Relating to Real Estate

The Court of Special Appeals recently held that homeowners could not build a second house on the land that they owned due to an 80 year old plat and a set of covenants despite their claims that the same issue had been resolved in prior litigation and that the homeowners association had waived the covenants. Shader v. Hampton Imp. Ass’n, Inc., 94 A.3d 224 (Md. Ct. Spec. App. June 26, 2014).
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. One of the restrictions was that no more than one dwelling could be erected on a lot. In 2002 Mr. and Mrs. Scott Shader bought two parcels of land there. One of those parcels was 2.246 acres and was a lot as shown on the 1930 plat. The other parcel was 1.475 acres and was a part of a lot shown on the 1930 plat. The deed that created the second parcel contained a restriction that it could not be used for a dwelling. The Shaders lived in a house on the first parcel, and they wanted to build a house on the second parcel.
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 nonmutual collateral estoppel based on a decision by the Circuit Court in a prior case involving other parties. They also argued that the homeowners 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.
The Court of Special Appeals stated that the Shaders could not prevail on the collateral estoppel argument because the four-part test for that theory was not satisfied. Most importantly, the court found that the issues presented in the Shaders’ case and in the prior case on which they relied were not identical.
In its consideration of whether the waiver argument would be successful, the Court of Special Appeals first determined that the language of the covenant was plain and unambiguous. From its reading of the covenant, the Court determined the intent of the covenant was that there should be only one dwelling per lot.
The Shaders argued that the homeowners association had not objected when landowners had built pool houses, guest houses, gazebos, sheds, and freestanding garages on other lots, and that the association had waived the right to stop the Shaders from building another house on the property that they owned.
In its analysis of the covenant, the Court found that it was comprised of four distinct clauses: the second of the four clauses prohibited any building except dwelling houses from being constructed on the lots, and the fourth clause provided that not more than one dwelling could be erected on a lot. Although the second clause had not been enforced over the years, the court found that the fourth clause had not previously been violated.
The Court of Special Appeals cited King v. Waigand, 209 Md. 308, 117 A.2d 918 (1955) for the proposition that restrictions in a set of covenants may be severable and that the restriction of one house to a lot could be enforced even though another clause in the same document had been waived. The Court then concluded that the homeowners association had not waived the applicable covenant, and it affirmed the decision of the Circuit Court.
For questions about this, please contact Ed Levin at (410) 576-1900.