Maryland Condominium Repair Reserve Fund Law Enacted for Montgomery and Prince George’s Counties

The sudden collapse of the 12-story Champlain Tower South Condominium in Surfside, Florida has focused attention on the need for all condominiums to determine and fund the long-term needs for repair and replacement of structural common components such as roofs, foundations, and walls, as well as the common plumbing, electrical and mechanical systems.

A prudent condo board should periodically obtain information regarding the estimated remaining life of each common property component and the estimated cost for future repair and replacement. Known as a “reserve study”, this evaluation should be performed by an independent construction professional. Based on the future estimated repair costs, the board should accumulate “reserve funds” as part of the annual owner assessment to pay for repairs when needed.

Recent changes in Maryland law now require all condos, housing cooperatives and homeowner associations in Montgomery County and Prince George’s County to obtain a reserve study every 5 years and to include funds for recommended repairs in the annual association budget. Prince George’s County and Montgomery County, bordering Washington D.C., are the 2 most populous Maryland counties with nearly 2 million total residents.

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Maryland General Assembly Wraps Up Virtual 2021 Legislative Session

By Scott Silverman, Esq.

Maryland’s General Assembly recently concluded its 2021 legislative session which was mostly held by virtual video teleconference due to COVID-19 pandemic concerns. Several new laws regarding community association governance were enacted, and take effect October 1, 2021.

Common Property Replacement and Repairs. Reserve studies were again a top issue regarding condominiums, homeowner associations, and housing cooperatives.   In 2020, a new law was enacted to require condos, coops and HOAs in Prince George’s County, Maryland to obtain a study of the association needs for future major replacement and repair of common property, and require the annual budget of condos and coops to provide funds for future repair work. Although statewide reserve legislation was considered in 2020 and 2021, it was not passed.

But, HB 567, a bill like the one applicable to Prince George’s County associations, was passed this year with respect to associations in Montgomery County, Maryland.  Under the new law, condominiums, cooperatives and homeowner associations in Montgomery County will be required to obtain reserve studies and to have them updated at least every five years. And, condominium, HOA, and housing cooperative boards must include reserve funds in the annual budget for future major replacement and repair of common property.

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Fair Housing Is A Top Priority for Biden Administration

President Joe Biden has directed the United States Department of Housing and Urban Development (HUD) to re-examine the the 2020 Trump-era rule which limited the role of the federal government in encouraging local government to affirmatively further the goals of the Fair Housing Act to prevent housing discrimination. Also, under review is the 2020 HUD rule regarding implementation of the “disparate impact” standard of the Fair Housing Act.

Although the Fair Housing Act does not specifically mention the housing practices, policies and services of condominiums, homeowners associations, and housing cooperatives, the courts and HUD have long- recognized that the Fair Housing Act applies to prohibit discrimination with respect to owners and residents of such communities. The federal fair housing law prohibits discrimination based on race, color, national origin, religion, sex, disability, and familial status. Community association boards are also required to affirmatively take action to prevent harassment and a hostile housing environment caused by the conduct of owners, residents and managers.

In a memorandum issued on January 26, 2021, President Biden explained that the housing policies and practices of the federal government during much of the 20th century “systematically supported discrimination and exclusion in housing and mortgage lending”.

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2021 Maryland Condo and HOA Legislation Introduced

The 2021 Maryland legislative session is now underway and runs until mid-April. Although the top priority for the Maryland General Assembly is Covid-19 relief funding, several bills affecting governance of condominiums, homeowner associations and housing cooperatives have been introduced and are under consideration by Maryland House and Senate legislative committees.

Replacement Reserve Funding. Legislation proposes to require all Maryland condos, HOAs and co-ops to conduct a study of the reserves necessary for major repair and replacement of common property components. The developer would be required to have the initial reserve study prepared and contribute to the reserve fund. The board would then be required to have a reserve study done every 5 years and would be required to fund the recommended amount of reserves. (House Bill 313).

A separate bill to require a reserve study and funding the recommended reserve amount only in Montgomery County was also introduced (House Bill 567). A similar reserve study and funding requirement applicable only in Prince George’s County was enacted in 2020.

Board Member Training. Legislation would require all board members to complete a training course on the responsibilities of being a board member or officer of a Maryland condominium, HOA or housing cooperative within 90 days of first being elected or appointed. A similar training requirement currently applies in Montgomery County. (House Bill 361)

Regulation of Community Association Managers. A proposal requiring community association mangers to be licensed by a Maryland State Board of Common Ownership Community Managers is again under consideration. Requirements for obtaining a community association manager license are based on training, community association management work experience, and knowledge of state laws and regulations concerning common ownership communities. Similar legislation has been introduced for the past several years.

The manager licensing legislation also requires each community association to register annually with the State of Maryland. (House Bill 367)

Electric Vehicle Re-charging Equipment. Covenants and other restrictions of a condominium or homeowners association which prohibit, or unreasonably restrict, the installation or use of electric vehicle recharging equipment in a parking space owned by, or designated for exclusive use by, a homeowner would be void and enforceable under proposed legislation. Additionally, an association board would have to approve a homeowner’s request to install electric vehicle re-charging equipment in the parking space if the owner agreed to comply with specified safety and use conditions. Similar legislation has been considered for the past several years. (House Bill 116/Senate Bill 144)

These bills and other related information can be found on the website of the Maryland General Assembly. To be enacted, proposed legislation must be passed by the Maryland House of Delegates and Maryland Senate, and be approved by the Governor.

Posted by Thomas Schild Law Group, LLC which represents condominiums, homeowner associations, and housing cooperatives throughout Maryland (including Montgomery County, Prince George’s County, Howard County, Frederick County, and Baltimore) and Washington, D.C.

Maryland Condominium Board Action Voided by Improper Meeting Notice

A Maryland condominium board of directors’ approval of a $1.2 million contract to update the fire alarm system was invalid where the board did not provide proper advance notice to unit owners, according to a recent decision of the Maryland Court of Special Appeals.

Although neither the condominium bylaws nor the Maryland Condominium Act expressly required notice of a special board meeting be given to unit owners, the appeals court ruled that it is implicit in the open meeting requirements of the Condominium Act that owners be provided with the same notice which the bylaws require to be provided to the directors.

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Replacement Reserve Funding Required for Condos and HOAs in Prince George’s County, Maryland

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.

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