Client Alert: A New Holding in the Court of Appeals of Maryland That May Affect Enforcement of Condominium Liens

Earlier this week, the Court of Appeals of Maryland held that condominium liens perfected under the Maryland Contract Lien Act cannot secure unpaid amounts which accrue subsequent to the recordation of the lien. In in re Anthony D. Walker, the Court answered a certified question from the United States Bankruptcy Court for the District of Maryland which had grappled with the issue.

During a twelve (12) year period, the unit owner defaulted many times on the monthly condominium assessments. These multiple defaults caused the unit owners’ association to file eight (8) separate liens and to obtain three (3) personal judgments. Growing weary of repeated enforcement issues, on December 22, 2015, the association filed its ninth lien for all unpaid sums owed as of October 6, 2015 “plus all sums becoming due thereafter.” On August 9, 2016, the association obtained a judgment based upon the ninth lien for sums due through December 31, 2016—a date more than four months after the judgment date.

In briefing to the Court of Appeals, the association argued that the plain text of the statute does not prohibit continuing liens nor does it require a lienholder to file a new lien with each additional unpaid damage. The association further argued that the United States District Court has previously held that a prohibition on continuing liens “‘would be bizarre and idiosyncratic and not tenable’ because it would require a creditor to file a new lien every time an additional cost accrued.” The unit owner countered that the Contract Lien Act prohibits a sum from being secured by a statutory lien until the unit owner has a pre-attachment opportunity to contest the lien.

Beginning with the statutory language, the Court of Appeals noted that such liens are afforded a limited senior priority above mortgage liens but that the statute permits the lien to only secure specified payments identified in the statute. Notably absent from the statutory list of secured payments were payments that accrue subsequent to the lien’s recordation. The Court then held that the purpose of the Contract Lien Act was served by its plain reading in that an association is free to file multiple liens and, with each recordation, the association puts future creditors on notice that the property is encumbered.

For mortgage holders facing claims from an association that their lien takes a priority, it is recommended that close attention be paid to the amounts being claimed as well as when those amounts accrued. An overzealous association may have its lien stripped from the property if it attempts to overreach and secure future amounts due.

Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.

If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.