New Condominium and Homeowners Association Laws
In light of the COVID-19 pandemic and a shortened session, the Maryland Legislature was still able to pass and amend various laws affecting condominium and homeowners association law. This post is a review of the newly enacted legislation which went into effect on October 1, 2020.
Increase in Unit Owner’s Insurance Deductible Obligation
Section 11-114 of the Maryland Condominium Act was revised to increase a unit owner’s share of the insurance deductible if casualty damages arise in an owner’s unit and the condominium pays for the repairs. Previously, the unit owner would be responsible for the insurance deductible under the condominium’s policy, up to a maximum amount of $5,000. Under the new law, that amount has been increased to $10,000. The statute states: “If the cause of any damage to or destruction of any portion of the condominium originates from a unit, the owner of the unit where the cause of the damage or destruction originated is responsible for the council of unit owners’ property insurance deductible not to exceed $10,000.”
Notice to Lienholders of Amendments to Governing Documents
Sections 11-103 (v) and (vi) of the Maryland Condominium Act and 11B-116 of the Maryland Homeowners Association Act have been amended to make it easier for condominium and homeowners associations in obtaining lienholders’ consent to an amendment to the Association’s Declaration. The new law states that so long as a condominium association or homeowners association provides holders of mortgages and deeds of trust with a copy of an amendment and the holder fails to object in writing within 60 days after receiving the notice, they are considered to have consented to the adoption of the amendment. The exception to this rule is present when the amendment would (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 to exercise rights under the mortgage or deed of trust. In those instances, express consent must still be obtained. This is welcome news for condominium and homeowners associations, who may have in the past waived a white flag when trying to implement amendments due to unreasonable lienholder approval requirements.
Requirement to Provide Owners with a Copy of the Adopted Budget
Sections 11-109.2 of the Maryland Condominium Act and 11B-112.2 of the Maryland Homeowners Association Act require condominium and homeowners associations to submit a copy of the proposed annual budget to owners at least 30 days prior to the meeting at which the budget is being considered along with notice of such meeting. Additionally, the adopted budget must be provided to each owner within 30 days after adoption but may be disseminated in various ways, such as by electronic transmission, by posting on the association’s home page, or by inclusion in the association’s newsletter.
New Reserve Funding Requirements in Prince George’s County
Sections 11-109.4 of the Maryland Condominium Act and 11B-112.3 of the Maryland Homeowners Association Act require associations located in Prince George’s County to fund their reserves to the amount recommended in the most recent reserve study, and require the associations to conduct a reserve study at least once every 5 years. The reserve study must be prepared by a person who has prepared at least 30 reserve studies within the last three years; someone who has a bachelor’s degree in construction management, architecture, engineering or equivalent experience and education; holds a license from the State Board of Architects or the State Board for Professional Engineers; or is currently designated as a reserve specialist by the Community Association Institute or the Association of Professional Reserve Analysts.
It is crucial that condominium and homeowners associations pay close attention to the Maryland Code requirements, as the State continues to implement new laws. Condominium associations and homeowners associations should contact legal counsel to discuss potential issues, obtain advice on navigating the best course of action going forward with their community or if there are any questions concerning compliance with the new laws.