Adverse Domination Doctrine Tolls Statute of Limitations on Maryland Condominium Association Legal Claims Against Developer During Period of Developer Control
Under the “Adverse Domination Doctrine” the Statute of Limitations may be Tolled as to legal claims a Maryland Condominium Association has against a Condominium Developer that arise during the Period of Developer Control
by Nicholas D. Cowie of Cowie Law Group, Maryland and Washington DC Condominium and HOA Attorneys
All Maryland condominium associations begin their existence under the control of a condominium developer. This is called “period of developer control,” during which a condominium developer controls the condominium association by appointing its own employees and representatives to serve as the association’s initial board of directors. During this period, the developer is able to direct the actions or inaction of a Maryland condominium association through its developer-appointed board members. There is an inherent conflict of interest in such a situation because the developer-appointed board members cannot, as a practical matter, be expected to cause the condominium association to investigate, uncover or pursue a condominium association legal claims against a developer who employs them. Nonetheless, the board of directors, even if its members are appointed by the developer, has fiduciary duty to investigate and pursue Maryland condominium association legal claims against the condominium developer for actionable conduct that the board members participate in or become aware of, such as a condominium developer’s misuse of association funds or the developer’s defective construction of the condominium common elements. This duty exist, even during the period of developer control has ended
Under these circumstances, Maryland law recognizes an equitable legal principle known as the “adverse domination doctrine,” which temporarily “tolls,” or stops, the running of the statute of limitations on a Maryland condominium association’s legal claims against the developer until such time as a the association is able to act independently. Independence from the developer’s control occurs when a majority of the association’s board of directors consists of non-developer affiliated, unit owner-elected board members. The adverse domination doctrine acknowledges the fact that a condominium association, as a legal entity, can only act through its board members, and when a majority of the board members controlling the Association are beholden to the developer, they cannot be expected to take legal action against themselves or their developer employer. Moreover, under the adverse domination doctrine there is a rebuttable presumption that a Maryland condominium association cannot have legal or actual knowledge of the developer’s wrongdoing so long as the Maryland condominium association is under the control of the developer-appointed members of the board of directors. Even if the board members are fully aware that the condominium association has a claim against the declarant, that knowledge is not imputed to a Maryland condominium association while under the control of the developer. As such, statue limitations time periods base on such knowledge will not commence, or begin running, on legal claims against the developer until the condominium association becomes independent of developer control.Once the resident unit owners control a majority of the condominium associations board of directors, the adverse domination doctrine no longer applies to toll statute of limitations.
Maryland adopted the doctrine of adverse domination as an exception to the running of the statute of limitations in the case of Hecht v. Resolution Trust Corp., 333 Md. 324, 635 A.2d 394 (1994). See Adverse Domination Article discussing the Hecht case. More recently the United States District Court for the District of Maryland held that under Maryland law, the adverse domination doctrine created a rebuttable presumption that the statute of limitations did not begin to run on the claims of a Maryland condominium association and a Maryland HOA against the community developer during the time period that those two associations were under the control of developer-appointed board members. Greenspring Quarry Association, Inc., the Beazer Homes, Corp., 2017 WL 2733935 (unreported) (D. Md.).
For an article regarding transition from the period of developer control, see Developer Transition for Maryland Condominiums
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NOTE ON LEGAL ADVICE: This Article should not be relied upon as a legal advice applicable to any specific case concerning Maryland condominium association legal claims arising during the period of Developer control. Rather, it is a general statement of legal principles that may or may not apply to your Maryland condominium association or HOA. The individual facts of each case need to be analyzed to determine the application of law, including the application of the adverse domination doctrine. Contact the Maryland Condominium and HOA attorneys at Cowie Law Group, P.C. for a consultation relative to your specific situation.
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