Maryland condominium developers can take advantage of a little known loophole in the state’s condominium law which allows them to allocate the common elements interest to their advantage.
In most states*, the condominium law requires developers to allocate the percentage interest in the common elements fairly. Fairly usually means the percentage common element interest must bear some relationship to the unit’s square footage, location, views, uniqueness, exclusive use, etc. Since the percentage common element interest determines how much monthly common charges and assessments an owner has to pay, the rationale is the better (more desirable) the unit, the more you pay, compared to your fellow owners. No so in Maryland.
In Maryland, the percentage common elements need not bear any such relationship and can evenly GROSSLY favor the developer. Yes, it’s true. And I will name names.
There is a condominium in Ocean City, Maryland, called Sandpiper Dunes. The land owner and condo developer were entities of which Hale Harrison was a principal& officer. Hale Harrison is a big-wig in Ocean City. When this condominium was formed in the mid-1980s, a declaration was filed allocating to Unit 1100 (now owned by Harrison and his wife) a percentage common element interest comparable to a 3 bedroom unit (1.1508 vs .9542). Just looking at the declaration alone, it does not seem strange. The only problem is Unit 1100 covers the entire top two floors of the building, an area equal to about 11,000 square feet. A 3 bedroom unit, by comparison, is about 1,340 square feet. Oh yeah. And get these extra perks– Unit 1100 has enormous terraces, unrivaled views of the ocean and the bay, and (supposedly) exclusive use of the roof in which to construct swimming pools, tennis courts, even a communications tower. And, apparently, it’s completely legal– at least according to the Maryland Condominium Act.
By virtue of this gross discrepancy in percentage common elements, Unit 1100’s monthly common charges are only slightly more than a 3 bedroom unit. As a result, the other owners are paying more than they would, had the allocation been according to the condominium laws in other states, like New York (or Washington D.C., a jurisdiction just down the block from Maryland)
Interestingly, the regime is permanent and cannot be changed without the vote of ALL owners (since Harrison is an owner, it is unlikely he would vote to upset his cushy deal and save his fellow owners some dough).
I called the Maryland State Attorney General’s Office and checked the state case law. There appears to be no case law on the equitable proportionality of percentage common elements under the Maryland Condominium Act. The AG’s office had no opinion on the legality of the Sandpiper Dunes Declaration giving Unit 1100 a grossly disproportionate share of the common elements and expenses as compared to other owners.
So, there you have it. Develop a condominium in Maryland and you can allocate the common element interest and share of common expenses so that you get as sweet a deal as Mr. Harrison in Ocean City.
* This is from the NY Condominium Act (section 339-i(1). See how the law is written to allocate common elements to be fair to ALL owners:
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It’s shady deals like this that make the public question our veracity..