Throughout Maryland many homeowners are involved with or somehow associated with a homeowners association (“HOA”) which requires the payment of dues to upkeep the neighborhood. Many homeowners default on that obligation and the HOA is forced to collect those back dues. Fortunately, the HOA is left with multiple options to collect those dues and a favorable 12-year statute of limitations, as explained in more detail below.
Under the Maryland Homeowners Association Act, the Maryland Condominium Act, and the Maryland Contract Lien Act, homeowners associations and condo associations may enforce the payment of dues and assessments provided in the declaration and covenants by recording a lien on properties or by suing for damages at law. See Md. Code, Real Prop. § 11B-117; Md. Code, Real Prop. § 14-202; Md. Code, Real Prop. § 11-110.
These remedies are not mutually exclusive, as the statutes governing collection of HOA dues specifically state that a “suit for a monetary judgment for unpaid damages may be maintained without waiving any lien securing the same.” See Md. Code, Real Prop. § 14-204(b).
When it comes to enforcing payment of HOA dues by recording a lien, the HOA may foreclose on that lien and is granted a 12-year statute of limitations from the date of recordation. Md. Code, Real Prop. § 14-204(c). This extended statute of limitations, compared to the general 3-year statute of limitations for most civil actions, is explicitly set out in the Maryland Contract Lien Act, dispelling any uncertainty as to the limitations period. The statute states “[a]ny action to foreclose a lien shall be brought within 12 years following recordation of the statement of lien.” Md. Code, Real Prop. § 14-204(c).
However, as the Maryland Contract Lien Act deals strictly with liens, it does not establish an extended 12-year statute of limitations for enforcing HOA due payments through a suit for a money judgment. The General Assembly left his unclear in the Real Property Article and in Md. Code, Cts. & Jud. Proc. § 5-102, which establishes the statute of limitations for actions on specialties. Section 5-102(a) states “An action on one of the following specialties shall be filed within 12 years after the cause of action accrues, or within 12 years from the date of the death of the last to die of the principal debtor or creditor, whichever is sooner: (1) Promissory note or other instrument under seal; (2) Bond except a public officer's bond; (3) Judgment; (4) Recognizance; (5) Contract under seal; or (6) Any other specialty.” Md. Code, Cts. & Jud. Proc. § 5-102(a).
Due to this statute’s vagueness with regards to “specialties,” the courts were left to decide whether the 12-year statute of limitations for specialties applies to covenants and declarations under seal, which are the instruments that allow for the collection of HOA dues.
Fortunately, in Columbia Ass’n, Inc. v. Poteet, 199 Md. App. 537 (Md. Ct. Spec. App. 2011), the Maryland Court of Special Appeals addressed this exact issue. In Poteet, the Court held that a “Declaration is a sealed instrument so as to create a specialty within the meaning of C.J. § 5–102,” which allows for the 12-year statute of limitations for specialties. Poteet, 199 Md. App. at 554 (citing Md. Code, Cts. & Jud. Proc. § 5-102).
The Court also held that although purchasers of lots within an HOA declaration do not sign the original declaration under seal, because the purchasers are assignees and “assignees are bound to the same limitations period as their assignor,” the purchasers as assignees under a deed are “subject to the twelve-year statute of limitations period applicable to specialties under C.J. § 5–102.” Id. at 555 (citing University System of Maryland v. Mooney, 407 Md. 390, 411 (Md. 2009)).
Therefore, when collecting HOA dues, HOAs have the option to record a lien and foreclose on that lien within 12 years, or sue for money damages within 12 years of any default.
Please contact us to inquire about collecting HOA dues for your association.