2017 Maryland Condo and HOA Legislation–The Home Stretch

Two weeks until the 2017 Maryland legislative session ends on April 10.  Several bills affecting condominium and homeowner associations are still under consideration.

State Registration of Community Associations.  Passed by the House.  Reviewed by a Senate Committee and waiting further action.  Final passage possible but uncertain.

Manager Licensing.  Approval this year appears unlikely.  No action on the House bill, but summer study may be a possibility.

Replacement Reserves for Capital Expenditures.  Passed by the House.  The Senate is taking a look.

Lender Foreclosure Sales.  Both the House and Senate have passed a bill to require notice of foreclosure sale postponement and cancellation to be provided to the property owner and to condominium and homeowners associations which have recorded an assessment lien on the property.  Odds are it will get final approval by the Governor.

Two other bills regarding lender registration of foreclosures with the Maryland Department of Labor, Licensing and Regulation have been passed by the House and are now in the Senate.

Governing Document Amendments.  The House approved a bill to make it easier for condos and HOAs to amend governing documents.  Senate committee may consider amendments.

Sale of Common Area.  Proposed bill was intended to help associations by requiring better County notice of tax sales of association common area.  After amendment in the Senate, the bill passed by the Senate would impose new notice requirements on condos and HOAs to notify owners of sale of the common area, including tax sales which are unknown to the association board.   Now up to the House to get this bill fixed or stopped.

Other legislation affecting condos and HOAs has already been killed by legislative committees as reported in our prior blogpost–2017 Maryland Condo and HOA Legislation–What’s Hot and What’s Not.

Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations and housing cooperatives in Maryland–including Montgomery County, Prince George’s County, Howard County, Frederick County, and Baltimore County; and in Washington, D.C.

 

2017 Maryland Condo and HOA Legislation–What’s Hot and What’s Not

With the Maryland General Assembly now in the final month of the 2017 legislative session which ends on April 10, several bills regarding community associations are still under consideration.  Other bills have died in committee.  A bill must be passed by the Maryland House and Senate and signed by the Governor in order to become law.

Here’s What’s HOT!

State Registration of Community Associations.  Legislation to require each condo, co-op and HOA to register with the state has been passed by the House after it was amended to limit the information required.  For communities which already register with the county, no additional state registration would be required. The bill is now under review in the Senate.

Manager Licensing.  A bill to require community managers to obtain a State license has been introduced again this year.  Manager licensing legislation was previously considered in 2014 and is under study again in the House of Delegates.  The proposed legislation would require a manager to have specified training, pass a test and pay a license fee in order to provide management services to condos, coops and HOAs.

Replacement Reserves for Capital Expenditures.  Every five years, each condominium and homeowners association would be required to obtain a study of the estimated costs to repair and replacement of building structural components, roads, recreation facilities and other similar items.  The House has passed this legislation which is now under review in the Senate.

Foreclosure Sale Notice.   A lender which sells a property at foreclosure would be required to give written notice of the proposed sale to any condo or HOA which has recorded an assessment lien against the property at least 30 days before the sale date.  Notice of any postponement or cancellation  of the foreclosure sale must also be provided to the property owner, condo and HOA.  This legislation has passed both the House and Senate.

Governing Documents.  Still under study are bills to make it easier to amend condo and HOA governing documents and to invalidate condo document provisions which limit the time for bringing condominium legal claims regarding construction defects.

Here’s What’s NOT

Electric Vehicle Charging Stations.  A bill to invalidate condominium and homeowner association covenants which prohibit or unreasonably restrict the installation electric vehicle charging stations in parking spaces designated for the exclusive use of a homeowner was killed by House and Senate committees.

Backyard Gardens.  Also killed in committee was a bill to invalidate association covenants which prohibited gardens in the backyard of a home.

Smoking Restrictions.  Legislation to allow the board of directors of a condominium or homeowners association to adopt rules to prohibit tobacco smoking in an owner’s  condo or townhome was voted down in committee.

For updates and details on legislation affecting Maryland condos, co-ops and homeowner associations, sign up for the Maryland Condominium & HOA Law Blog to receive the latest blogposts by email.

Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations and housing cooperatives in Maryland–including Montgomery County, Prince George’s County, Howard County, Frederick County, and Baltimore County; and in Washington, D.C.

 

Maryland Top Court to Review Condo Towing Rule

To tow or not to tow…with apologies to William Shakespeare, that is the question at the heart of long-running litigation between an Anne Arundel County condominium and owners whose vehicles were towed from the condo parking lot.  The Maryland Court of Appeals will soon resolve the dispute over a condominium association’s authority to suspend a condo owner’s use of the common elements when the owner is in arrears in payment of condominium assessments.

