Maryland Community Associations Legislative Update

Despite a 2020 legislative session truncated on account of the public health emergency, the Maryland General Assembly passed three bills important to community associations.

Once signed by the Governor, these bills will take effect on October 1, 2020.

Insurance Deductibles

This new law increases, from $5,000 to $10,000, the amount of the insurance deductible a condominium association can assess to the owner of the unit where the damage originates.

The new law also clarifies that damage originating from “an event outside of the condominium units” as well as from the common elements is a common expense.

For the specifics, consult the text of bill numbers HB 108/SB 175, which amend to § 11-114 of the Maryland Condominium Act.

Adopted Budgets

Once this law goes into effect, condominium and homeowner associations will have to circulate the adopted annual budget to their members within 30 days of the meeting during which the budget was adopted. The adopted budget may be circulated by electronic transmission, posting on the association’s home page, and/or inclusion in the association’s newsletter.

For the specifics, consult the text of bill numbers SB 472, which amend to § 11-109.2 of the Maryland Condominium Act and § 11B-112.2 of the Maryland Homeowners Association Act.

Mortgagee Approval

This law generally eases the burden of obtaining mortgagee consent to amend the governing documents.

With this new law, certain requirements to obtain mortgagee action are deemed satisfied if the community association “cause[s] to be delivered to each holder of a mortgage or deed of trust entitled to notice of a copy of the proposed amendment” and the mortgagee “fails to object, in writing, to the proposed amendment within 60 days after the date of actual receipt of the proposed amendment.” In such cases, the mortgagee “shall be deemed to have consented to the adoption of the amendment.”

In plain English, all that community association needs to do is send the text of a proposed amendment to the mortgagees and wait out the 60 day period for any written objections.

There are limitations and exceptions. For a condominium, the relaxation of the mortgagee approval requirement applies only if the requirement is found in and applies to an amendment of the declaration. For a homeowner’s association, it applies in the context of the declaration, bylaws, deed and agreement, and recorded covenants and restrictions. In addition, the law does not apply to certain proposed amendments that materially affect the mortgagees’ priority of lien, collateral, or rights under the mortgage documents.

For the specifics, consult the text of the bills numbered HB 25/SB 293, which amend § 11-103 of the Maryland Condominium Act and § 11B-116 of the Maryland Homeowners Association Act.

Notable Bills That Did Not Pass

  • The highly publicized bill to assess sales tax on all service providers in Maryland was withdrawn.
  • A bill proposing to regulate community managers and require manager licensing failed in the Senate.
  • A bill to invalidate covenants that prohibit or restricting electric vehicle recharging equipment also failed.
  • The General Assembly did not have an opportunity to vote on the bill proposing to mandate and regulate reserve studies.

As always, Lerch Early’s community association’s department will continue to keep our clients abreast of legislative developments.