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FROM THE CHAIR

From The Chair

From the Editor

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Court of Appeals of Maryland Decides a Contract Provision Does Not Mean What It Says

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Court Holds That Lenders Are Limited In Recovering Attorneys’ Fees From Their Borrowers

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Court Of Appeals Strikes Penalty For Failure To Register Ground Leases With The SDAT

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Court Of Appeals Lifts Lead Paint Liability Limitation

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Waiver Of Statute Of Limitations Requires Explicit Language

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EPA Conducting Renovation, Repair And Painting Rule Inspections In Maryland

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Effective Stormwater Management Plans Make Great Neighbors: A Supplement To The Adage “Good Fences Make Good Neighbors.” The Maryland Court Of Appeals Reviews The Law On Private Nuisance And Negligence Per Se.

 

Lila Shapiro-Cyr, Esq.

This Bar Year for the Real Property Section is off to a terrific start.  A tremendous thanks to all of you who work on the Section’s projects and programs. We have a great group of folks who contribute their time and energy to a number of exciting events and other efforts during the year, and it is truly a group effort.

A special thank you is extended to Francie Spahn and Danielle Zoller, co-chairs of the Advanced Real Property Institute and to the committee members and faculty of the Institute.  The ARPI had great attendance this year, attributable in part to it being held in Columbia, a central location convenient for much of our membership.  This year’s lineup provided many terrific sessions, which started out with an incredibly informative and timely keynote speech by Federal Reserve Board Governor Sarah Bloom Raskin. We are so grateful that she accepted our invitation to speak.

If you have not been able to attend the regular monthly Commercial Real Estate Discussion Groups, I urge you to try and make that a New Year’s Resolution.  This is a valuable resource from both an educational and networking perspective.  Also, as he says in his Editor’s note, Marc Bergoffen is working hard to make Ground Rules as timely as possible.  In that vein, Ground Rules will be published as articles are submitted and accepted.  I am looking forward to this change, and I hope our membership will embrace it as well.  If you submit an article (and it is accepted), you will likely get your own email blast to the membership!

The Section Council recently formed a committee to focus more acutely on continuing legal education programming, and we hope to be able to begin to roll out some of those opportunities shortly.  If you are interested in working on that committee, or on any of our others (including foreclosure, land use), your assistance would be greatly appreciated.  Please feel free to contact me at (410) 528-5624 or shapirocyr@ballardspahr.com if you’d like to volunteer.

I am looking forward to a year of growth and opportunity, and if you aren’t already doing so, I hope that you will join me in trying to improve what our Section offers to its membership.  Happy Holidays to all, and may 2012 bring you much health and happiness.

 

FROM THE EDITOR

Marc B. Bergoffen
Bregman, Berbert, Schwartz & Gilday, LLC

As 2011 draws to a close, real estate practice is starting to show (if not already showing) signs of life.  Hopefully, the Maryland economy will not grow cold like the early months of 2012.

In an effort to bring you more timely articles, beginning in 2012, we will publish Ground Rules as articles are submitted and accepted, with each calendar constituting a separate “edition” of Ground Rules.

Please feel free to submit an article on any topic that you feel may be of interest to the Real Estate Section.  Articles typically range from 1,000 to 2,500 words.  The articles do not need to be written originally for Ground Rules and may be modified from previously published work (with proper authorization, as necessary) or previously issued Client Alerts.

 

Court of Appeals of Maryland Decides A Contract Provision Does Not Mean What It Says

By Douglas M. Bregman, Esq.

Earlier this year, the Court of Appeals of Maryland held that two out of three parties to an agreement could modify it despite a provision in the agreement expressly stating that any modification or cancellation required written signatures of all three original parties.  The case, 600 North Frederick Road, LLC v. Burlington Coat Factory of Maryland, LLC, involves a dispute regarding an amendment to a covenant agreement governing three parcels of land adjacent to Maryland Route 355 and Perry Parkway in Gaithersburg, Maryland.2

At some time prior to 1976, a large tract of land was divided into these three parcels, which were denominated as “Parcel One,” “Parcel Two,” and “Parcel Three.”  Parcel One (approximately 2.47 acres), is on the northeast corner of the tract, at the intersection of Perry Parkway and Route 355.  Parcel Two (approximately 7.53 acres) is west of Parcel One, and is bounded by Perry Parkway and Route 355.  Parcel Three is west of Parcels One and Two, with Perry Parkway on the south, Montgomery Village Avenue on the northwest, and Route 355 on the northeast. 

