Governor Hogan has signed into law legislation adopted by the General Assembly during 2019 session that deals with the voting rights of developers in homeowner associations where not all lots have been sold. Senate Bill 305, which was passed unanimously by both Houses and signed by the Governor on April 30, 2019, amends Section 11B-111.7 of the Maryland Homeowners Association Act, and addresses the votes to which a developer is entitled with respect to whether lots have been subdivided and recorded. Of course, any lot that has been sold must have first been subdivided and recorded. The issue has been the developer’s votes on unsold lots that have not been subdivided and recorded. Under current law, which will be changed when the new law takes effect on October 1, 2019, until all of the lots have been subdivided and recorded, a developer is entitled to the number of votes equal to the number of unsold lots that have been subdivided and recorded but remain unsold. There is no vote for lots that have not yet been subdivided and recorded. The new law provides that, once all of the lots have been subdivided and recorded, the developer is entitled to one vote per lot that remains unsold. But, until all of the lots have been subdivided and recorded, the developer’s votes are to be as provided in the governing documents; i.e., the governing documents control until every lot has been subdivided and recorded. So developers will have control of determining the number of votes to which they are entitled by addressing the issue when the governing documents are prepared. Arguably, however, if the governing documents are silent on the issue, the developer gets no votes on unsold lots until each and every lot is subdivided and recorded.
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.
Legislation pending in the Maryland House of Delegates seeks to supplement a prior revision that applied the percentage required for approval of amendments of condominium bylaws to only the number of unit owners “in good standing” — meaning unit owners not more than 90 days in arrears in payment of assessments of other charges. — rather than to the total number of owners. A change to the Section 11-104 of the Maryland Condominium Act adopted during 2017 provides that, notwithstanding what the bylaws themselves require, the bylaws may be amended by the affirmative vote of 60% of the unit owners in good standing, “or a lower percentage if required by the bylaws.” This had the effect of reducing the number of votes required to the extent that some unit owners were not “in good standing.” House Bill 207 would go further and provide that any lower percentage contained in the bylaws would also be applied only to “unit owners in good standing.” In other words, if the bylaws call for a percentage lower than 60%, that lower percentage requirement would also be determined only by the number of “unit owners in good standing” and not to the entire number of owners. The bill also would affect homeowners associations by making the same amendment Section 11B-116 of the Maryland Homeowners Association Act.
House Bill 564 in the Maryland General Assembly would require a developer, upon the conveyance of 25% of the units or lots, to appoint at least one board member to the association’s governing body who is a unit owner or lot owner, and not affiliated with the developer. The bill would also require the association’s governing body to meet at least two times each year, and would require the developer to provide the members of the board with certain information relating to any bond provided to a governmental authority in connection with the project. The legislation would also require that the books and records of the association be kept separate and apart from those of the developer.
The United States District Court for the District of Maryland has denied a motion to dismiss filed on behalf of a developer, and allowed claims of a property owner’s association to proceed that concern actions taken while the board was under the control of the developer’s agents. In Greenspring Quarry Association, Inc. v. Beazer Homes Corp., Civil No. JKB-17-646, the association’s suit relates to charges for common area maintenance costs. The assoication alleged that the developer was to be responsible for such charges until title transferred to the association, and claimed that, during the period that the developer controlled the board, the management company had been instructed to bill the association for common area maintenance for several years before title was transferred. The court denied the developer’s motion to dismiss all claims, finding that there were sufficient allegations of an independent duty of care and reasonable reliance on the representations made, and that the claims were stated with sufficient particularity. Notably, the court found that the developer’s agents on the board assumed fiduciary duties to the association when they occupied the board seats.
Maryland Governor, Larry Hogan, has signed into law legislation passed in the General Assembly that requires a condominium council of unit owners or a homeowners association to provide at least 30-days notice to all owners of any sale, including a tax sale, of a common element in the condominium or common area in the HOA. What had been Senate Bill 809 and House Bill 1369 in the 2017 session will add new Subsection 11-108(d) to the Maryland Condominium Act, and new Section 11B-106.2 to the Maryland Homeowner Association Act. The notice required to be given must include written notice to every homeowner; posting of a sign on the property; and, if the association has a website, a notice on the home page.
Beginning in October, Maryland homeowner associations will have the right to collect a fee relating to inspections during the resale process. What had been House Bill 34 in the 2017 session of the General Assembly, and has now been enacted, entitles an HOA to charge “a reasonable fee not to exceed $50 for an inspection of the lot if required.” Under Section 11B-106 of the Maryland Homeowner Association Act, sellers are required to provide certain information to prospective purchasers, much of which is often provided by the Association. Under the statute, the Association can charge “a reasonable fee” for providing this information up to certain limits provided in the statute. The new law adds an additional fee charge for costs relating to an inspection of the property as part of the resale process.
Maryland Governor, Larry Hogan, has signed into law a bill which will reduce the number votes required to amend condominium and homeowner association bylaws. What originated as House Bill 789, (now Chapter 480 of the 2017 legislative session), provides for a reduction in the required percentage vote for an amendment of the bylaws from two-thirds to 60 percent. The original version of the bill passed by the House of Delegates called for a reduction to 55%, but that was ultimately amended in the final version that was passed in both houses of the General Assembly. Additionally, the bill authorizes adopted bylaws to provide for a percentage lower than 60%. The new law will also limit the voting to members in “good standing, ” which is defined as not being more than 90 days in arrears with regard to assessment payments.
The new provisions will take effect on October 1, 2017.
Both houses of the Maryland General Assembly have passed an amended version of legislation that would reduce the number votes required to amend condominium bylaws. As amended, what originated as House Bill 789 would reduce the required percentage vote for an amendment of the bylaws from two-thirds to 60 percent. The original version of the bill called for a reduction to 55%, but that was ultimately rejected in the final version. However, the bill authorizes the bylaws themselves to provide for a percentage lower than 60%. The law would also limit the voting to members in “good standing, ” which is defined as not being more than 90 days in arrears with regard to assessment payments.
The approved legislation contains similar provisions to reduce the percentage vote required for bylaw amendments under the Maryland Homeowners Association Act.
The Maryland House of Delegates has passed an amended version of a bill previously approved in the State Senate that would require a condominium council of unit owners to provide at least 30-days notice to all unit owners of any sale, including a tax sale, of a common element. The bill would add new Subsection 11-108(d) to the Maryland Condominium Act. Additionally it would add new Subsection 14-804(e) to the Tax Article to provide that a council of unit owners must give notice to the unit owners when a tax lien has been imposed on a common element.
The proposed law would create a similar notice requirement for homeowner associations with respect to a sale of any common area in the community by adding new Section 11B-106.2 to the Maryland Homeowner Association Act.