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Owner of Two Houses in Homeowner Community is Theoretically Entitled to Disclosures, but He may be Estopped from Claiming a Right to Them

In Lipitz et al. v. Hurwitz, 435 Md. 273, 77 A.3d 1088 (2013), the Court of Appeals held that William Hurwitz was entitled to the statutory disclosures under the Maryland Homeowners Association Act before he bought a house in the Caves Valley Golf Club Development in Baltimore County even though he already owned two houses in the development. The Court further held, however, that Hurwitz may be equitably estopped from asserting his right to those disclosures.

On August 6, 2009 Hurwitz entered into a contract to purchase a home in the Caves Valley Golf Club Development from Flora and Roger Lipitz, trustees of a revocable trust, for approximately $4,000,000. Although the form of contract that the real estate broker submitted included the Maryland Homeowners Association Act Notice to Buyer and the Maryland Homeowners Association Act Disclosures to Buyer, the parties struck those documents from the contract that they signed. The sellers alleged that they attempted to provide Hurwitz with the information set forth in those forms, but that Hurwitz refused to accept the disclosures because he already had them.

On November 1, 2009, the day before the purchase and sale was scheduled to close, Hurwitz notified the Lipitzes that he was not going to settlement, later explaining that the reason was that he had not received the statutorily mandated disclosures. The Lipitzes sued for specific performance in the Circuit Court for Baltimore County on June 10, 2010, and a hearing was held on March 29, 2011.

The Lipitzes argued that because Hurwitz was the owner of two other houses subject to the same homeowner association documents he should not be regarded as being a “member of the public.” The court issued an oral opinion holding that Maryland Code, Real Property Article, §11-B-106(a) requires that the written notice of homeowner association disclosures must be given to “a member of the public who intends to occupy or rent the lot for residential purposes,” that the statute was clear and unambiguous, that Hurwitz was a “member of the public,” that the disclosures were not given, and that Hurwitz had the absolute right to rescind the transaction.

The Lipitzes appealed, and in a published opinion (Lipitz v. Hurwitz, 207 Md. App. 206, 52 A.3d 94 (2012)) the Court of Special Appeals affirmed the decision of the Circuit Court for Baltimore County. The Court of Special Appeals found no ambiguity in the law and determined that, despite vigorous objection from the Lipitzes, Hurwitz was a “member of the public” and thus entitled to the disclosures from the Lipitzes.

When the Court of Appeals considered the case, it did find that there was an ambiguity in the statute because the term “member of the public” was not defined in it. The Court of Appeals examined the legislative history of the statute, but it appears that the words “member of the public” were intended to differentiate a person who planned to purchase a home to live in it from a developer who bought properties for the purpose of resale. The Court found nothing in the legislative history that addressed whether the owner of other homes in a community who already had the information that the statute required was exempt from the disclosure requirement.

The Lipitzes next argued that the interpretation given by the Court of Special Appeals was “absurd, illogical or incompatible with common sense.” Although the Court of Appeals said that it was rejecting this argument, in essence the Court accepted it and disposed of the case accordingly.

The final argument raised by the Lipitzes was the one that won them a reversal of the case. They contended that Hurwitz was equitably estopped from contending that he was entitled to rescind the contract of sale because he did not receive the statutory disclosures from the Lipitzes. Equitable estoppel is voluntary conduct by a party that precludes him from asserting a right against someone who changes position, to that person’s detriment, as a result of such conduct. The problem facing the Lipitzes with their argument was that Maryland Code, Real Property Article, §11-B-108(d) provides that “the rights of a purchaser under this section may not be waived in the contract and any attempted waiver is void.” One would have thought that if there was anything that was unambiguous in the applicable law it was this clause. However, the Court of Appeals differentiated waiver, which is based on the intention of the actor, from estoppel, which focuses on the change of position by the other party.

As noted above, the Court of Appeals held that the Lipitzes were entitled to raise the defense of equitable estoppel. At the trial stage, the Circuit Court for Baltimore County had disposed of the case by granting a motion to dismiss. For purposes of considering a motion to dismiss, the court is to accept everything in the plaintiff’s complaint as true. The Court of Appeals stated that the Lipitzes had pled enough to justify a claim of equitable estoppel. Therefore, the Court of Appeals remanded the case to the Circuit Court so that the trier of fact could determine whether the elements of estoppel did exist.

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

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Date

01.07.14

Type

Publications

Authors

Levin, Edward J.

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Real Estate