In 1976, the owner of all three parcels at that time, Danac Real Estate Investment Corporation (“Danac”), signed a thirty-year lease agreement with Montgomery Ward (“Ward”) involving Parcels One and Two, and Ward built a retail store on Parcel One and parking for the store on Parcel Two.  Under the terms of the 1976 lease, Ward’s use of Parcel Two was subject to Danac’s right to develop that parcel and Danac could not develop the parcel without Ward’s consent (and consent could not be withheld unreasonably).  Over time, Danac conveyed Parcels One and Two and parts of its Parcel Three land to others. 

[View Entire Article Online]

 

Court Holds That Lenders Are Limited In Recovering Attorneys’ Fees From Their Borrowers

By Ed Levin

In SunTrust Bank v. Goldman (decided on September 30, 2011), the Maryland Court of Special Appeals held that the prevailing party in an action on a defaulted line of credit could collect only $3,094.00 in legal fees – not the $60,206.00 to which it claimed to be entitled under the loan documents.  The Court based its decision on three principles:  (i) provisions in contracts providing for payment of attorneys’ fees are indemnity clauses, (ii) attorneys’ fees must be reasonable, and (iii) future fees will be allowed to be included in the award only if evidence is presented that with certainty they will be incurred.

On June 30, 2009, SunTrust Bank sued Frank and Lisa Goldman in Baltimore County for the outstanding principal balance under a line of credit ($401,373.31), interest ($14,259.31), and attorneys’ fees in the amount of $60,206.00 (15% of the principal balance).  On March 12, 2010, the court entered a default judgment against the Goldmans for the principal balance and interest but deferred a decision on the bank’s claim for attorneys’ fees. 

The equity line agreement at issue provided that upon default the Goldmans would pay SunTrust’s “costs of collection, including court costs and fifteen percent (15%) of the principal plus accrued interest as attorneys’ fees or reasonable attorneys’ fees as allowed by law . . . .”  The Circuit Court for Baltimore County awarded SunTrust attorneys’ fees in the amount of only $3,094.00. 

[View Entire Article Online]

 

Court Of Appeals Strikes Penalty For Failure To Register Ground Leases With The SDAT

By Searle Mitnick

In 2006, the Baltimore Sun ran a number of articles describing horror stories of homeowners losing their properties because of delinquencies in the payment of small amounts of ground rent.  In many cases, the costs and attorneys’ fees that the ground tenants were required to pay far exceeded the amount of the rent that was due.

These extreme cases attracted the attention of the Governor and the Maryland General Assembly.  The response was Chapter 290 of the Laws of 2007.  This law provided for a registration system for ground rents that would be accessible online at the Maryland State Department of Assessments and Taxation (SDAT).  It also provided that if the ground leaseholder failed to register by September 30, 2010, the ground lease was extinguished and rent was no longer payable to the owner of the ground lease.

On October 25, 2011, the Maryland Court of Appeals ruled in Muskin, Trustee v. State Department of Assessments and Taxation, No 140, September Term 2010 (Md. Oct. 25, 2011), by a vote of five to two, that the part of Chapter 290 that extinguishes ground rents that were not registered, is unconstitutional as a violation of the Maryland Declaration of Rights and Constitution.

