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You May Be In Violation of Consumer Protection Laws if Your Contract Disclosures Are Not Kept Updated

Author: Judyann M. Lee Date: 02/27/2019

Categories: Real Estate Law

Top view of handshake of a real estate agent and a client.

Most developers and builders of homes in residential subdivisions and condominiums know they must provide purchasers with certain disclosures at the time of contract and they prepare such disclosures for their initial sales. But many forget to update or amend their disclosures as the development progresses and information in the initially prepared disclosures changes over time.  This could lead to the unintentional consequence of violating several laws, including state consumer protection laws, which could then lead to contract rescission, monetary damages, fines, and civil and criminal penalties. Therefore, it is important to remember to update disclosures as things change within the association and the development of the project.

Maryland, Virginia and the District of Columbia all have a Condominium Act that, together with the Maryland’s Homeowners Association Act and the Virginia Property Owners Association Act, all require that certain disclosures and documents be provided to purchasers.  Depending on the type of home that’s being sold, these disclosures come in the form of a condominium public offering statement or a homeowner’s association disclosure packet. If the condominium is within a homeowners association, then both types of disclosure documents are required.  All three jurisdictions require that the information provided in these disclosures be updated and amended as necessary whenever there is a material change to the development or the occurrence of an event that makes any statement of fact no longer accurate. In the case of a condominium public offering statement, the developer is required to file copies of any changes in the documents or disclosed information which is necessary to keep the public offering statement current with the appropriate registration authorities.  In the case of a homeowners association in Maryland, the bylaws and rules and regulations of the association must be filed in the appropriate county’s HOA depository; any amendments to these documents should also be filed in the HOA depository. If not filed, they are unenforceable. In Virginia, an annual report must be filed with the Common Interest Community Board or the State Corporation Commission, in order for the disclosure packet or public offering statement to be considered current.

Below is a list of information or events that should be updated in a public offering statement or disclosure packet and included in the HOA depository or annual report.

  • A material change in the budget (increase of assessments) or newly adopted annual budget;
  • The adoption of a policy or rule by the board of directors;
  • The recordation of previously unrecorded drafts of declarations, agreements or covenants that were given to purchasers;
  • Any amendments to the declaration or bylaws, or supplementary declarations annexing new phases of the development;
  • Any changes to development plans or deannexation of property from the project; and
  • Any recreational or facilities agreements, easements or licenses that have been entered into by the association.

This list is certainly not exhaustive but covers most documents and information that typically change as the development of a project progresses. A good rule of thumb to follow is to update any information or documentation that is no longer true and could be considered misleading or any change that makes a previously disclosed statement inaccurate.  If in doubt, please contact me to discuss the matter further or call (301) 251-1180 x 308 to speak with me.