Elvaton Towne Condominium Regime II, Inc. v. Rose

Barbera, C.J. The principal issue for consideration in the present case is the extent to which, and upon what authority, a condominium association may impose restrictions on a unit owner’s right of access to communally-held property. The parties are Petitioners/Cross-Respondents Elvaton Towne Condominiums in Glen Burnie, its condominium association, and its management firm (collectively, “Elvaton”) and Respondents/Cross-Petitioners William and Dawn Rose (“the Roses”). Elvaton’s parking areas and the pool are general common elements, which, according to ¶ 7(C) of Elvaton’s governing declaration, “shall be exclusively owned in common by all of the Unit Owners.” Under the Maryland Condominium Act, Md. Code Ann., Real Prop. §§ ll-101(c), 11-107, a “general common element” is one over which every unit owner enjoys ownership rights. Unit owners are assessed an annual condominium fee, to be paid on a monthly basis, to cover, among other things, the maintenance of the common elements of the property, which include the parking lot and pool.

As a means of enforcing collection of such debts, Elvaton’s governing Board of Directors passed a “suspension-of-privileges” rule that prohibits unit owners who are delinquent in their payment of condominium fees from parking overnight within the ⁶⁸⁹ complex and from using the pool, until such time as the delinquency is cured. The dispute at issue here has its genesis in Elvaton’s claim that the Roses were delinquent in paying their condominium fees. In addition to recording a statement of lien against the Roses’ condominium unit and filing suit in the District Court sitting in Anne Arundel County to recover the alleged debt, Elvaton notified the Roses that, pursuant to the “suspension-of-privileges” rule, they were prohibited from parking in the parking lot overnight or using the pool until such time as they paid their allegedly delinquent condominium fees. During the pendency of the District Court action, the Roses filed in the Circuit Court for Anne Arundel County a complaint seeking, among other relief, a declaratory judgment that (1) Elvaton did not possess the authority to prohibit them, on the basis of an alleged delinquency, from using the common elements of the Elvaton complex; and (2) the Roses did not owe a debt to Elvaton.

The Roses also obtained a stay of the District Court proceedings during the pendency of the case in the circuit court. Before trial, the circuit court ruled in favor of Elvaton that the Roses were not entitled to have the court issue a declaratory judgment on the validity of the alleged debt given that the issue was pending review in the District Court. Later, following a trial on the merits of the remaining counts of the Roses’ complaint, the circuit court found in favor of the Roses on the validity of the rule. The court explained that Elvaton did not have the authority to restrict the Roses’ use of the parking lots and the pool as a means of collecting on the debt, because Elvaton was not authorized by the condominium’s governing documents to do so for the alleged failure to pay association assessments.

Both Elvaton and the Roses appealed their respective adverse judgments, and the Court of Special Appeals affirmed both judgments of the circuit court. Elvaton Towne Condo. Regime II, Inc. v. Rose, No. 1033, Sept. Term, 2014, slip op. at 25, 32-33 (Md. Ct. Spec. App. filed Apr. 21, 2016).

Both parties sought, and we granted, further review in this Court. ⁶⁹⁰ For the reasons that follow, we conclude that the Maryland Condominium Act, Md. Code Ann., Real Property § 11-101 et seq. (1982, 2015 Repl. Vol.) 1 allows access to communally-held property, that is, the “general common elements” of the condominium, to be restricted as a means to enforce payment of condominium fees. Such restrictions, however, must first be authorized by the unit owners through agreement in the condominium’s declaration.

In the present case, Elvaton did not include such a restriction in its declaration. We therefore affirm the judgment of the Court of Special Appeals that came to the same conclusion. We likewise affirm the Court of Special Appeals’ judgment that the Roses were not entitled to have the validity of the debt resolved in the circuit court, given its pendency in the District Court. I Condominium Law, in a Nutshell “A condominium is a ‘communal form of estate in property consisting of individually owned units which are supported by collectively held facilities and areas.’ ” Ridgely Condo.

