Recent Maryland Legislation Impacting Community Associations

By Brian D. Bichy
Shareholder at Selzer Gurvitch 

The Maryland legislature passed two (2) important bills that impact community associations statewide effective October 1, 2022.  First, in the wake of the Surfside condominium collapse in Florida in June of 2021, many states around the nation have passed mandatory reserve study and funding requirements.  Last year, reserve study and funding legislation that only applied to cooperatives, condominiums and homeowners associations located in Montgomery and Prince George’s Counties was passed.  However, Maryland House Bill 107 was passed in this year’s legislative session that broadened the scope of such reserve study and funding requirements to apply statewide.

            What do I need to know?

• Effective October 1, 2022, all condominiums and cooperatives statewide require an independent reserve study.
• Also, homeowners associations statewide whose common areas components require a total initial purchase and installation cost of at least $10,000 require an independent reserve study effective October 1, 2022.
• The governing body for a condominium association, homeowners association, or cooperative shall have an updated reserve study completed within 5 years after the date of the initial reserve study and at least every 5 years thereafter.
• The amount of the reserves provided for in the annual budget shall be the funding amount recommended in the most recent reserve study completed.
• The timing for the initial reserve studies varies depending on whether your association is located in Montgomery and Prince George’s Counties or in other Maryland counties.
• For associations in Montgomery County that were established before October 1, 2021, if the governing body has not had a reserve study conducted on or after October 1, 2017, the governing body must have had a reserve study conducted on or before October 1, 2022 and must have an updated reserve study at least every 5 years thereafter. However, if a reserve study was conducted on or after October 1, 2017, the governing body shall have an updated reserve study conducted within 5 years after the date of that reserve study and at least every 5 years thereafter.
• For associations in Prince George’s County that were established before October 1, 2020, if the governing body has not had a reserve study conducted on or after October 1, 2016, the governing body must have had a reserve study conducted on or before October 1, 2021 and must have an updated reserve study at least every 5 years thereafter. However, if a reserve study was conducted on or after October 1, 2016, the governing body shall have an updated reserve study conducted within 5 years after the date of that reserve study and at least every 5 years thereafter.
• For associations in any county other than Prince George’s County or Montgomery County established before October 1, 2022, if the governing body has not had a reserve study conducted on or after October 1, 2018, the governing body must have a reserve study conducted on or before October 1, 2023, and must have an updated reserve study at least every 5 years thereafter. However, if a reserve study was conducted on or after October 1, 2018, the governing body shall have an updated reserve study conducted within 5 years after the date of that reserve study and at least every 5 years thereafter. 
• If the most recent reserve study was an initial reserve study, the new law allows for the governing body to have 3 fiscal years following the fiscal year in which the initial reserve study was completed to attain the annual reserve funding level recommended in the initial reserve study.

It is important to note that the new law’s funding requirements only pertain to the amounts for reserves as shown in the annual budgets adopted by the governing body.  Such amounts must be equivalent to the reserve funding level recommended in the most recent reserve study.  However, the new law does not address what happens when associations face deficits due to uncollected assessments from delinquent owners or emergency repairs and replacements that require accessing the reserve funds.  Thus, the new law does not prohibit an association from making use of such reserve funds as necessary – the key is to ensure that the annual budget includes reserves that meet the recommended levels of the most recent reserve study. 

The second key piece of legislation that impacts condominium associations and homeowners associations is House Bill 615 which accomplished two objectives: 

(1) Revised the dispute settlement procedures set forth in Section 11-113 of the Maryland Condominium Act to allow for the condominium association to impose a fine, suspend voting, or infringe upon any other rights of a unit owner or other occupant for violations of the governing documents by providing notice and the opportunity for a hearing if requested by the alleged violator.  If the alleged violator fails to request a hearing, then the board of directors may proceed to impose the appropriate sanction.  Previously, the board was required to go through the hearing process regardless of whether the alleged violator had responded in any fashion.  Eliminating the required hearing process if the alleged violator does not request one should help to streamline the dispute settlement process for condominium boards of directors.

(2)  Added a new subsection to the Maryland Homeowners Association Act (Section 11B-111.10) that creates the same dispute settlement procedures as set forth in Section 11-113 of the Condominium Act for any violations of the governing documents of a homeowners association.  Previously, unless the governing documents provided dispute settlement procedures for levying fines or suspension of privileges, Selzer Gurvitch often advised boards to adopt an enforcement policy that was similar to the dispute settlement procedures set forth in Section 11-113 of the Condominium Act.  Now, that is no longer necessary: Section 11B-111.10 guides enforcement procedures for homeowners associations unless the homeowners association’s governing documents direct otherwise.

Boards of directors and property managers must be mindful of these new requirements for reserves and changes to the dispute settlement procedures.  If you have any questions or wish to discuss your community association, please contact Brian D. Bichy, Esq., Chair of the Condo/HOA Practice Group at 301.634.3151 or bbichy@sgrwlaw.com.