Greenspoon Marder LLP Financial Services Client Update – State of Maryland Prohibition Of Collection Of Property Inspection Fees

Oct 5, 2020

On October 1, 2020 an opinion came out of Maryland’s Court of Special Appeals Donna Kemp v. Seterus et al No. 2652 September Term 2018 which has serious implications for loan servicers and investors. The opinion of this class action case details that property inspection fees assessed to a loan after default are not recoverable and thus illegal under Section 12-121 of Maryland’s Commercial Law Article. This prohibition extends to assignees of the loan, servicers and the original makers of the loan. While the Deed of Trust at issue in the case did provide the right to charge property inspection fees upon default, the Deed of Trust also provides that the lender cannot charge fees that are prohibited by applicable law and thus such fees were unauthorized, illegal and can give rise to civil liability under state statute as well as other various consumer protection statutes. The Court of Special Appeals is the intermediate appellate level in the State of Maryland so there is the possibility, however unlikely, of further appeal and reversal.

Of special note in this case is that it was brought by the Consumer Law Center LLC, a highly litigious legal group which focuses on technical infractions of the laws of Maryland as it relates to foreclosures and other default actions. This was the same law group that effectuated the case that caused many of Maryland default actions to come to a complete stop due to questions regarding debt collection license requirements (Blackstone, et al v. Sharma, et al, No. 1524, September Term 2015). As such, while the holding of Kemp v. Seterus does not materially affect default operations in the State of Maryland, this is an issue that requires servicers and investors to ensure proper controls are in place to prevent these fees from being assessed to loans in Maryland.

Please reach out to Greenspoon Marder LLP to discuss your internal process and the implications of this case to your loans in the State of Maryland.

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This Greenspoon Marder LLP Client Alert is issued for informational purposes only and is not intended to be construed or used as general legal advice nor a solicitation of any type. Please contact the author(s) or your Greenspoon Marder LLP contact if you have any questions regarding the currency of this information. The hiring of a lawyer is an important decision. Before you decide, ask for written information about the lawyer’s legal qualifications and experience.

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Greenspoon Marder LLP Financial Services Client Update – State of Maryland Prohibition Of Collection Of Property Inspection Fees

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