Relating to Real Estate

In Simmons v. Maryland Mgmt. Co., 253 Md. App. 655, 269 A.3d 369, No. 1680, Sept. Term 2019, 2022 WL 333894 (Feb. 4, 2022), six residential tenants (Tenants) brought a putative class action in the Circuit Court for Baltimore City against their landlords and the landlords’ lawyers, law firms, and the collection agency employer of one of the lawyers (Landlords and Lawyers) because the Tenants were sued for unpaid rent more than three years after the rent accrued.  The limitations period for an action for back rent on a residential lease is three years, but the leases governing the tenancies included a clause entitled “Statute of Limitations” that purported to establish a twelve-year limitations period for causes of action under the leases (Statute of Limitations Clauses).

The Tenants alleged that the Statute of Limitations Clauses were invalid and unenforceable and that the actions for back rent were time-barred. They further alleged that by including the Statute of Limitations Clauses in the leases and acting to enforce them, the Landlords violated Real Property Article (RP) §8-208; and that by filing actions to recover time-barred debt and enforcing, or attempting to enforce, judgments they obtained, the Landlords and Lawyers violated Courts and Judicial Proceedings Article § 5-1202(a).  That section provides that a creditor or a collector may not initiate a consumer debt collection action after the expiration of the statute of limitations applicable to the consumer debt collection action.  The Tenants also alleged violations of the Maryland Consumer Debt Collection Act (MCDCA) and the Maryland Consumer Protection Act (MCPA).  The Tenants sought damages for the statutory violations, declaratory and injunctive relief, and attorneys’ fees.  The circuit court granted the defendants’ motions to dismiss.  The Tenants appealed, and the Court of Special Appeals (CSA) vacated the judgments and remanded the case.

It is now clear under Maryland law that that the statute of limitations for residential leases is three years, regardless of whether the lease was executed under seal and regardless of whether the lease has a provision that states that the statute of limitations is 12 years (or any period of time in excess of three years).  To reach these points, it is necessary to consider Tipton v. Partner’s Management Co., 364 Md. 419, 773 A.2d 488 (2001), and Smith v. Wakefield, 462 Md. 713, 202 A.3d 1240 (2019).  Tipton involved a landlord who tried to collect rent that was seven years past due.  The landlord claimed that the applicable statute of limitations was three years, but the landlord claimed an exemption for a lease that had the word “(SEAL)” next to the signatures of the parties – alleging that this made the lease a specialty with a 12-year statute of limitations.  The Court of Appeals stated that all leases had historically been executed under seal, “primarily to create presumptions of consideration and validity.” But Maryland law had established that the limitations period for actions for back rent is three years, and the Court of Appeals had construed the statute that set forth the 12-year limitations period for specialties, as not applying to leases.

Footnote 3 of the Tipton opinion provided: “Any statute of limitations can be waived by agreement of the parties. Generally, the affixation of a seal, alone, will not constitute such a waiver.”  In the conclusion of its opinion, the Tipton Court stated:

We hold that claims for arrearages of rent under a residential lease, even a lease to which a seal is affixed, must be filed within the three-year limitation period unless the parties to the lease agree, in the body of the lease, that the lease is subject to the twelve-year limitation period of section 5-102.  (Emphasis added.)

Eighteen years later, the Court of Appeals decided Smith v. Wakefield, a five to two opinion in which Judge (now Chief Judge) Joseph M. Getty wrote a dissent that was joined by Judge Sally D. Adkins. The Smith court emphasized that the statute of limitations for residential leases is three years.  It announced that the provisions in Tipton that outlined the circumstances in which the statute of limitations could be extended to 12 years were dicta and not holdings of the case.  Therefore, even though the landlord in Smith v. Wakefield followed the path directed by Tipton extending the statute of limitations and included what seemed to be the necessary language, the Smith court refused to extend the statute of limitations beyond three years. 

In the Simmons case, the CSA stated that for the Tenants to support their MCDCA claim, they must establish that the Landlords and Lawyers acted or attempted to claim, threaten, or enforce the right to sue for back rent with knowledge that the right did not exist because the debt was time-barred.  Additionally, the Tenants must produce evidence that the Landlords and Lawyers made a mistake of law and did so recklessly.

The CSA held that the facts alleged in the Tenants’ complaint supported a finding that the Landlords and Lawyers acted recklessly by pursuing actions for back rent beyond the three-year limitations period based on a clause in a lease that purports to extend the statute of limitations that the Smith Court later held was invalid and unenforceable, so as to violate the MCDCA.

The CSA also found that the allegations in the Tenants’ complaint were sufficient to support a claim that the defendants violated Commercial Law Article (CL) §13-303 of the MCPA, which prohibits a person from engaging in any unfair, abusive, or deceptive trade practice.” Because the Tenants alleged facts which, if backed by evidence, could support a jury finding that the Landlords violated the anti-waiver provision, the MCPA claim should not have been dismissed.

CSA held that the judgments against the Defendants were not void and could not be collaterally attacked.  However, the CSA held that if the Tenants ultimately prove, pursuant to CL §14-202(b), that the Landlords and Lawyers brought the District Court actions for back rent with actual knowledge that the claims were time-barred, the lower court may direct that monies obtained as a consequence shall be disgorged and that all judgments so obtained may not be enforced.

The Defendants claimed attorneys’ fees, but the circuit court had dismissed those claims because they relied on the underlying claims in the litigation.  Because the CSA vacated the judgments that dismissed the substantive claims, it also vacated the judgment dismissing the claim for attorneys’ fees.

For more information, contact Edward J. Levin.

Ed Levin
410-576-1900 • elevin@gfrlaw.com