Maryland Court of Appeals Agrees to Hear Case that May Affect Private Water and Sewer Charges

Maryland’s highest court has agreed to hear a case that may greatly impact the rights of developers, property owners, home builders and investors who create, enforce and collect private deferred water and sewer charges from individual homeowners outside of Prince George’s County.  The case is Elsberry v. Stanley Martin Companies, and it concerns the statewide application of Section 14-117(b)(3)(ii) of the Real Property article of the Maryland Annotated Code.  According to the underlying legislative history for subsections (i) and (ii) of Section 14-117(b)(3), known as the “Prince George’s County – Deferred Water and Sewer Charges Disclosure Act of 2014,” a 20 year term limitation was established for any private deferred water and sewer charges imposed against residential projects in Prince George’s County.  The law became effective October 1, 2014. 
 
The homeowner in this case is asserting that the 20 year term limitation actually applies to the entire State of Maryland and not just to Prince George’s County. The case originated from a residential project located in Charles County that included a longer term limitation for the private water and sewer charges beyond 20 years.  The trial court found in favor of Stanley Martin Companies, who was the home builder that sold the lot to the homeowner.  The homeowner appealed the trial court’s decision, and in 2021, the Maryland Court of Special Appeals (“COSA”) affirmed the trial’s court’s decision, finding that the 20 year term limitation set forth in Section 14-117(b)(3)(ii) did not apply outside of Prince George’s County. 
 
If the Court of Appeals reverses the decision of the COSA and finds that the 20 year term limitation applies statewide, this is potentially disastrous for developers, investors and home builders who are attempting to enforce and collect on private water and sewer charges in residential projects that were created after October 1, 2014.  Violations of Section 14-117(b)(3)(ii) allow recovery of damages for the total amount of the water and sewer charges that a homeowner would be required to pay, which will likely lead to class action lawsuits against the sellers of the lots, typically the home builders.  Further, if such violations are found, the continued enforceability and collection of the subject private water and sewer charges would be questionable.  It is unclear if a decision by the Court of Appeals extending the 20 year limitation beyond Prince George’s County would be applied prospectively or would it be applied retroactively. A retroactive application would call into question any residential project outside of Prince George’s County with private water and sewer charges for longer than a 20 year term created after October 1, 2014.
 
The oral argument for this case is currently scheduled for September 8, 2022.  The Maryland Building Industry Association (“MBIA”) intends to file an amicus brief on behalf of developers, home builders, investors and other interested parties that have a large stake in the outcome of this case.  MBIA is currently collecting funds to support the preparation and filing of the amicus brief, and we encourage you to contribute to support the cause. 
 
Please contact Brian D. Bichy, Esq., our firm’s practice group leader for the Condominium and Homeowners Association Practice Group, at 301.654.3151 or bbichy@sgrwlaw.com if you have questions or wish to discuss further.