Ass’n v. Smyrnioudis, 343 Md. 357, 358 , 681 A.2d 494 (1996) (quoting Andrews v. City of Greenbelt, 293 Md. 69, 71 , 441 A.2d 1064 (1982)). Owning property in common offers certain benefits to condominium owners, such as affordability and shared costs of property management, and in exchange condominium owners “agree to be bound by rules governing the administration, maintenance, and use of the property.” Id. at 359, 681 A.2d 494 (footnote omitted). We have recognized that, inherent in the condominium concept is the principle that to promote the health, happiness, and peace of mind of the majority of the unit owners since they are living in such close proximity and using facilities in common, each unit owner must give up a certain degree of freedom of choice ⁶⁹¹ which he might otherwise enjoy in separate, privately owned property. Condominium unit owners comprise a little democratic sub society of necessity more restrictive as it pertains to use of condominium property than may be existent outside the condominium organization.

Id. at 359 , 681 A.2d 494 (quoting Hidden Harbour Estates, Inc. v. Norman, 309 So.2d 180, 181-82 (Fla. Dist. Ct. App. 1975)). The Maryland Condominium Act (hereinafter, the “Act”) “regulates the formation, management, and termination of condominiums in Maryland.” Jurgensen v. New Phoenix Atlantic Condo.

Council of Unit Owners, 380 Md. 106, 115 , 843 A.2d 865 (2004). Under the Act, a condominium is established by recording a declaration, bylaws, and condominium plat among the land records of the county in which the property is located. § 11-102(a)(1). The declaration, among other provisions, names the condominium, defines the common elements of the condominium, and assigns the percentage interests in the common elements appurtenant to each unit and the number of votes appurtenant to each unit at any council of unit owners. § 11-103. Declarations may be amended only by the written consent of eighty percent of the unit owners listed on the current roster. § 11— 103(c)(1).

The percentage interest in common elements appurtenant to each unit, however, “shall have a permanent character and ... may not be changed without the written consent of all of the unit owners and their mortgagees.” § ll-107(c) (emphasis added). The Act further provides for the enactment of bylaws, which address the foundational aspects of the community’s general management and operations. § ll-104(a) (“The administration of every condominium shall be governed by bylaws which shall be recorded with the declaration.”). The bylaws describe the council of unit owners—the governing body of a condominium—and its authority and the extent to which it may delegate its tasks to a board of directors or managers. § ll-104(b)(l). The bylaws also establish the method of voting by unit owners, ⁶⁹² including matters such as quorum and the method of calling for a gathering of unit owners. § ll-104(b)(3).

Of particular relevance here, the bylaws describe the “manner of assessing against and collecting from unit owners their respective shares of the common expenses” and “also may contain any other provision regarding the management and operation of the condominium including any restriction on or requirement respecting the use and maintenance of the units and the common elements.” § 11—104(b)(4), (c). The fundamental governance agreements established in the bylaws may be modified, but only by a minimum two-thirds vote of the unit owners. § ll-104(e)(2). 2 Condominiums also may “adopt and amend reasonable rules and regulations,” consistent with the two foundational governing documents described above, that address less fundamental administrative needs of the community. §§ 11-109(d)(2), 11-111. Such rules are passed or amended, after notice and the opportunity for public comment, by simple majority vote of the council of unit owners or its delegated management entity. § ll-lll(a)(l). Rules “generally deal with the use and occupancy by owners of units and common areas, patios and other exterior areas, parking, trash disposal, pets, etc. They frequently prohibit conduct that could constitute a nuisance.” Dulaney Towers Maintenance Corp. v. O’Brey, 46 Md.App. 464, 466 , 418 A.2d 1233 (1980).

The Act clarifies the superiority of the declaration over the plat, bylaws, and any rules or regulations. Section 11—124(e) provides: “If there is any conflict among the provisions of this title, the declaration, condominium plat, bylaws, or rules adopted pursuant to § 11-111 of this title, the provisions of each shall control in the succession listed hereinbefore.” ⁶⁹³ “A condominium owner ... holds a hybrid property interest consisting of an exclusive ownership of a particular unit or apartment and a tenancy in common with the other co-owners in the common elements.” Ridgely, 343 Md. at 358-59 , 681 A.2d 494 ; § 11-107(a); see also Andrews, 293 Md. 69, 73-74 , 441 A.2d 1064 . The “common elements” of condominium property, as well as its subsets, are defined in § ll-101(c) of the Act: (1) “Common elements” means all of the condominium except the units. (2) “Limited common elements” means those common elements identified in the declaration or on the condominium plat as reserved for the exclusive use of one or more but less than all of the unit owners.

