Maryland Condo Law Blog
An online resource for condominium and homeowner associations and their members, and for developers, builders, contractors, architects, engineers and others in the building industry.
Proposed Legislation Would Require Unit Owner Participation On a Condo’s Board of Directors During the Period of Developer Control
House Bill 1053, now pending in the Maryland General Assembly, would make significant changes affecting the operation of a condominium during the period of developer control. The proposed law would require the developer, within 30 days after 25% of the units are sold, to appoint at least one board member who is a unit owner and unaffiliated with the developer. If there is no board at that time, the developer would be required to create one. Additionally, the developer would be required to keep separate books and records for the condominium apart from the developer’s own business records.
Once the unit owners take control, the bill would require the developer to provide notice of any bond provided by the developer to a government agency, and to provide advance notice of the developer’s intention to request that it be released from a bond.
The bill would also require, in all circumstances, that a condominium governing body meet at least two times per year.
The bill calls for similar requirements to be be applicable to homeowner associations.
Proposed Legislation Would Require a Developer In Control of a Condominium To Hold At Least One Council Meeting Per Year
A bill filed in the Maryland General Assembly would require condominium developers to hold at least one meeting of the council of unit owners per year, and receive unit owner comment on the operation of the association. House Bill 218 would amend Section 11-109 of the Maryland Condominium Act, which presently requires that a condominium’s “governing body shall convene at least one meeting each year at which the agenda is open to any matter relating to the condominium.” The proposed legislation is intended to address those circumstances in which the developer maintains control the council as a result of still owning a majority of the units. It would provide that the mandated open agenda meeting is to be called by “the governing body or the developer,” and would require that, at the meeting, “the unit owners have an opportunity to provide comment.”
Proposed Legislation Would Increase a Unit Owner’s Responsibility For The Condominium’s Insurance Deductible From $5,000 To $10,000
Legislation now pending in the Maryland General Assembly would double unit owner responsibility for the condominium’s insurance deductible when damage to components of the condominium originates from a unit. Under current law as established in Section 11-114 of the Maryland Condominium Act, the council of unit owners is required to maintain insurance “[f]or property and casualty losses to the common elements and units, exclusive of improvements and betterments installed in the units by the unit owners other than the developer.” An individual owner in whose unit the damage originates is responsible for the condominium’s insurance deductible up to a maximum of $5,000. Otherwise, the deductible remains a common expense. The result is that condominium master policies must cover property damage to all of the condominium structure, including both the common elements and units as originally constructed and finished by the developer, with the unit owners providing individual insurance for their improvements and personal contents. If damage originates in the unit, the owner is responsible for the insurance deductible up to a maximum of $5,000. Under House Bill 108 and Senate Bill 175, the $5,000 limit on unit owner responsibility would be raised to $10,000.
PROPOSED BILL WOULD REQUIRE RESERVE STUDIES EVERY 5 YEARS AND ANNUAL FUNDING OF RESERVE AMOUNTS
Proposed legislation introduced in the current session of the Maryland General Assembly would require condominiums with 50 or more units, as well as homeowner associations with 50 or more homes and cooperative housing corporations with 50 or more units, to conduct regular reserve studies, and to fund reserves in an amount equal to at 80% of that established in the reserve studies. House Bill 58 and Senate Bill 386 would add new Section 11-109.4 to the Maryland Condominium Act requiring reserves studies addressing “major repairs and replacement” of the common elements. The reserve study must (1) identify the components that the council of unit owners is responsible for maintaining; (2) state the estimated useful life of each; (3) state the estimated cost of repair or replacement of each; and (4) state the estimated annual reserve amount necessary to accomplish the repair or replacement. For condominiums created prior to October 1, 2020, if a reserve study was conducted on or after October 1, 2016, the condominium would be required to conduct a reserve study within 5 years of the date of the last reserve study, and every 5 years thereafter. If the condominium has not conducted a reserve study on or after October 1, 2016, they would be required to obtain a reserve study on or before October 1, 2021, and then every 5 years thereafter. Future condominiums created on or after October 1, 2020 would be required to conduct a reserve study within 90 days of the turnover from the developer and every 5 years thereafter. The proposed legislation would require that persons providing reserve studies have prepared at least 30 reserve studies