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Maryland Legislature Considering Bill To Require Property Mangagers To Purchase Fidelity Insurance For Dishonest Acts

Under Section 11-114 of the Maryland Condominium Act, and Section 11B- 111.6 of the Maryland Homeowners Association Act require that condominium councils of unit owners and homeowner associations maintain property and liability insurance.  House Bill 741 pending in the current session of the Maryland General Assembly would extend an insurance requirement to a management company that contracts with the condominium or homeowners association.  The proposed language provides that, if a condominium or homeowners association “contracts with a management company for operation or maintenance services,” such “management company shall purchase fidelity insurance that provides for the indemnification of the [condominium or homeowners association] against loss resulting form acts or omissions arising from fraud, dishonesty, or criminal acts by any agent or other employed of the management company.”

This proposed requirement also would apply to cooperative housing corporations.  It would not apply to any condominium or homeowners association in which four or fewer units or lots.  It also would not apply to condominiums in which three months worth of gross annual assessments is less than $3,000, or homeowners associations in which three months of gross annual assessments is less than $2,500.  The bill was assigned to the Environmental Matters Committee.