In a win for commercial real estate investors and lenders, the Appellate Court of Maryland clarified this month that a buyer who purchases property at foreclosure may recover for post-sale damage to the property by the prior owner. That’s the case even where the foreclosure sale contract specifies that the buyer assumes the risk of damage from the sale date forward.

The case, Wonder City LLC v. Ralph J. DiPietro, involved a small apartment building in Baltimore. The owner and borrower defaulted, leading to a 2022 foreclosure sale at which Wonder City LLC purchased the property. According to the buyer, the borrower then embarked on a campaign of waste and damage to the property after the sale had occurred, but while the borrower was still in possession pending the circuit court’s ratification of the sale four months later. 

The buyer alleged that the prior owner had removed flooring and air-conditioning equipment; tampered with an electrical meter, leading to a destructive arc flash; and failed to control a rat infestation that led to water leaks and damaged wiring. The buyer estimated the cost of necessary repairs at nearly $100,000.

Since the sale — atypically —   generated surplus funds, Wonder City petitioned the circuit court to award it some of those funds to cover the alleged post-sale damage. The court denied the petition and a subsequent motion for reconsideration based principally on language in the sale advertisement, which is treated as contractual under Maryland foreclosure law, stating that the purchaser "assumes the risk of loss or damage to the property from the date of sale forward." 

The appellate court disagreed in its opinion on December 22, 2025. It noted that the rules of procedure require a circuit court to distribute surplus funds "equitably," that a circuit court has broad discretion to grant such relief, and — critically —  that even a contractual risk-of-loss or "as-is" provision "may be ‘trumped’ by equitable considerations." The court emphasized that a buyer at foreclosure cannot even request, much less take, possession of the property until a court ratifies the sale, at which point the buyer is deemed to have equitable title (pending its receipt of legal title when the sale price is paid and a deed is conveyed).  The general rule of law in Maryland is that the borrower bears the risk of loss occurring after the foreclosure sale but before ratification.

Based on these principles, the appellate court held that the circuit court’s "strict reliance" on the contractual risk-of-loss provision was in error "because it is possible … that equitable considerations … justify excising the risk-of-loss provision." 

The appellate court explained:

The contractual provision at issue here, if strictly applied, would require the purchaser to bear the entire risk of loss or damage to a property which the purchaser is not yet entitled to possess, even when the damage at issue was the result of deliberate acts by the former owner who still has lawful possession.

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[D]uring this precise period when a foreclosure purchaser has only an inchoate equitable interest in the foreclosed property and is not yet entitled to seek possession, it would be inequitable to impose upon the purchaser complete liability for any and every possible kind of damage to the property, including damage brought about by the deliberate acts of the former owner.

Nevertheless, the appellate court did not reverse the circuit court’s ruling outright. Instead, it sent the case back to the circuit court for consideration of the merits of Wonder City’s claim in light of the principles articulated by the appellate court in its opinion. 

In any event, the appellate court’s ruling should embolden lenders, investors, and other buyers at foreclosure to press on with claims for post-sale waste and damage, regardless of any "as-is" provisions in place.

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