by Raymond Daniel Burke | May 13, 2025
Since the collapse of the Champlain Towers South Condominium in Surfside, Florida during 2021, adequate funding for building reserves has become a much-discussed topic. Under Section 11-109.4 of the Maryland Condominium Act, condominiums have been required to have reserve studies performed at least every five years. However, the law has only required that the reserve study be available for inspection by the unit owners; that the reserve study be “reviewed” by the board or other governing body in connection with preparation of the annual budget; and that a summary of the reserve study be provided to the unit owners with the proposed budget. However, legislation passed by both chambers of the Maryland General Assembly during the 2025 session (HB 0292 and SB 0063) amends the annual budget provisions of Section 11-109.2 to require that the budget include funding in accordance with the reserve study, and mandates that condominiums “develop a funding plan to determine how to fund” the amounts recommended in the reserve study. Under this legislation, it is required that a condominium’s annual budget under Section 11-109.2 include (a) the establishment of reserves in accordance with an adopted funding plan; (b) that the funds recommended in the most recent reserve study be funded as part of the budget; and (c) that those funds be deposited in the reserve account on or before the last day of each fiscal year. Under proposed new Section 11-109.4(f)(3), the funding plan, which must be developed in consultation with the author of the reserve study, is required to “prioritize adequate amounts for repair and replacement of common elements of the condominium that are necessary for (i) the health safety and well-being of the occupants; (ii) ensuring structural integrity such as roofing replacements and maintaining structural systems; (iii) essential functioning such as plumbing, sewer, heating and cooling and electrical infrastructure; and (iv) any other essential or critical purpose, as determined by the governing body.”
The new legislation makes provision for financial hardship that makes full funding of reserve amounts not possible. It provides that, by a two-thirds vote of the unit owners, it may be determined that “the condominium and the unit owners are experiencing a financial hardship that limits the ability to fund reserves that are required.” In that event, the condominium “may reasonably deviate from the reserve funding requirement,” and the “funding level under that requirement shall be at least the funding amount necessary for the purposes specified under Section 11-109.4(f)(3),” the requirements of which are described above. Moreover, deviation from the reserve study budget requirements may only be implemented for one fiscal year, unless it is extended for an additional fiscal year by another two-thirds vote of the unit owners. The board or other governing body is also required to make “good faith efforts” to resolve the financial hardship and resume funding reserves as required by the reserve study, and must “maintain detailed documentation of the good faith efforts,” such documentation to be made available for inspection a part of the condominium’s books and records.
The new legislation contains similar provisions that are applicable to homeowner associations and cooperatives. It is presently awaiting the Governor’s signature.
by Raymond Daniel Burke | Nov 6, 2024
During the 2024 Session, the Maryland General Assembly passed Senate Bill 665 and House Bill 1496, which changed the amendment process in Section 11-103(c) of the Maryland Condominium Act so, as to lower the percentage required for approval of an amendment from 80 percent to 66 -2/3 percent of the total eligible voters in the condominium. The legislation was signed by the Governor and took effect on October 1, 2024. However, the reduced percentage does not apply in the event that any units are still owned by the developer, in which case the 80 percent requirement is still applicable. Additionally, the reduced percentage requirement does not apply to a purely corrective amendment of a typographical error under Section 11-103.1, which can be accomplished by the condominium’s board of directors. Also remaining unchanged is the provision that the council of unit owners may amend the declaration to add or repeal a suspension of privileges provision by the affirmative vote of at least 60 percent of the total eligible voters of the condominium.
by Raymond Daniel Burke | Oct 22, 2024
House Bill 1227, passed during the 2024 session of the Maryland General Assembly and signed into law by Governor Moore, changes the special insurance requirements for “detached” condominium units that arose from legislation passed during the 2023 session. The 2023 legislation amended Section 11-114 of the Condominium Act concerning the mandatory insurance that is required to be maintained by the Council of Unit Owners. Those changes, which took effect on October 1, 2023, differentiated between “attached” and “detached” units for insurance purposes. Generally, a Condominium Council is required to maintain “[p]roperty insurance on the common elements and units, exclusive of improvements and betterments installed in units by unit owners other than the developer, insuring against those risks of direct physical loss commonly insured against, in amounts determined by the council of unit owners but not less than any amounts specified in the declaration or bylaws.” The 2023 law provided that the Council is only required to maintain insurance on “attached” units. With respect to detached units, the 2023 law specifically provided that the Council was required to maintain insurance only on the common elements and not any portion of the detached units. The new law, which took effect on October 1, 2024, now provides that the exception for detached units only applies to detached units “located within a condominium composed entirely of similar detached units.” The new law also requires that the Council must “give annual notice, in writing, of any obligation of an owner of a residential, detached unit to obtain property insurance coverage on the unit.” It also obligates the Council to provide prompt notice to unit owners of any change in insurance coverage requirements. Accordingly, the Council must now provide notice to owners of detached units that were not covered by the Council as a result of the 2023 law, but are now covered by the Council under the 2024 law because they are not located in a condominium composed entirely of detached units.
