A reserve study to determine the funding needed for future major repairs and replacement of common property in condominiums, homeowner associations and housing cooperatives in Prince George’s County, Maryland will now be required by a new Maryland law, effective October 1, 2020.
The replacement reserve study must be prepared by a qualified professional and identify each structural, mechanical, electrical and plumbing component of the common property and any other components that are the responsibility of the condo, HOA or coop to repair and replace. It must also state the normal useful life and estimated remaining useful life of each component; state the estimated cost of repair or replacement; and state the estimated annual reserve amount necessary to accomplish any future repair or replacement.
The new law also requires the annual budget of a condominium, HOA and coop to include reserves equal to the funding amount recommended in the the most recent reserve study. In turn, the annual assessment paid by each owner will include funds for the replacement reserves with the goal of accumulating sufficient funds to pay for future major repairs and replacement of the association common property.
For new communities established after October 1, 2020, a reserve study must be prepared before the community is turned over to the homeowners and the developer must provide accumulated reserve funds to the association. For existing communities, a reserve study must be completed by October 1, 2021, unless a reserve study had been conducted in the past 5 years in which case a new reserve study must be completed within 5 years from the prior study. A new reserve study must be completed at least every 5 years thereafter.
Each reserve study for community associations in Prince George’s County, Maryland must be reviewed by the board of directors in connection with preparing the annual budget; be summarized for submission with the annual proposed budget provided to homeowners; and be available for inspection and copying by any homeowner.
To facilitate funding for future repairs and replacement of common property, the new Maryland law provides that the board has the authority to increase an assessment to cover the reserve funding amount recommended by the reserve study, even if there are provisions in the association articles of incorporation, declaration, bylaws of coop lease which restrict assessment increases or cap the assessment that may levied in a fiscal year.
Similar legislation which would apply statewide to all condos, coops and HOAs in Maryland was considered but not enacted in 2020.
Posted by Thomas Schild Law Group, LLC, attorneys for condominiums, homeowner associations, and housing coops throughout Maryland (including Montgomery County, Prince George’s County, Howard County and Frederick County) and the District of Columbia.