UPDATE: FRONT FOOT BENEFIT ALERT! Court Case Affects Collection Rights

Author: Michael A. Faerber Date: 05/28/2020

Categories: Real Estate Law

Client signs document regarding real estate activity next to lawyer or real estate agent sitting at office desk. Business concept of selling and buying house.Back in February, 2020, I notified you of a new Maryland court case that affected the ability to collect delinquent charges from homeowners.  As a reminder, the Maryland Court of Special Appeals, in H.C. Utilities, LLC v. Song Y. Hwang, December Term, 2019,  No. CSA-REG-2423-2018, issued an opinion dated January 29, 2020, in which the Court ruled that front foot benefit declarations do not create a “contract” between the utility company that is enforcing and collecting the charges, and the homeowner whose lot or unit is subject to the Declaration, such that the utility company would have the right to bring an action in court seeking a personal judgment against the homeowner.  The court noted that the recording of the Declaration does create a “contract” for the purposes of being able to file a lien against the property of a delinquent owner under the Maryland Contract Lien Act, but without the homeowners having signed the Declaration to which they are being held responsible, personal liability does not apply.  I also advised that the party who lost at the Court of Appeals was working on a reconsideration request with the Court of Special Appeals.

I have been in contact with the attorneys representing H.C. Utilities, LLC and have very good news to report.  While the motion for reconsideration was pending before the Court, the parties to the case entered into a settlement agreement on the matter.  The Court of Special Appeals then took the unusual, but fortuitous, step to vacate their prior opinion and dismiss the case.  This means that their opinion, reported in January of this year, no longer is law, and the ruling is no longer applicable.  The law now reverts to the status quo, which permitted personal liability for unpaid front foot benefit charges on the part of delinquent owners.

Please contact Michael Faerber at 301-251-1180 or if you would like to discuss further how this may affect your projects and transactions.