Nearly 5 years after a condominium owner filed suit to challenge a condo association’s practice of towing owner’s vehicles of owners from the condominium common element parking lot and denying access to the swimming pool, the litigation is now before Maryland’s top appeals court in Elvaton Towne Condominium Regime II, Inc. v. Rose.  The  condo unit owner, who disputes that the assessments are in arrears,  is also contesting the condo’s court suit and assessment lien.

The condominium contends that the board-approved rule for suspension of the use of parking lot and pool is permitted by the Maryland Condominium Act and the Condominium Bylaws which authorize the board to regulate the common elements.  In contrast, the unit owner claims that the Board’s action is not merely regulation of the common elements but a prohibition on use not allowed by the Act or the condominium governing documents.

The Anne Arundel Circuit Court and the Maryland Court of Special Appeals–an intermediate appeals court–previously agreed with the homeowner and ruled that the condominium board of directors does not have the authority to adopt a rule to suspend the use of the common element parking lot and pool for non-payment of assessments, where the condominium declaration and bylaws do not provide that such action is allowed.  Because the decision of the Court of Special Appeals is “unreported”, it is not a binding precedent applicable to other condominiums.

Concerned that the towing practice violates the Maryland Condominium Act and Maryland Consumer Protection Act, the Maryland Attorney General participated in the court appeal in support of the homeowner whose vehicle was towed.

The Court of Appeals heard oral argument in early January and its decision is expected by June 2017.

Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations and housing cooperatives in Maryland–including Montgomery County, Prince George’s County, Howard County, Frederick County, and Baltimore County; and in Washington, D.C.

2017 Maryland Legislative Session Begins

Outside the glare of worldwide attention to the inauguration of Donald Trump as the President of the United States, the Maryland General Assembly began its 2017 90-day legislative session in mid-January.

Some bills considered–but not enacted–in 2016 will be examined again by legislative  committees in the Maryland House of Delegates and Maryland Senate.  This includes legislation to establish a state registry for common ownership communities, to require lender notice to condominiums and homeowner associations when a lender postpones or cancels a foreclosure sale, and to make it easier to amend the governing documents of condominiums and homeowner associations.

Other proposed legislation would require Maryland community association managers to obtain a state license to provide management services and establish a State Board of Common Ownership Community Managers.  Several bills would limit the authority to prohibit or regulate uses such as electric vehicle charging stations and backyard gardens.  Also under consideration is a bill to require condos and HOAs to obtain an independent reserve study of the condition of the common areas every 5 years to determine future costs of major repairs and replacement.

A legislative committee will receive comments on each bill and make a recommendation on whether the bill should become law.  Only legislation which is passed by both the House and Senate, and approved by the Governor becomes law.

For updates and details on legislation affecting Maryland condos, co-ops and homeowner associations, sign up for the Maryland Condominium & HOA Law Blog to receive the latest blogposts by email.

Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations and housing cooperatives in Maryland–including Montgomery County, Prince George’s County, Howard County, Frederick County, and Baltimore County; and in Washington, D.C.

FHA Condo Certification Rule Awaits Review by Trump Administration

The Federal Housing Administration (FHA) recently issued its long-awaited proposed rule regarding standards for condominiums in which individual unit owners are eligible to obtain FHA-insured loans.  However, final action awaits review by new housing agency officials in the Trump Administration.

Mortgages backed by the FHA allow borrowers to make a lower down payment and have less stringent financial qualification criteria than conventional  mortgages. Of the estimated 150,000 condominium nationwide, fewer than 10,000 are certified for FHA-insured loans.

Since 2010, FHA condo approval standards have been set by administrative policy rather than a formal rule.  Although it had been anticipated that the FHA would propose specific standards, the proposed rule largely leaves to future FHA action to establish specific criteria and allows for FHA discretion to grant exceptions to some criteria on a case by case basis.

For instance, the proposed rule would limit the number of FHA-insured condo units to between 25 and 75 percent of the total units in a condominium.  Between 25 and 75 percent of the units would have to be owner-occupied, and the amount of commercial/non-residential space would be limited to between 25 and 60 percent of the total floor area.

The proposed rule includes one specific financial requirement–10 percent of the monthly assessments must be allocated to reserves, unless the FHA allows a lower amount for a specific condo based on a reserve study completed in the past 24 months.  The rule allows the FHA to later adopt additional standards regarding a condominium’s financial condition, special assessments, and insurance coverage.

