For those interested in Homeowners Associations and Condominium projects, the Maryland General Assembly passed several new laws in 2010 that will affect the drafting of new governing documents for these types of projects to include how administration, management and maintenance requirements are addressed by the developer while in control of the project and, thereafter, by the homeowners and management company.
Here is a synopsis of the new legislation.
SB 597 – Condominiums and Homeowners Associations – Common Elements and Common Areas – Implied Warranties (Takes Effect October 1, 2010)
1. To the extent that common area improvements are shared by or serve more than one unit or serve any portion of the common elements, this legislation requires the description of those elements in a condominium declaration that is recorded on or after October 1, 2010, to include the following:
- external and supporting walls,
- mechanical, electrical and plumbing systems, and
- other structural elements.
2. Except for corrective amendments to comply with the new common element description requirement, the description and designation of common elements may not be amended until after the date on which the unit owners, other than the developer and its affiliates, first elect a controlling majority of the members of the board of directors for the council of unit owners.
3. The provisions in #1 and #2 above are limited to residential condominiums.
4. The legislation also alters the period for condominium elements covered by implied warranties to be the later to occur of:
- three (3) years from the commencement of the warranty period (first transfer of a unit to a unit owner or, if the common elements are not yet complete then when the are complete or available for use by all owners, whichever is later), or
- two (2) years from the date on which unit owners, other than the developer and its affiliates, first elect a controlling majority of the members of the board of directors for the council of unit owners.
5. With regard to common areas for homeowners associations, the implied warranty on improvements to common areas is altered to be the later of:
- two (2) years from commencement of the warranty period (upon the first transfer of title to a lot to a member of the public or, if the improvements are not yet complete at that time, then upon completion of the improvement or with its availability for use by lot owners, whichever occurs later), or
- two (2) years from the date on which the lot owners, other than the declarant and its affiliates, first elect a controlling majority of the members of the governing body of the homeowners association.
SB 416 – Homeowners Association – Annual Budget – Notice, Information and Adoption (Takes Effect October 1, 2010)
This new law requires the board of directors or other governing body of a homeowners association to prepare and submit an annual proposed budget to the lot owners at least 30 days before its adoption. The new budget may be sent to each lot owner by electronic transmission, by posting on the homeowners association’s home page, or by including the annual proposed budget or notice in the homeowner’s association newsletter.
The annual budget shall provide information regarding expenditures for at least the following items:
- General expenses
- Reserves, and
- Capital expenses.
The budget shall be adopted at an open meeting of the homeowners association. Except for an expenditure made by the homeowners association because of a condition that, if not corrected, could reasonably result in a threat to the health or safety of the lot owners or a significant risk of damage to the development, any expenditure that would result in an increase in an amount of assessments for the current fiscal year of the homeowners association in excess of 15% of the budgeted amount previously adopted shall be approved by an amendment to the budget adopted at a special meeting for which not less than 10 days written notice shall be provided to the lot owners.
HB 566 – Prince George’s County – Community Association Property Management Services – Registration (Takes Effect October 1, 2010)
This legislation requires the Prince George’s County Office of Community Relations to establish a registry of entities that provides for specified community association management services for condominiums, homeowners associations, or cooperative housing corporations located in the county; requires the entities to register annually with the Office; requires specified information to be included in the registration; and authorizes the Office to collect a $100 annual registration fee.
HB 702 – Common Ownership Communities – Fidelity Insurance – Fidelity Bond (Takes Effect October 1, 2010)
Allows governing bodies of a cooperative housing corporation, condominium, or a homeowners association to satisfy the requirement of purchasing fidelity insurance by purchasing a fidelity bond and requires a copy of a specified fidelity insurance policy or fidelity bond to be included in the books and records kept and made available by or on behalf of the cooperative, condominium or homeowners association.
SB 800 – Common Ownership Communities – Fidelity Insurance – Exemption (Takes Effect October 1, 2010)
Pursuant to this new statute, the requirement that the governing body of a cooperative housing corporation, a condominium, or a homeowners association purchase fidelity insurance does not apply to the governing body of a cooperative housing corporation, condominium, or homeowners association (a) that has 4 or fewer members and (b) for which 3 months’ worth of gross common charges is less than $2,500.
SB 224 – Real Property – Installation and Use of Clotheslines on Residential Property (Takes Effect October 1, 2010)
For “Single-Family Properties”, which include (a) single-family detached homes, (b) townhomes, and (c) properties subject to homeowners associations or condominium regimes that do not contain more than four dwelling units within the Single-Family Property, no contract, deed, covenant, restriction instrument, declaration, rule, bylaw, lease agreement, rental agreement or any other document may prohibit the installation or use of clotheslines on such Single-Family Properties. This does not prohibit reasonable restrictions on (i) dimensions, placement or appearance of clotheslines for purpose of protecting aesthetic values, or (ii) the placement of clotheslines for the purpose of protecting persons or property in the event of fire or other emergencies. Certain procedures set forth in the new law must be followed in order to adopt any such reasonable restriction.
Should you have any questions about the applicability of any of the legislation to any of your projects or if you have any other questions regarding homeowners or condominium association issues or concerns, you can contact Michael Faerber by email or telephone at (301) 251-1180, ext. 305.