in a document — prepared by the developer — called a public offering statement. The document spells out what improvements the developer made, such as the installation of a new roof or replacement of outdated plumbing and wiring.
But before the pair went to closing, the first-floor area was destroyed when large amounts of rain entered through the walls and the windows. After buying, they spent more than $14,000 just on mold cleanup.
The defendants accused the developer, Capital City Real Estate, of fraud and of violating the District’s consumer protection laws. The case went to the Court of Appeals, which came to the same conclusion as in Maryland: You can sue the developer even if it was not the actual seller of the property. The case was sent back to the Superior Court, where it is pending.
“Developers will need to be very careful in making representations about residential homes and condominiums in which they are involved, including on developer Web sites and in other advertising, public offering statements, sales contracts and other materials provided to consumers,” said Roger Winston, a real estate attorney with the law firm of Ballard Spahr in the District.
Whatever the outcome of the Wetzel case, the takeaway is this: Buyers in Maryland, the District and Virginia (which has no similar reported cases) should beware.
Obviously, if you plan to buy into a community association, you must carefully read the documents about the property. But you must do more.
Go over to the building on a weekend, introduce yourself to some of the owners and ask them about the project. Talk directly to the president of the board: Ask if there are any problems with the units or if there are special assessments in the planning stage but not yet formally authorized.
It’s your investment. Do your homework.
Benny L. Kass is a Washington and Maryland lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel. For a free copy of the booklet “A Guide to Settlement on Your New Home,” send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036.