Maryland Condo and HOA Legislative Hot Topics for 2016

With the Maryland legislature in the midst of its 2016 session which runs to mid-April, several bills which would affect condomium and homeowner association operations are now being considered by House and Senate legislative committees of the Maryland General Assembly.

Resale Disclosures

Legislation concerning resale disclosures would cap the amount which an association or it management company could charge an owner for providing the governing documents and other information  in connection the sale of the owner’s home. As introduced, the bill would limit the basic charge to $250 and allow additional charges of $100 to inspect the property for covenant violations and up to $100 for providing an expedited response to a request for resale disclosures.

Condo associations have long  been required to provide resale disclosure information.   If enacted, the bill would create a new obligation for a homeowners association to provide resale disclosure information to an owner who is selling a home in an HOA.

Condominium Construction Warranty

Also under review is legislation to amend the Maryland Condominium Act to prevent developers of residential condominiums from including provisions in sales contracts and condo governing documents which limit the ability of condominium associations to file suit to enforce construction warranties for the condominium common elements.

Among the provisions which the warranty bill would prohibit are those which purport to shorten the statute of limitations applicable to any legal claims; waive the “discovery rule” or other accrual date applicable to claims; and prevent a condo association from bringing claims on behalf of two or more unit owners.  It would also disallow developer-imposed requirements that as condo association obtain the approval of unit owners, the developer or others as a condition to commencing mediation, arbitration or litigation on behalf of the condo association.

Annual State Registration

Legislation has also been introduced which would require annual state registration of all condos, HOAs and coops and require associations to  provide contact information for the association board members and any management company and attorney.employed by the association.  It would also require information regarding the number and type of residential units,  fidelity insurance, replacement reserves, grievance procedures and any other information required by the Maryland Department of Assessments and Taxation.

Amendment of Governing Documents

A bill to make it easier to  amend the declaration, bylaws and other governing documents of condos and HOAs has also been introduced.  It would allow an amendment by a vote of owners in “good standing” which includes only owners who are not more than  3 months in arrears in payment of association assessments and have satisfied other requirements of the bylaws.  An amendment could be passed by  two-thirds of the total votes of owners in good standing, or by a lower percentage if required in the governing document. The legislation would also allow an owner’s failure to vote to be counted as that owner’s approval of the proposed amendment.

As of mid-February 2016, these bills are under review by House and Senate legislative committees and have not been enacted..

Posted byThomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations, and housing cooperatives in Maryland and Washington, D.C.

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Condo Insurance Claims Soar as Temperatures Plummet

by Tom Schild

As arctic temperatures blanket Maryland and much of the eastern United States, frozen pipe breaks are causing havoc for homeowners.

Typically, the cost of repairing a burst pipe is not covered by property insurance but repair costs for the related water damage to the building is covered.  For condominium owners, there are special challenges in sorting out whether the condo association–or the individual unit owner–pays to repair damage to walls, floors, carpet and other portions of the building.

In Maryland, the Condominium Act requires the condo association to have property insurance for both the common elements and the individual units. Repair costs in excess of the insurance deductible amount will be paid for by the insurance company.

However, who pays the first $5,000 of repair costs depends on whether the broken pipe is a common element or part of the unit.  Under Section 11-114 of  Maryland Condominium Act, the entire insurance deductible amount is paid for by the condo association if the cause of the damage originates in a common element pipe.  But, if the frozen pipe is a unit pipe, the owner of the unit where the cause of the damage occurs must pay up to $5,000 of the repair cost not paid by the insurance company.

The individual unit owner is also responsible for the cost of repairing or replacing any upgrades or additions to the unit–commonly referred to as “betterments and improvements”  in insurance jargon–beyond what was in the unit as originally constructed.

To cover up to $5,000 of the condo association insurance deductible and the cost to repair or replace betterments and improvements, unit owners can obtain their own individual unit insurance known as an HO-6 policy.  This insurance also covers damage to an owner’s furniture and other personal property.   The deductible amount to be paid by the unit owner in individual insurance policies can be as little as $250.

Yet, many condo owners do not have individual HO-6 coverage and are not able to pay the first $5,000 to repair their unit, other units and the common elements when the broken pipe is part of the unit.  This can leave other unit owners or the condo association to make repairs and then seek reimbursement from the owner of the unit where the cause of the damage originated.

To avoid surprises and disputes over payment of the first $5,000 of repair costs, each condominium association is required by the Condo Act to provide annual written notice of the amount of the deductible in the condominium master insurance policy and the unit owner’s responsibility for the property insurance deductible.  Additionally, the condo bylaws can require each unit owner to maintain an individual condominium unit insurance policy.  Existing bylaws can be amended to require unit owner insurance with approval of 51 percent of the unit owners.

Water damage can occur year round.  But, the arctic temperatures of the winter of 2015 will gladly soon be a blast from the past.

POSTED BY: Thomas Schild Law Group, LLC