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Why Many HOA Rules May Not Be Enforceable

Author: Michael A. Faerber Date: 04/07/2014

Categories: Real Estate Law

Whether they were drafted 10 years ago by a developer or amended last week by an HOA’s Board of Directors. No matter how meticulously they hew to the letter of the law. Regardless of how long and technical – or brief and simple – the bylaws and rules of every Maryland homeowners’ association; they all have one essential trait in common.  None of them are enforceable unless they have been filed in one of the HOA Depositories set up by the State.

Maryland enacted this requirement so that the public can know where to access the regulations and policies that pertain to any particular association.

That’s not a problem with some legal documents. For example, when we create HOA’s for our homebuilder and developer clients, we file their Articles of Incorporation with the State Department of Assessments and Taxation. We also record the Declaration of Covenants, Conditions, Easements and Restrictions in the Land Records of the County where the HOA is located.

But other than the Depositories, there is no comparable official “home” for HOA bylaws and rules.  According to State law, the bylaws and any rules – setting forth the association’s operating procedures and covering everything from the election of directors, to fees collection procedures and architectural control guidelines – must be submitted to the Depository in the association’s County (or Baltimore City).  And this is not a “one time only” submission.  New or revised rules, policies and guidelines adapted by the HOA’s Board of Directors must also be submitted.

This is where things can get dicey. It’s perfectly possible to publish bylaws and rules without putting them in the Depository.  It’s also possible – and even likely – that Boards will add or change governing rules without updating the Depository’s records.  The HOA may even function forever without consequence.

But if owners or other interested parties consult the Depository – and discover that a particular rule or regulation is not on record – they have grounds to disregard it.  It is perfectly conceivable that an association might be unable to enforce properly adopted rules.  A supplemental fee levied as the result of an unrecorded Board decision may be uncollectable.  A homeowner may even discover legitimate grounds to challenge a duly-held election.

While Maryland does not expressly require builders or developers to make these filings on behalf of the HOAs they establish, our recent experience indicates that new owners expect it to have been done.  Because the Depository Statement is a simpler version of the Disclosure Statement that builders are already required to give to customers, there is little reason not to do it.  It is sound business practice and good public relations. During the time that the developer may hold or be selling property or homes in the community, the Depository also permits the use of the bylaws and rules to protect your interests.  Our Firm coordinates these submissions for our clients.

And whatever your relationship may be to an HOA – as a founding developer, a Board member or homeowner – it is absolutely crucial to add newly adopted bylaws, rules, policies, and other guidelines to the Depository so that they remain up-to-date and enforceable.

If you would like to discuss establishing a homeowners association, or a condominium association for your new project, please contact Michael Faerber by e-mail at mfaerber@mcmillanmetro.com.