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Proposed Bill Relating To the Period of Developer Control Passes the House But Does Not Reach the Floor In the Senate

A bill that proposed significant changes to the Maryland Condominium Act, as well as the Maryland Homeowner Association Act, concerning the period during which the developer is in control of the council of unit owners or the homeowner association, was passed in the House of Delegates by a vote of 101 – 31.  However, it was never brought to a vote in the Senate.   As it relates to condominiums, the bill would require that the developer hold at least two meeting per year, rather than the current one annual meeting, and that the unit owners have an opportunity to comment on condominium matters during those meetings.   Additionally the bill would require that, if the condominium has a board of directors, within 30 days after 25% of the units have been titled to unit owners, the developer must appoint a board member who is a unit owner and not otherwise affiliated with the developer; and that, if there is no board at that time, a board must then be established  The bill would further require the developer to disclose any governmental bonds affecting the project, and provide notice in advance of requesting release of any such bonds.  Also, it would be required that the maintenance of the condominium’s books and records begin on the date that the council of unit owners is established, and that the condominium’s books and records be kept separate and apart from those of the developer.  The House approved similar changes to the Maryland Homeowner Association Act.  In the Senate, the bill was referred to the Judicial Proceedings Committee, which is as far as it went during the 2021 legislative session.

Required Disclosure of Defects In Home Sales Applies Only To Single Family Residential Property Improved By Less Than Five Units

Compliance with Section 10-702 of the Maryland Real Property Code has been a source of some considerable discussion.  It requires that a home seller provide the buyer with a either a “disclosure statement,” by which information is provided relating to the seller’s knowledge of defects, or a “disclaimer statement,” which applies to “as is” sales, but still requires disclosure of “latent defects.”  It should be noted, however, that neither statement is required in connection with the sale of a unit in a property containing five or more units, because the statute expressly applies “only to single family residential property improved by four or fewer units.”  In the sale of a condominium unit, disclosure requirements are governed by Section 11-135 of the Maryland Condominium Act, which requires certain disclosures by both the council of unit owners and the selling unit owner.

Condominiums Should Be Seeking Coronavirus Advice

As multi-family housing communities, condominium’s need to be particularly mindful regarding the impact the Covid-19 pandemic.  I have received a number of requests for guidelines, and condominiums are correct to reach out for advice from their attorneys and property managers.  There should be clear communications issued to the community concerning complying with social distancing requirements within the premises.  This includes such matters as restrictions on the use of facilities, issues relating to visitors and deliveries, and contact with employees, contractors and vendors who may be on the property.  Notifications need to be provided as to how scheduled meetings will be conducted, as well as instructions with regard to contacts with board members and management.  A specific plan needs to be in place for dealing with owners who request deferral or other accommodations with regard to the payment of assessments.  And special instructions need to be established for the dissemination of information about the presence in the community of someone who has tested positive for Coronavirus, or is in self-quarantine as a result of experiencing symptoms or having had contact with an infected person.  It is extremely important to seek professional guidance at this time as to what policies need to be in place and the content of communications with unit owner members.

Proposed House Bill Would Clarify Procedures for Mortgage Holder Approval of Amendments

Legislation being introduced in the 2020 session of the Maryland General Assembly would require holders a mortgage or deed of trust on a condominium unit to provide a written objection in writing to a proposed amendment to the declaration within 60 days of receiving notice, or be deemed to have consented to the amendment.  HB 25 pending in the House of Delegates is intended to address an uncertainty arising from provisions in condominium declarations requiring that mortgagees and holders of deeds of trust approve amendments.  A question has often arisen as to what happens if a mortgage holder receives notice of a proposed amendment, but does not respond.  HB 25 would amend Section 11-103(c) of the Maryland Condominium Act, and establish a 60-day period for holders of mortgages or deeds of trust to respond after receipt of the proposed amendment, or be deemed to have consented.  However, the proposed change does carve out three specific exceptions to the 60-day rule for any amendment that would (1) alter the priority of the lien; (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.  Amendments falling into those categories would still require actual approval by the mortgagee or deed of trust holder.  It is also noteworthy that the proposed legislation is limited to proposed amendments of the declaration, and does not address provisions requiring that holders of mortgages or deeds of trust approve amendments to the by-laws.

Condominium Bills That Passed the House of Delegates But Were Not Voted on in the Senate

The following House of Delegates bills in 2019 session of the Maryland General Assembly passed in a vote of the full House but failed to get out of committee in the Senate:

HB207 concerning members qualified to vote to amend bylaws.

HB249 concerning responsibilities for insurance deductibles.

HB392 concerning dispute resolution procedures.

HB655 concerning denial of rental licenses for units with assessments in arrears.

HB825 concerning rights of holders of mortgages and deeds of trust in connection with declaration amendments.

HB826 concerning unit owner’s installation of electric vehicle charging equipment.

HB1037 concerning council of unit owner meeting requirements.

 

 

Maryland House of Delegates Considers Bill Regarding Percentage Required For Amending Bylaws

Legislation pending in the Maryland House of Delegates seeks to supplement a prior revision that applied the percentage required for approval of amendments of condominium bylaws to only the number of unit owners “in good standing” — meaning unit owners not more than 90 days in arrears in payment of assessments of other charges. — rather than to the total number of owners.  A change to the Section 11-104 of the Maryland Condominium Act adopted during 2017 provides that, notwithstanding what the bylaws themselves require, the bylaws may be amended by the affirmative vote of 60% of the unit owners in good standing, “or a lower percentage if required by the bylaws.”  This had the effect of reducing the number of votes required to the extent that some unit owners were not “in good standing.”  House Bill 207 would go further and provide that any lower percentage contained in the bylaws would also be applied only to “unit owners in good standing.”  In other words, if the bylaws call for a percentage lower than 60%, that lower percentage requirement would also be determined only by the number of “unit owners in good standing” and not to the entire number of owners.  The bill also would affect homeowners associations by making the same amendment Section 11B-116 of  the Maryland Homeowners Association Act.