2020 Vision: Maryland Condominium Legislative Update

Condominium insurance, replacement reserves and dispute resolution procedures were among the condominium and homeowners association topics which were considered during the 2019 Maryland legislative session.  However, virtually no new laws affecting community governance were enacted this year.

Looking ahead to 2020, legislation concerning insurance, reserves and dispute resolution is likely to introduced again.

Condominium Insurance Deductibles

Where damage to condominium units and common elements is caused by fire, water or other perils covered by the master property damage insurance, the Maryland Condominium Act requires a unit owner to pay up to the first $5,000 of repair expenses when the cause of the damage originates in that owner’s condominium unit.  While some condos choose a higher deductible, others can only obtain insurance with a deductible of $10,000 or more.  This leaves the condominium association responsible for repair expenses between $5,000 and the amount covered by insurance.

To shift more responsibility to the unit owner where the cause of damage originates in the unit, legislation was proposed in 2019 to allow the bylaws of a condominium to require a unit owner to pay the full deductible amount up to $25,000 (House Bill 249). As passed unanimously by the House of Delegates, this proposal was modified to allow a $10,000 deductible amount payable by an owner, whether or not the bylaws address the amount of the insurance deductible.  The Senate did not act on this bill.

Since the bill passed the House this year, the focus in 2020 will likely be getting Senate approval.

Replacement Reserves

As communities age, many associations have not saved enough to make major repairs or replacement of the building structure and other common property.  All too often, the board of directors has not taken the first step of determining the remaining useful life of  each common property component and determining the estimated future cost of repair and replacement.

Legislation was introduced in 2019 to require condominiums, co-ops and homeowner associations to conduct a study of the reserves necessary for major repairs and replacement of the structural, mechanical, electrical and plumbing components of the common property (HB 900).  The developer would be required to have the initial reserve study prepared and contribute to the reserve fund.

The board of directors then would be required to have a reserve study prepared every 5 years and fund at least 80 percent of the recommended amount of reserves.

Although no action was taken on the replacement reserve legislation this year, a reserve bill is likely to be re-introduced in 2020 to aid associations in planning for future repair and replacement expenses.

Other Governance Legislation

For nearly 40 years, the Maryland Condominium Act has required condo boards to provide owners notice and a hearing regarding alleged violations of the condo rules before a fine can be imposed on the owner.  Legislation to streamline the condo hearing process and extend the dispute resolution procedures to homeowners associations was passed  by the House but not acted on by the Senate (House Bill 392).

Also passing the House but not considered by the Senate in 2019 were bills to clarify the required vote for amending condo bylaws (House Bill 207); extending the condo bylaw amendment procedure regarding lender notice and presumed approval to amendments to the condo declaration and HOA governing documents (House Bill 825); clarifying the procedure for holding a second owners’ meeting when a quorum is not present for the annual meeting (House Bill 1037); and regulating the installation of electric vehicle charging stations in an owner’s designated parking space (House Bill 826).  These bills may get a second look in the 2020 legislative session of the Maryland General Assembly.

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, and Baltimore County; and in Baltimore City and Washington, D.C.

 

 

 

 

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