by Raymond Daniel Burke | Aug 13, 2024
Senate Bill 665, which passed during the 2024 session of the Maryland General Assembly and has been signed into law by the Governor, reduces the percentage of unit owner votes needed to amend a condominium declaration from 80 percent to 66 2/3 percent. The new lower percentage applies only in the event that there are no units still owned by the condominium’s developer. Where the developer continues to own any units, the 80 percent requirement still applies. The 80 percent requirement also will continue to apply to a corrective amendment under Section 11-103.1 of the Condominium Act. The new law amends Section 11-103(c) of the Condominium Act and will take effect on October 1, 2024. It retains all of the previous limitations on declaration amendments:
(i) Except to the extent expressly permitted or expressly required by other provisions of this title, an amendment to the declaration may not change the boundaries of any unit, the undivided percentage interest in the common elements of any unit, the liability for common expenses or rights to common profits of any unit, or the number of votes in the council of unit owners of any unit without the written consent of every unit owner and mortgagee.
(ii) An amendment to the declaration may not modify in any way rights expressly reserved for the benefit of the developer or provisions required by any governmental authority or for the benefit of any public utility.
(iii) Except to the extent expressly permitted by the declaration, an amendment to the declaration may not change residential units to nonresidential units or change nonresidential units to residential units without the written consent of every unit owner and mortgagee.
(iv) Except as otherwise expressly permitted by this title and by the declaration, an amendment to the declaration may not redesignate general common elements as limited common elements without the written consent of every unit owner and mortgagee.
(v) 1. Except as provided in subparagraph (vi) of this paragraph, if the declaration contains a provision requiring any action on the part of the holder of a mortgage or deed of trust on a unit in order to amend the declaration, that provision shall be deemed satisfied if the procedures under this subparagraph are satisfied.
2. If the declaration contains a provision described in subsubparagraph 1 of this subparagraph, the council of unit owners shall cause to be delivered to each holder of a mortgage or deed of trust entitled to notice a copy of the proposed amendment to the declaration.
3. If a holder of the mortgage or deed of trust that receives the proposed amendment fails to object, in writing, to the proposed amendment within 60 days after the date of actual receipt of the proposed amendment, the holder shall be deemed to have consented to the adoption of the amendment.
(vi) Subparagraph (v) of this paragraph does not apply to amendments that:
1. Alter the priority of the lien of the mortgage or deed of trust;
2. Materially impair or affect the unit as collateral; or
3. Materially impair or affect the right of the holder of the mortgage or deed of trust to exercise any rights under the mortgage, deed of trust, or applicable law.
by Raymond Daniel Burke | Jun 17, 2024
A new law, passed by both houses during the 2024 session of the Maryland General Assembly and signed by Governor Moore, permits a condominium to lease clean energy equipment as part of the common elements. House Bill 216/Chapter 253 empowers a condominium board of directors to “grant leases in excess of 1 year or similar interests affecting the common elements of the condominium for the installation and use of leased clean energy equipment.” For purposes of this provision, clean energy equipment includes “electric vehicle recharging equipment, solar energy equipment, and energy storage systems.” The legislation amends Section 11-125(f) of the Maryland Condominium Act, which generally provides that a declaration or bylaws may give the council of unit owners authority to grant easements, rights-of-way, licenses and leases in excess of one year affecting the common elements, with the approval of two-thirds of the unit owners and the consent of mortgagees. New subsection (5) gives a majority of the board of directors authority to approve the leasing of clean energy equipment, without unit owner or mortgagee approval, by a vote at a board meeting with 30-days’ notice to the unit owners. It is further provided that a mortgagee or group of mortgagees may not overrule the board’s vote. The new law will take effect on October 1, 2024.