(3) “General common elements” means all the common elements except the limited common elements. Section ll-107(a) provides for communal ownership of common elements: Each unit owner shall own an undivided percentage interest in the common elements equal to that set forth in the declaration. Except as specifically provided in this title, the common elements shall remain undivided. Section ll-107(c) describes the nature of percentage interests in the common elements as follows: The percentage interest provided in subsections (a) and (b) of this section may be identical or may vary.

The percentage interests shall have a permanent character and, except as specifically provided by this title, may not be changed without the written consent of all of the unit owners and their mortgagees. Any change shall be evidenced by an amendment to the declaration, recorded among the appropriate land records. The percentage interests may not be separated from the unit to which they appertain. Any instrument, matter, circumstance, action, occurrence, or proceeding in any manner affecting a unit also shall affect, ⁶⁹⁴ in like manner, the percentage interests appurtenant to the unit.

Section ll-108(a) in turn provides: Subject to the provisions of subsection (c) of this section, the common elements may be used only for the purposes for which they were intended and, except as provided in the declaration, the common elements shall be subject to mutual rights of support, access, use, and enjoyment by all unit owners. (Emphasis added). II Elvaton’s Condominium Documents The “Declaration for Elvaton Towne Condominiums, Regime Two” (the “Declaration”) was executed on May 27,1975. 3 Paragraph 13 of the Declaration makes each unit owner a voting member of the Council of Unit Owners, but Article V, §§ 2-3 of the Elvaton Towne Condominiums, Regime Two By-Laws (the “By-Laws”) delegates authority to a Board of. Directors, tasking it with the general administration of the condominium, including, pertinent here, the promulgation of rules and regulations respecting the use of common elements.

The Declaration provides that “all streets, curbs, sidewalks, ... and parking areas,” are among the general common elements as to which each unit owner has a fractional ownership interest. ¶ 7(A). The Declaration at ¶ 7(B) further provides that there are “no limited common elements within the Regime created herein”; making clear that all common elements are “general common elements,” as defined in § 11-101(c)(3). In addition, the developer stated at ¶ 15 of the Declaration that “[i]t is the intention of Developer that each Unit Owner ... shall have the right to use all of the recreational facilities for so long as same, including swimming pool ⁶⁹⁵ and bath house, shall exist .... This right shall be a right appurtenant to each condominium unit,” Paragraph 7(C) of the Declaration provides that “[t]he common elements shall be exclusively owned in common by all of the Unit Owners.” Paragraph 7(F) further provides: Each Unit Owner, in proportion to his Percentage Interest, shall contribute toward payment of the Common Expenses, and no Unit Owner shall be exempt from contributing toward said Common Expenses either by waiver of the use or enjoyment of the common elements, or any of them, or by the abandonment of his unit.

The contribution of each Unit Owner toward Common Expenses shall be determined, levied and assessed as a lien, all in the manner set forth in the By-Laws which are being recorded among the Land Records of Anne Arundel County simultaneously herewith. The Elvaton By-Laws were executed the same day as the Declaration. Relevant here are Article V - Directors, Article IX - Condominium Fees/Assessments, and Article X - Use Restrictions. Section 3 of Article V is entitled Powers and Duties and provides in pertinent part that the “Board of Directors shall have all the powers and duties necessary for the administration of the affairs of the Condominium,” which include, among others, the power and duty, (b) to establish and provide for the collection of assessments from the Unit Owners and for the assessment and/or enforcement of liens therefor in a manner consistent with the law and the provisions of these By-Laws and the Declaration^] [[Image here]] (d) to promulgate and enforce such rules and regulations, and such restrictions on, or requirements, as may be deemed proper respecting the use, occupancy and maintenance of the project, and the use of the general and limited common elements, as are designated, to prevent unreasonable interference with the use and occupancy of the Condominium and of the general and limited common elements by ⁶⁹⁶ the Unit Owners, all of which shall be consistent with laws and the provisions of these By-Laws and the Declaration.

