Proposed Bill Would Prohibit Limitations On Disclosures Of Agreements To Unit Owners

Legislation now pending in the Maryland  House of Delegates would prohibit condominium boards from withholding legal agreements from unit owners, and would prevent developers from including provisions in the governing documents, sales contracts, or  settlement documents that bar disclosure to unit owners of settlement terms.  House Bill 30 would add new Subsection (c) to Section 11-109.1 of the Maryland Condominium Act, which addresses the requirements for closed door meetings of the board of directors, providing that “[n]othing in this section may be interpreted to, authorize the board to withhold or agree to withhold from the unit owners information about any legal agreement to which the board is a party.”  Additionally, the proposed law would amend Section 11-134.1 to provide that any provision in (1) the declaration, (2) the bylaws, (3) a contract for an initial sale from the developer, or(4) an agreement to settle a disputed claim, is unenforceable if it “[p]rohibits the disclosure to the unit owners of any term of an agreement to settle a disputed claim.”

Proposed House Bill Would Clarify Procedures for Mortgage Holder Approval of Amendments

Legislation being introduced in the 2020 session of the Maryland General Assembly would require holders a mortgage or deed of trust on a condominium unit to provide a written objection in writing to a proposed amendment to the declaration within 60 days of receiving notice, or be deemed to have consented to the amendment.  HB 25 pending in the House of Delegates is intended to address an uncertainty arising from provisions in condominium declarations requiring that mortgagees and holders of deeds of trust approve amendments.  A question has often arisen as to what happens if a mortgage holder receives notice of a proposed amendment, but does not respond.  HB 25 would amend Section 11-103(c) of the Maryland Condominium Act, and establish a 60-day period for holders of mortgages or deeds of trust to respond after receipt of the proposed amendment, or be deemed to have consented.  However, the proposed change does carve out three specific exceptions to the 60-day rule for any amendment that would (1) alter the priority of the lien; (2) materially impair or affect the unit as collateral; or (3) materially impair or affect the right of the holder of the mortgage or deed of trust to exercise any rights under the mortgage, deed of trust, or applicable law.  Amendments falling into those categories would still require actual approval by the mortgagee or deed of trust holder.  It is also noteworthy that the proposed legislation is limited to proposed amendments of the declaration, and does not address provisions requiring that holders of mortgages or deeds of trust approve amendments to the by-laws.

Maryland General Assembly Considers Two Bills That Would Expand a Condominium’s Priority Lien

Senate Bill 374 and House Bill 250, pending in the Maryland General Assembly, would expand the portion of a condominium’s lien that has a priority over a first mortgage or first deed of trust.  Under the current provisions of Section 11-110 of the Maryland Condominium Act,  a portion of a condominium’s lien for delinquent assessments has a priority consisting of four months of assessments limited to a maximum of $1,200.  Additionally, it is limited to regular assessments only, and my not include (1) interest; (2) costs of collection; (3) late charges; (4) fines; (5) attorney’s fees; (6) special assessments; or (7) “any other costs or sums due under the declaration or bylaws of the condominium or as provided under any contract, law or court order.”  The proposed law would expand the priority to six months of assessments, eliminate the maximum limitation, and allow inclusion of the list of seven items that are now expressly precluded.

Maryland House of Delegates Passes Bill To Raise Condo Unit Owner Responsibility for Insurance Deductible

By a vote of 139 – 0, the Maryland House of Delegates has passed legislation that would make condominium unit owners responsible for a larger amount of the insurance deductible when the condominium’s policy pays for damage from an issue that originates in the owner’s unit.  Under Section 11-114, a condominium must maintain property insurance on the entire property, including the common elements and the units, except for improvements and betterments installed in the units by the owners. Where damage originates from a component of a unit, the liability of the unit owner is limited to the insurance deductible under the condominium’s policy up to a maximum of $5,000.  HB 249 would double the unit owner responsibility to $10,000.  The bill also adds clarifying language with regard to damage that is a common expense.  The current law provides that any damage originating from the common elements is a common expense.  HB 249 provides that this also would include damage originating from “an event outside of the condominium units and the common elements.”  The bill now moves onto the Senate Judiciary Committee.

Maryland General Assembly Considers Two Bills That Expand the Condominium Common Element Implied Warranty

House Bill 069 and Senate Bill 379, now pending in the Maryland General Assembly, would apply the condominium implied warranty from a developer to all common elements, and not just those enumerated in the statute, along with any component that the council of unit owners is required to maintain, repair or replace, regardless of whether it is defined as a common element in the governing documents.  Under the current provisions of Section 11-131(d) of the Maryland Condominium Act, there is an implied warranty from a condominium developer to a council of unit owners, which applies to “the roof, foundation, external and supporting walls, mechanical, electrical, and plumbing systems, and other structural elements.”  The proposed law would establish that the implied warranty applies “to all common elements, including” those listed in the current law.  Additionally, the bills propose that the implied warranty is applicable “to any portion of the condominium that the council of unit owners is required to maintain, repair, or replace under the [governing documents] regardless of whether the portion of the condominium is designated as a unit or a common element.” (more…)

Bills In the Maryland General Assembly Would Preclude Limits On the Power of Condo Councils To Engage In Litigation and Enforce Warranties

House Bill 68 and Senate Bill 379, now pending in the Maryland General Assembly, would prohibit condominium developers from including language in the governing documents that would limit the power of a council of unit owners to bring suit.  Section 11-109(d)(4) of the Maryland Condominium Act presently gives a council of unit owners authority “[t]o sue and be sued, complain and defend, or intervene in litigation or administrative proceedings in its own name on behalf of itself or two or more unit owners on matters affecting the condominium.”  The proposed legislation would confirm this authority “notwithstanding any provision in the declaration, bylaws, ,or other instrument made by a developer in accordance with this title.”  The pending bills would, however, permit the developer to include a requirement for mediation or arbitration of any claims brought by the council against the developer. Similarly with regard to the authority of a council of unit owners under Section 11-109(d)(19) to enforce the Section 11-131 implied warranties, the proposed legislation would preclude limits on this power, while permitting the governing documents to provide for mediation or arbitration of such warranty claims.