[View Entire Article Online]

 

Court Of Appeals Lifts Lead Paint Liability Limitation

By Michael Powell and Bob Enten

By now many landlords have heard of the Maryland Court of Appeals’ decision striking down limitations on lead paint liability.  The case, Jackson, et al.  v. The Dackman Company, et al., No 131, September Term 2008 (Md. Oct. 24, 2011) exposes all owners of rental properties where lead paint is present to potentially huge liability claims even if the owner has complied with Maryland risk reduction requirements and registered the units with the Department of the Environment.  Owners of such units must carefully consider the risks involved if the units continue to be rented – even if the lead paint is properly contained and maintained in accordance with Maryland law.

Although there were some complex facts presented in the underlying case, the relevant factual issue, in the opinion of the Court, was fairly simple.  Under Maryland law, a landlord who complies with Maryland lead paint risk reduction requirements can escape further liability by making a “qualified offer” to a tenant injured by exposure to lead paint.  A “qualified offer” consists of an offer to reimburse up to $17,000 in medical and relocation expenses.

[View Entire Article Online]

 

Waiver Of Statute Of Limitations Requires Explicit Language

By Ed Levin and David Fishman

Ahmad v. Eastpines Terrace, et al., No. 1043, September Term 2009 (Md. Ct. Spec. App.  Sept. 1, 2011), involved a family business venture that went bad.  However, the appellant’s action for damages was not timely filed because, as the court held, language that seemed to waive the statute of limitations was effective only for the period of time up to the date of the document that contained the waiver, and it did not alter the period for filing of claims that started subsequent to that date.

After the appellant, M. Abraham Ahmad, contributed money to family entities, he asked his father, Mehdi Ahmad, to be repaid.  Mehdi Ahmad signed a document on June 25, 2000 (called the “2000 Acknowledgment”) on behalf of himself and three entities.  The 2000 Acknowledgment contained the following provisions:

[View Entire Article Online]

 

EPA Conducting Renovation, Repair And Painting Rule Inspections In Maryland

By Neil Schechter and Michael Powell

A number of owners and contractors who renovate multi-family housing have received notices from the Environmental Protection Agency (EPA) indicating that the EPA in cooperative agreement with Senior Services of America, Inc. (designated by the EPA Administrator) will be conducting inspections of their properties and records under Section 409 of the Toxic Substances Control Act (TSCA). These inspections are directed at compliance with Section 402(c) of the TSCA, the Renovation, Repair and Painting Rule (RRPR) which became effective a little over a year ago.

[View Entire Article Online]

 

Effective Stormwater Management Plans Make Great Neighbors:
A Supplement To The Adage “Good Fences Make Good Neighbors.”
The Maryland Court Of Appeals Reviews The Law On Private Nuisance And Negligence Per Se.

By Lisa Spitulnik

On August 17 the Maryland Court of Appeals decided Douglas Wietzke, et ux. v. The Chesapeake Conference Association, et al., 2011 Md. Lexis 520.  In this matter, land owners (the “Wietzkes”) claimed that construction activity on the adjacent Church’s property caused flooding to their home which was located down the hill from the Church’s property.

The Court reviewed the standard for a nuisance case in the State of Maryland.  Following other decisions in Maryland, the Court of Appeals stated that there are two types of nuisances: (1) a “public nuisance,” which is an injury to the public at large or to all persons who come in contact with it, and (2) a “private nuisance” which is an injury to an individual or a limited number of individuals only.  Private nuisance is split into two categories: (1) a nuisance per se, or a nuisance at law, which involves the use of one’s land which is so unreasonable that it is deemed to constitute an actual nuisance “at all times and under any circumstances” (typically motivated by malice), and (2) a nuisance in fact, which arises when considering the surrounding circumstances, a particular land use constitutes a nuisance even though the conduct might not be a nuisance in another locality, or another time, or under some other circumstances. 

The Wietzkes’ case was a private nuisance per se matter. The jury ruled in favor of the Church on the issue of nuisance.  The Wietzkes appealed and argued that the trial court failed to include certain jury instructions including that (i) strict liability was the appropriate standard that the court should consider in determining liability, and (ii) county approval or the existence of other sources that may have contributed to the damage does not absolve a defendant of nuisance liability.  They also argued that the trial court erred in dismissing their negligence claim based on violation of a statute.

[View Entire Article Online]

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