Section 1 of Article IX is entitled Annual Condominium Fees/Assessments and provides in pertinent part: (a)Each Unit Owner shall pay to the Council, monthly, a sum equal to one-twelfth (1/12) of the Unit Owner’s proportionate share of the sum required by the Council pursuant to the Percentage Interests in Common Expenses and Common Profits ... to meet its annual expenses[.] Section 4 of Article IX, entitled Non-Payment of Assessment, provides in pertinent part: (a) A Unit Owner shall be liable for all assessments, or installments thereof, coming due while he is the owner of a unit .... (b) All assessments, until paid, together with interest on them and actual cost of collection, constitute a lien on the units on which they are assessed, if a statement of lien is recorded within two years after the date the assessment becomes due. ... (c) Any assessment, or installment thereof, not paid when due shall bear interest, from the date when due until paid at the rate not exceeding the maximum permissible legal rate per annum. Section 7 of Article IX, entitled Enforcement, provides: The lien may be enforced and foreclosed by the Council of Unit Owners, or any other person specified in the By-Laws, in the same manner, and subject to the same requirements, as the foreclosure of mortgages or deed of trusts on real property in the state containing a power of sale, or an assent to a decree.

Article X, entitled Use Restrictions, at § 3, “Prohibited Uses and Nuisances,” provides: (b) There shall be no obstruction of any general common elements, except as herein provided. Nothing shall be stored upon any general common elements, except as herein provided, without the approval of the Board of Directors. ⁶⁹⁷ Vehicular parking upon general common elements may be regulated by the Board of Directors!).] [[Image here]] (r) There shall be no violation of any rules for the use of the general or limited common elements which may from time to time be adopted by the Board of Directors and promulgated among the Unit Owners by said Board in writing; and the Board of Directors is hereby, and elsewhere in these By-Laws, authorized to adopt such rules. Article XV, entitled Amendment, provides: These By-Laws may be amended by the affirmative vote of Unit Owners representing 75% of the total votes of the Condominium Regime, as then constituted, at any meeting of the Unit Owners duly called for such purpose in accordance with the provisions of the Real Property Article, Section 11-104 of the Annotated Code of Maryland!.] I—I hH hH The Litigation We noted at the outset that Elvaton, proceeding on the basis that the Roses were delinquent in payment of their condominium fees, recorded a Statement of Lien against the Roses’ unit and filed suit against them in the District Court, seeking payment of the allegedly delinquent fees. 4 In addition, Elvaton notified the Roses that, pursuant to the “suspension-of-privileges” rule (hereinafter, the “Rule”) promulgated by the Board of Directors, the Roses were prohibited from parking overnight in the condominium parking area. The Rule promulgated by Elvaton provided that, the right to park within the Council’s Property shall automatically be suspended for any unit owner ... that is more ⁶⁹⁸ than forty-five (45) days past due in the payment of condominium assessments and other charges for a condominium unit in the community.

The suspension of the parking permit shall remain in effect until the unit’s account is brought current. Elvaton further notified the Roses that, pursuant to a rale that apparently had existed for many years, they were likewise precluded from using the condominium “community” pool during the summers of 2012 and 2013. The Roses responded to Elvaton’s action in the District Court by filing a six-count complaint in the Circuit Court for Anne Arundel County against Elvaton, its management company (Wentworth Property Management, LLC), and Elvaton’s debt collection attorney, John Oliveri, and his firm, Oliveri & Associates, LLC. In this appeal, we are concerned only with Count One. 5 Count One was an action for declaratory judgment, in which the Roses requested the court to make four declarations: (1) that this Court determine and adjudicate the property rights of the Roses and all Unit Owners as to the unhindered use of general common areas including parking areas and the community recreational areas; [and] (2) that this Court determine and adjudicate the rights and liabilities of the parties with respect to the assessments and other fees allegedly due from the Roses to Elvaton; and ⁶⁹⁹ (3) that this Court determine and adjudicate the rights and liabilities of the parties with respect to the Statement of Lien; and (4) that this Court declare the Statement of Lien recorded in the land records of Anne Arundel County at book 23888 page 0474 to be void ab initio or, in the alternative, released[.] In addition to their complaint in circuit court, the Roses filed a request for stay of the delinquency action in District Court during the pendency of the circuit court proceedings.

That request was granted. Elvaton filed a motion for summary judgment in the circuit court action. After a hearing on the motion, the court granted summary judgment in Elvaton’s favor on Declarations 2, 3, and 4 of Count One, ruling that these issues would be addressed in the District Court proceeding. Trial followed on the remaining counts of the Roses’ complaint.