in the last three years, and have a bachelor’s degree in construction management, architecture or engineering, or equivalent experience or education, or be licensed by the State in architecture or engineering. The bills would also amend Section 11-109.2 (b) to provide that the annual budget provide reserve funding at least equal to 80 percent of the recommended amount contained in the most recent reserve study. Developers in control of a council of unit owners would also be required to comply with the reserve study mandate, and, at turnover of the community, would be required to provide funds at least equal to 100% of the recommended reserve amount. Section 11-110 would also be amended to give the board of directors authority to increase assessments to fund the required reserves regardless of any restrictions in the governing documents. read more…
Proposed Bill Would Prohibit Limitations On Disclosures Of Agreements To Unit Owners
Legislation now pending in the Maryland House of Delegates would prohibit condominium boards from withholding legal agreements from unit owners, and would prevent developers from including provisions in the governing documents, sales contracts, or settlement documents that bar disclosure to unit owners of settlement terms. House Bill 30 would add new Subsection (c) to Section 11-109.1 of the Maryland Condominium Act, which addresses the requirements for closed door meetings of the board of directors, providing that “[n]othing in this section may be interpreted to, authorize the board to withhold or agree to withhold from the unit owners information about any legal agreement to which the board is a party.” Additionally, the proposed law would amend Section 11-134.1 to provide that any provision in (1) the declaration, (2) the bylaws, (3) a contract for an initial sale from the developer, or(4) an agreement to settle a disputed claim, is unenforceable if it “[p]rohibits the disclosure to the unit owners of any term of an agreement to settle a disputed claim.”
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.
The Persistence of Prejudice
Here is a link to my opinion/commentary in today’s Baltimore Sun that you can copy and past to your browser: http://digitaledition.baltimoresun.com/infinity/article_share.aspx?guid=f83309e8-b53c-4a5e-a07c-8548819a0b6f
New Maryland Law Affects Developer Voting Rights in an HOA
Governor Hogan has signed into law legislation adopted by the General Assembly during 2019 session that deals with the voting rights of developers in homeowner associations where not all lots have been sold. Senate Bill 305, which was passed unanimously by both Houses and signed by the Governor on April 30, 2019, amends Section 11B-111.7 of the Maryland Homeowners Association Act, and addresses the votes to which a developer is entitled with respect to whether lots have been subdivided and recorded. Of course, any lot that has been sold must have first been subdivided and recorded. The issue has been the developer’s votes on unsold lots that have not been subdivided and recorded. Under current law, which will be changed when the new law takes effect on October 1, 2019, until all of the lots have been subdivided and recorded, a developer is entitled to the number of votes equal to the number of unsold lots that have been subdivided and recorded but remain unsold. There is no vote for lots that have not yet been subdivided and recorded. The new law provides that, once all of the lots have been subdivided and recorded, the developer is entitled to one vote per lot that remains unsold. But, until all of the lots have been subdivided and recorded, the developer’s votes are to be as provided in the governing documents; i.e., the governing documents control until every lot has been subdivided and recorded. So developers will have control of determining the number of votes to which they are entitled by addressing the issue when the governing documents are prepared. Arguably, however, if the governing documents are silent on the issue, the developer gets no votes on unsold lots until each and every lot is subdivided and recorded.
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 General Assembly Considers Two Bills That Would Expand a Condominium’s Priority Lien
Senate Bill 374 and House Bill 250, pending in the Maryland General Assembly, would expand the portion of a condominium’s lien that has a priority over a first mortgage or first deed of trust. Under the current provisions of Section 11-110 of the Maryland Condominium Act, a portion of a condominium’s lien for delinquent assessments has a priority consisting of four months of assessments limited to a maximum of $1,200. Additionally, it is limited to regular assessments only, and my not include (1) interest; (2) costs of collection; (3) late charges; (4) fines; (5) attorney’s fees; (6) special assessments; or (7) “any other costs or sums due under the declaration or bylaws of the condominium or as provided under any contract, law or court order.” The proposed law would expand the priority to six months of assessments, eliminate the maximum limitation, and allow inclusion of the list of seven items that are now expressly precluded.
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The Maryland Condo Law Blog is written by Raymond Daniel Burke. One of the region's top construction and real estate development lawyers, Ray has more than 35 years of experience in matters relating to condominium and other multi-use development matters.