The 2022 Maryland General Assembly was an active session for the community association industry. Four bills of particular significance to Maryland’s more than 6,800 common interest communities will become law.
These bills will take effect on October 1, 2022.
In response to the 2021 Surfside, Florida condominium collapse, the existing reserve study law, which applied only to Montgomery County and Prince George’s County, has been expanded to Maryland community associations statewide with some new changes. The new law will require all condominium associations, cooperatives, and homeowners associations to obtain a reserve study and budget for reserves in the amount recommended in the most recent reserve study.
Maryland community associations in counties other than Prince George’s County or Montgomery County that do not have reserve studies, or have reserve studies conducted prior to October 1, 2018, must obtain a reserve study by October 1, 2023. Thereafter, an updated reserve study must be conducted/updated every five years.
Each community association will also be required to budget for reserves in accordance with the annual reserve funding amounts recommended in their current reserve study. A community association obtaining an initial reserve study under this law will have three fiscal years to attain the annual reserve funding level recommended in the study.
The board of directors has the power to increase assessments to cover the reserve study funding recommendations regardless of any provision of the governing documents restricting or capping assessment increases in a fiscal year.
For the specifics: Please see the text of bill number HB 107, which amends §§ 11-109, 11-109.2, 11-109.4, and 11-110 of the Maryland Condominium Act; §§ 11B-106.1, 11B-112.2, 11B-112.3, and 11B-117 of the Maryland Homeowners Association Act; and § 5–6B–26.1 of the Corporations and Associations Article of the Maryland Code.
Enforcement Procedures for Condominium and Homeowners Associations
This new law alters the existing enforcement procedures a condominium board of directors must adhere to before imposing sanctions for alleged violations. The law also imposes the same enforcement procedures to homeowners associations that do not otherwise have enforcement procedures addressed in their Declarations or Bylaws.
Among other requirements, this new law requires a condominium or homeowners association board of directors to provide an alleged violator a written notice of violation providing at least 15 days (increased from 10 days previously applicable to condominiums only) to abate the violation. To the extent the violation continues after the deadline to abate, the board must provide the alleged violator a written notice of their right to request a hearing on the violation within 10 days. This right to request a hearing eases the former hearing mandate previously applicable to condominiums only. Additionally, the findings and decisions of the Board on the violation, whether or not a hearing occurs, must be included in the Board meeting minutes.
The new law only applies to enforcement actions occurring after October 1, 2022.
For the specifics: Please see the text of bill number HB 615, which amends § 11-113 of the Maryland Condominium Act, and creates § 11B-111.10 of the Maryland Homeowners Association Act.
Disclosures to Unit Owners and Prohibited Provisions in Instruments
This new law aims to enhance transparency between condominium unit owners and their boards’ of directors, with a focus on common element warranty issues. The law requires a board of directors to disclose to its unit owners any agreement entered into with the declarant/developer for settling common element warranty claims at least 21 days before its execution.
The law also deems confidentiality provisions in condominium association agreements unenforceable except to the extent they are related to personnel matters or individual owner assessment accounts. Relatedly, the bill clarifies that Section 11-109.1 of the Maryland Condominium Act, authorizing certain closed board meeting, does not permit a board to withhold from its unit owners the terms of a legal agreement the condominium association is a party to.
For the specifics: Please see the text of bill number HB 40, which amends §§ 11-109.1, 11-126, 11-134.1 and 11-135 of the Maryland Condominium Act.
Enforcement of Collection Judgments
This new law takes away an important tool from a community association’s ability to enforce judgments under $5,000 against delinquent owners. This law prohibits a court from ordering a debtor in a small claims action (under $5,000) to answer interrogatories or appear for a deposition about their income and assets, actions which were previously authorized to aid creditors in the enforcement of their judgments.
Notable Bills That Did Not Pass
- A bill proposing the creation of a State Board of Common Ownership Community Managers in the Maryland Department of Labor and requiring licensing of community managers died in committee.
- A bill to increase the number of annual membership meetings a condominium or homeowners association must hold to two meetings, and requiring a condominium developer to appoint a unit owner board of directors at 25% conveyance was withdrawn.
- A bill to establish repair and rehabilitation funds for condominiums and homeowners association impacted by the statewide reserve study legislation was withdrawn.
As always, Lerch Early’s community association’s department will continue to keep our clients abreast of legislative developments.
For more information, contact a Lerch Early Community Associations attorney.