It is unnecessary for present purposes to summarize all the evidence presented. It is enough to note that Elvaton provided evidence that, at some point before June 1, 2012, the Roses had fallen behind on their monthly assessments. Mrs. Rose testified that a member of Elvaton’s Board of Directors gave her a letter informing her that, because Elvaton considered the Roses to be delinquent on their assessments, effective June 1, 2012, the Roses would be prohibited from parking in either of their two assigned parking spaces. Mrs. Rose further testified about email reminders to the community, on or about June 4, concerning a “new towing policy” that would be taking effect that week advising that any resident who is delinquent on the assessment would be prohibited from parking and, if parked, would be towed at the unit owner’s expense.

The Roses, therefore, parked on a county road outside the community. Mrs. Rose testified that the Roses were also barred from using the community pool for the summers of 2012 and 2013. Following trial, the circuit court issued a Memorandum Opinion and Order detailing the court’s findings and conclu ⁷⁰⁰ sions. The court found in favor of the Roses on Declaration 1 of Count I. The circuit court applied the Act and Ridgely, supra, in reasoning that Elvaton’s action was an unauthorized taking of the Roses’ property.

The court determined that, because the Roses own a percentage share of the common elements of the condominium complex, Elvaton could not deprive the Roses of their property right to those common elements, even temporarily, without proper authority. The court recognized that the Act would allow for such debt collection practices had they been authorized by the Declaration; the Declaration, however, did not authorize that practice. Instead, Elvaton established that practice through a rule, which, pursuant to the governance structure of the condominium, is passed by majority vote of the governing Board of Directors. The court ruled that, given the absence in the Declaration of a provision authorizing Elvaton to employ such a debt collection practice, Elvaton could not deprive the Roses of their property interest in the common elements of the condominium complex.

Elvaton appealed the court’s decision on the debt collection practices issue, and the Roses cross-appealed on their right to seek in the circuit court a declaratory judgment on the alleged debt. The Court of Special Appeals affirmed the circuit court on both claims, prompting both Elvaton and the Roses to seek further review in this Court. We granted certiorari to review the parties’ respective claims. 6 Elvaton Towne Condo. v. Rose, 449 Md. 409 , 144 A.3d 704 (2016). ⁷⁰¹ IV The permissibility of Elvaton’s debt collection practice is a purely legal question, which we review de novo. “[W]here an order [of the trial court] involves an interpretation and application of Maryland constitutional, statutory or case law, our Court must determine whether the trial court’s conclusions are ‘legally correct’ under a de novo standard of review.” Schisler v. State, 394 Md. 519, 535 , 907 A.2d 175 (2006) (citation omitted). It is the general rule, moreover, that “the construction or interpretation of all written instruments is a question of law for the court.” Olde Severna Park Improvement Ass’n v. Gunby, 402 Md. 317, 329 , 936 A.2d 365 (2007) (quoting Gordy v. Ocean Park, Inc., 218 Md. 52, 60 , 145 A.2d 273 (1958)).

Elvaton’s primary argument is that the debt collection practices it instituted through its “suspension-of-privileges” Rule are not a taking of property because they are not permanent. Elvaton further argues, in the alternative, that the Rule is a reasonable use restriction authorized by the Declaration and By-Laws. Neither argument carries the day for Elvaton. A. Does application of the Rule constitute an impermissible taking?

The decisions of the circuit court and Court of Special Appeals on this argument were grounded in the facts of Ridgely . We therefore begin our discussion with a summary of that case. Ridgely involved a dispute concerning certain unit owners’ use of the lobby area of the building, a condominium composed of 232 residential units and seven ground floor units authorized for use as businesses. Each of the seven units were accessible from both the lobby and an exterior entrance.

Some of those businesses allowed their customers to enter through the building’s well-appointed lobby, a general common element ⁷⁰² of the condominium. 343 Md. at 363 , 681 A.2d 494 . Citing security concerns, the condominium association amended its bylaws to impose a permanent requirement that customers' were to use only exterior entrances to access the businesses, not the lobby. Id. at 363-64 , 681 A.2d 494 . Several of the commercial unit owners challenged the validity of this bylaw amendment as an unauthorized taking of their property.

In our review of the relevant law of a number of our sister states, we noted that the cases “fall generally into two categories, ... ‘exclusive use cases’ ... [and]