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 | Apr 8, 2024
I will be speaking at the Community Associations Institute’s Delmarva Breakfast Conference on Friday, April 12, 2024 at the Atlantic Sands Hotel in Rehoboth, Delaware. My primary topic will be condominium and homeowner association resale disclosure requirements.
by Raymond Daniel Burke | Aug 11, 2023
House Bill 98, making changes to condominium insurance requirements, was passed during this year’s legislative session and signed into law by Governor Moore. It amends Section 11-=114 of the Condominium Act concerning the mandatory insurance that is required to be maintained by the Council of Unit Owners. These changes, which will take effect on October 1, 2023, differentiate between “attached” and “detached” units for insurance purposes. The new law changes subsection (a)(1), which presently provides that the 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 amended provision establishes that the Council is only required to maintain insurance on “attached” units. Where units are detached, the Council is only required to maintain insurance on the common elements and not any portion of the units. Similarly, subsection (d), which provides that insurance proceeds are first to be disbursed to repair the common elements and then the units, is amended to provide that the distribution of insurance proceeds for units is only to be made in the case of “attached” units. A new subsection (e)(2) is also added, which expressly requires that “and owner of a residential detached unit shall carry homeowners coverage on the entirety of the unit.”
by Raymond Daniel Burke | Mar 9, 2023
House Bill 55, now pending in the Maryland General Assembly, would authorize a county or municipality to “establish a local trust fund or other appropriate fund for the purpose of repairing or rehabilitating infrastructure with communities that are subject to the requirements of the Maryland Condominium Act or the Maryland Homeowners Association Act.” The bill, which would add new Section 1-1318 to the Local Government Article, is expressly intended to address circumstances in communities in which the original developer designated roads and other infrastructure a private components to be owned and maintained by the condominium associations or homeowners associations. The Bill’s preamble notes that owners living in such communities “are burdened by paying for repairs and services for the types of infrastructure that would otherwise be paid for by local governments, as well as paying property taxes that support this type of infrastructure in other condominium associations and homeowners associations with publicly managed infrastructure.” Any fund created pursuant to this proposed legislation could be used to repair “infrastructure that is traditionally maintained by the county or a municipality for the benefit of the public, including roads and storm management facilities,” but may not be used to repair recreational facilities used exclusively by homeowners and guests. Any such fund would be financed from property taxes paid by the members of the affected condominium or homeowners association. A county or municipality could establish eligibility requirements, but must prioritize those associations the exhibit the greatest need for repair or rehabilitation.
