By James E. Crossan, Esq. and Josh Welborn, Esq.
It is common for homeowners in Maryland to be subject to restrictive covenants placed on their land by developers preventing certain uses or actions at their property. Restrictive covenants are enforced by individual owners within a development if they are self-executing or by a homeowners’ association if that entity is authorized by the developer’s declaration. While there is no hard and fast rule, smaller developments are typically governed by self-executing declarations while larger communities are typically governed by homeowners’ associations.
A question that arises when neighbors attempt to enforce restrictive covenants when there is no homeowners’ association is whether the Maryland Homeowners Association Act (“MHAA”) applies to the dispute. And if not, can a homeowners’ association be created in a community governed by self-executing declaration without the consent of all property owners? These issues were recently addressed by the Maryland Appellate Court in Logan v. Dietz, 258 Md. App. 629 (2023).
Logan v. Dietz involved a small eight-unit development located in Ocean City known as Captains Quarters. Each unit in Captains Quarters was encumbered by restrictive covenants set-forth in a self-executing declaration. The declaration could only be amended by the unanimous vote of all unit owners. Among other restrictions, the declaration provided that no unit owner could make any alterations to the exterior of their townhouse without first obtaining the consent of all other unit owners. Despite this restriction, Dietz, an owner in Captains Quarters, significantly renovated the exterior of his unit without first obtaining the required consent. Logan, another unit owner in Captains Quarters, sued Dietz claiming that his renovations were in violation of the declaration.
Trying to make an end run around the declaration and defeat the litigation, Dietz and four other unit owners created and recorded an amendment to the declaration. This amendment declared that the unit owners comprised a homeowners’ association that would be governed by the MHAA. As such, Dietz and his conspirators asserted that the declaration could be amended by the affirmative vote of 60% of the unit owners (five units) pursuant to § 11B-116 of the MHAA. Unsurprisingly, Dietz then had the declaration amended to remove the requirement for unanimous consent and retroactively approved his renovations.
Dietz then sought to end the litigation by arguing that there was no dispute because the offending renovations had been approved under the terms of the amended declaration. Logan argued that the MHAA did not apply to Captain Quarters because its declaration was self-executing. The Circuit Court found in favor of Dietz determining that the declaration gave rise to a de jure (of right) homeowners’ association because it established a private right of enforcement and called for each unit owner to pay for the maintenance of the development’s common elements.
On appeal, the Appellate Court rejected Dietz’s attempts to thwart Logan. The Appellate Court held that the MHAA does not automatically apply to every self-executing declaration’s restrictive covenants. In short, there is no implied right to create a homeowners’ association and the MHAA only applies if the original declaration creates an entity to act as a homeowners’ association and must provide that entity with the authority to assess mandatory fees to the property owners. Additionally, a homeowners’ association cannot be imposed on unwilling property owners but requires consent.
As a result, the Appellate Court held that Dietz’s amendments to the Captain Quarters’ declaration were invalid and unenforceable and remanded the case for further proceedings. When faced with a restrictive covenant dispute, this case highlights that it is critical to identify whether those covenants are self-executing so you know what law will be applied.
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James E. Crossan is a partner at Liff, Walsh & Simmons and is the director of the firm’s litigation practice group and member of the firm’s business law, real estate, and labor and employment practice groups.
Josh Welborn is an Associate Attorney at Liff, Walsh & Simmons and a member of the firm’s business law, litigation, real estate, and labor and employment practice groups.
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