Relating to Real Estate

In Shader v. Hampton Imp. Ass'n, Inc., 443 Md. 148, 115 A.3d 185 (2015), the Court of Appeals held that an 80-year-old recorded covenant continued to prohibit homeowners from building a second house on their land despite the fact that the improvement association had waived another restriction that was contained in the same sentence.

In 1930 the Hampton Company (predecessor to Hampton Improvement Association, Inc.) recorded a plat subdividing the Hampton estate in Baltimore County, and in 1931 it recorded restrictive covenants that affected the property. The applicable restrictions were contained in Paragraph C of the document, which contained four clauses in a single sentence. One clause prohibited the construction of any building on a lot other than private dwelling houses and garages. A separate clause stated that no more than one dwelling could be erected on a lot.

In 2002 Mr. and Mrs. Scott Shader bought property that included Lot 59, which was 2.246 acres, and the easterly part of Lot 75, which was 1.475 acres. The Shaders lived in a house on Lot 59, and they wanted to build a house on the part of Lot 75 that they owned.

The Shaders filed a complaint in the Circuit Court for Baltimore County seeking a declaration that the covenants did not prohibit them from building a second house. They based their claim on two arguments. They contended that they should prevail under the doctrine of offensive non-mutual collateral estoppel based on a circuit court decision in a prior case involving the Hampton Improvement Association and another party. They also argued that the improvement association had waived the right to enforce the covenant in question. The circuit court ruled against the Shaders, and they appealed to the Court of Special Appeals, which affirmed. See the August 2014 issue of Gordon Feinblatt’s Relating to Real Estate for a discussion of the Court of Appeals decision. The Court of Appeals granted certiorari and affirmed.

Under the theory of offensive non-mutual collateral estoppel, a defendant may not make a claim if in a prior case the defendant unsuccessfully raised that claim, even though the plaintiff was not a party to the prior litigation. The Court of Appeals stated that this doctrine has not been accepted in Maryland, and that this was not the right case to apply it because the issue in the prior Hampton Improvement Association litigation noted by the Shaders was not identical to the issue in the current case.

With respect to the waiver argument, over the years a number of buildings other than houses (including pool houses, guest houses, gazebos, sheds, and freestanding garages) had been constructed on the property subject to the restrictions, but in no situation had more than one house been built on a lot. The Court of Appeals agreed with the finding of the circuit court that the improvement association had waived the clause in Paragraph C restricting the construction of buildings. Importantly, the Court further agreed with the circuit court that such clause should be severed from the rest of Paragraph C, and that the prohibition of one house per dwelling was not waived.

For questions, please contact Ed Levin (410) 576-1900.