Maryland Trial Court OKs Assessment Increase Based on 80-Year Inflation

An assessment covenant first imposed in 1936 for a "sum equal to $5" to fund community road maintenance, repair and replacement should be interpreted to allow an assessment of $91 in 2018 dollars, according to a recent decision of a Calvert County, Maryland trial court.

The assessment covenant was included in the deeds to each lot in the Cove Point Beach community sold between 1936 and the early 1960s and required payment to the developer.  Once all lots were sold, the assessment was payable to a homeowners association which also asked owners to pay additional voluntary dues to pay for the upkeep of other community facilities.

When an owner did not pay the road maintenance assessment in an amount which factored in inflation over more than 80 years, the association brought suit to collect unpaid assessments.  The owner opposed the suit contending that the assessment covenant allowed only for an assessment of $5.

In Cove Point Beach Association, Inc. v. Collins, the circuit court agreed with the association that the intent of the developer was to provide sufficient funds to maintain, repair and replace the roads over the extended life of the community.

In interpreting the covenant, the court explained that it must effectuate the intention which is clear from the context, the objective sought to be accomplished, and the result  which would arise from a difference construction.

The court concluded that it would "strain logic"  to believe the author of the covenant intended the construction, reconstruction and maintenance of the streets could be done for $5 per lot in perpetuity.  Rather, a reasonable person in the position of the parties when the road covenant was first adopted would have understood that the cost for necessary road maintenance had to be adequate over time.   Therefore, the court determined that "the sum equal to $5" is not a cap on the assessment amount and allows for increases in the assessment to take into account the effect of inflation.

Cove Point Beach Association was represented in this matter by Thomas Schild.