For condos which have not obtained FHA approval, the proposed rule would allow “single unit approval” for units which meet less stringent standards to be determined by FHA.

The Community Associations Institute (CAI) has submitted detailed comments to FHA which generally support the existing FHA approval criteria and support single unit approvals.  However, CAI urges FHA to adopt clear guidance concerning application of the general approval criteria and how FHA will exercise its discretion to allow exceptions to the general standards.

Separately, the existing FHA condominium approval standards have been extended through August 2017 and remain in effect until changed by a final FHA rule.  With the change in leadership at FHA and the Department of Housing and Urban Development in the Administration of President-elect Donald Trump,  how and when the condo certification standards will be changed is uncertain.

Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations, and housing cooperatives in Maryland–including Montgomery County, Prince George’s County, Howard County, Frederick County and Baltimore County; and in Washington, D.C.

Will Community Associations Get Trumped?

The election of Donald Trump as the President of the United States ushers in uncertainty for a variety of federal housing policies which affect the financing and governance of homes in community associations–condominiums, homeowner associations and housing cooperatives.  During the election campaign, Trump said little about the federal role in promoting homeownership.

But, his support for reduced government regulation and the 2016 Republican Platform provide clues about how a Trump Administration may impact community associations.

FHA-Insured Condominium Loans.  After years of deliberation, the Federal Housing Administration (FHA) issued proposed rules in late September regarding FHA condominium certification which allows condo unit owners to obtain FHA-insured loans.  The rules would ease some criteria such as owner-occupancy and commercial/residential ratios but allow FHA staff to develop the details of other eligibility standards.

With new leadership at the Department of Housing and Urban Development (HUD) and the FHA, issuance of final rules might be held up for further review.  The Republican Platform calls the FHA “poorly-managed”, and promises to limit taxpayer exposure to “risks taken by FHA officials” and end FHA loans for high-income individuals.  Whether this results in more stringent FHA lending standards for condominiums is unknown.

Fannie and Freddie.   For many decades, Fannie Mae and Freddie Mac have facilitated the availability of residential mortgage financing  by purchasing home loans which they sell to investors as mortgage-backed securities. Since the onset of the Great Recession in 2008, Fannie and Freddie have been run by the federal government’s Federal Housing Finance Agency (FHFA).

The Republican Platform calls their operations a “corrupt business model” which lets their shareholders and executives “reap huge profits while the taxpayers cover all losses”.  It promises that a Republican Administration would reconsider the usefulness of Fannie and Freddie and clear away “the jumble of subsidies and controls that complicate and distort home-buying”.  And, the Platform declares that the Republican goal is to end government mandates that require Fannie Mae, Freddie Mac, and federally-insured banks to satisfy lending quotas to specific groups.

What happens to Fannie, Freddie and the future of housing finance is up to the new President and Congress.

Assessment Lien Priority.  In recent years, the FHFA has actively sought to invalidate state laws which give a foreclosure priority to the assessment liens of condominium and homeowner associations.  In court litigation and legislative advocacy, FHFA contends that state lien priority laws are pre-empted by federal banking law.  With Republicans often favoring state regulation over federal regulation, it is uncertain whether there will be a continued federal assault on state assessment lien laws.

Housing Harassment.  Just weeks before the presidential election, the United States Department of Housing and Urban Development adopted fair housing rules regarding “hostile environment harassment” which could make condominiums, housing co-ops and homeowner associations liable for the discriminatory conduct of community residents.  The new rules establish nationwide standards which HUD will apply in enforcing the federal Fair Housing Act with respect to alleged harassment based on race, color, religion, national origin, sex, familial status or disability.

Under the housing harassment rules, a community association could be in violation of the fair housing laws if its board of directors fails to take prompt action to correct and end a discriminatory housing practice by a community resident, where the board knew or should have known of the discriminatory conduct and has the power to correct it.

Whether the HUD leaders in the Trump Administration will follow this newly-minted policy, or seek to revise or reverse it, is unknown.

Jobs, immigration, and terrorism are the hot button issues which grab the headlines.  However, there are also many decisions to be made by the new President, housing agency officials, and Congress which will impact homeownership and community associations.  As the Trump Administration begins, the only certainty about the future of federal housing policies is….uncertainty!

Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations and housing cooperatives in Maryland–including Montgomery County, Prince George’s County, Howard County, Frederick County, and Baltimore County; and in Washington, D.C.