ANNAPOLIS — Homeowners’ associations cannot enforce payment of assessments by their members, or lot owners, by requiring that they waive their right to challenge the dues in court, a sharply divided Maryland high court ruled Monday.
In its 4-3 decision, the Court of Appeals said the associations must comply with the state’s Consumer Protection Act, which bars the use of “confessed-judgment” clauses under which the consumer concedes – or confesses – the debt is owed in advance of any litigation. The court, by the slimmest of majorities, said the members are “consumers” under the law because their assessments pay for goods and services provided by the association for their personal, household or family use.
Lot owners have “a right to use and enjoy the common areas and community facilities, and a concomitant duty to pay the assessments or fees – debts which are incurred ‘primarily for household [or] family … purposes,’” Judge Brynja M. Booth wrote for the majority, quoting from the Consumer Protection Act.
The “obligation to pay the HOA (homeowners association) assessments arose in connection with the purchase of (the) property, even if the timing and amount of the particular assessment was yet to be determined,” Booth added. “The fact that the assessments may benefit more than a single household does not change their character as debts incurred primarily for personal, household or family purposes.”
HOAs can enforce payment of the assessments through breach-of-contract and similar legal claims, the high court added.
Attorney Martin E. Wolf, who represented the lot owner challenging the homeowners’ association in the case, hailed the decision.
“The practical effect is people will get their day in court before any adverse action is taken against them,” said Wolf, of Gordon, Wolf & Carney Chtd. in Towson.
But the homeowners’ association’s attorney, Timothy Guy Smith, assailed what he characterized as the majority’s overly broad interpretation of the Consumer Protection Act.
“The Court of Appeals has substituted their judgment for that of the legislature,” said Smith, of Timothy Guy Smith P.C. in Glenwood.
Booth was joined in the opinion by Chief Judge Mary Ellen Barbera and Judges Robert N. McDonald and Shirley M. Watts.
In dissent, Judge Joseph M. Getty said the Maryland Homeowners Association Act governs HOA assessments, which are distinct from “consumer” payments under state law. Thus, HOA assessments are not subject to the Consumer Protection Act’s ban on confessed-judgment provisions, he said.
“HOA assessments are not optional consumer contracts but instead are a requirement of the HOA declaration and a responsibility of the lot owner,” Getty wrote, citing the Homeowners Association Act. “Unlike a consumer transaction, the HOA declaration creates continuing and mandatory obligations for HOA assessments to support common use property maintenance and facilities.”
Getty was joined in the dissent by Judges Michele D. Hotten and Irma S. Raker, a retired jurist sitting by special assignment.
In its decision, the court struck down the confessed-judgment provision of an assessment-payment contract the Goshen Run Homeowners Association in Gaithersburg had reached with a member, Cumanda Cisneros, who was delinquent in paying the association’s fee.
Goshen moved to enforce the confessed-judgment provision after Cisneros missed payments, but the Maryland District Court in Montgomery County declined the motion, saying the clause violated her consumer rights. The Montgomery County Circuit Court agreed, prompting the association to seek review in the Court of Appeals.
The high court rendered its decision in Goshen Run Homeowners Association Inc. v. Cumanda Cisneros, No. 3, September Term 2019.