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.
Individual Unit Owners
A bill introduced in the Maryland House of Delegates would increase the number of months of unpaid condominium assessments that have a priority over mortgages in the event of foreclosure. HB 250 would amend Section 11-110(f) of the Maryland Condominium Act to provide that six months of unpaid assessments for common expenses have a priority over a first mortgage or first deed of trust. The current law provides that four months of unpaid assessments have priority. The proposed law would also significantly expend the charges that can be included in the priority lien. Under the existing provisions, the priority portion of a condominium’s lien may not include (1) interest; (2) costs of collection; (3) late charges; (4) fines; (5) attorney’s fees; (6) special assessments; and (7) any other costs or sums due under the declaration or bylaws, or as provided by any contract, law or court order. HB 250 would entirely reverse this limitation, and provide that all seven of these items may be included in the portion of a condominium’s lien that has a priority.
The bill has been assigned to the Environmental and Transportation Committee, and will have its first hearing on February 12, 2019 at 1:00 pm.
Governor Larry Hogan has signed into law House Bill 575, which permits a condominium declaration to provide for the suspension of the use of parking or recreational facility common elements by a unit owner who is more that sixty (60) days in arrears in the payment of assessments. The new law, which takes effect on October 1, 2018, will add new Section 11-103(d) to the Maryland Condominium Act, requiring that, prior to any suspension of privileges, the council of unit owners must first send a demand letter giving the unit owner ten (10) days in which to pay the arrearage, or request a hearing to contest the suspension. If a hearing is requested, the council must provide notice and hold the hearing before a suspension of privileges may be implemented. The new law further provides that a condominium declaration may be amended to add or repeal such a provision for suspension of privileges by the affirmative vote of sixty percent (60%) of the unit owners. House Bill 575 was passed unanimously by both the House of Delegates and State Senate.
Maryland Governor Larry Hogan has approved a new law intended to prevent condominium developers from including provisions in the project’s governing documents and sales contracts that limit the ability of the unit owners to bring claims for construction defects. The provisions of Senate Bill 258 and House Bill 77 will now become law as of October 1, 2018. New Section 11-134.1 of the Maryland Condominium Act protects claims relating to the developer’s failure to comply with applicable building codes; approved plans and specifications; product manufacturer’s installation instructions; or the implied warranties provided under Maryland law. The new law prohibits a developer from including language in the condominium’s governing documents or in the purchase agreements that (1) shortens the applicable statute of limitations; (2) waives the application of the discovery rule or other means of determining the claim’s accrual date; (3) requires that the claim be submitted to arbitration within a period shorter than the applicable statute of limitations; or (4) operates to prevent the assertion of a claim within the applicable statute of limitations. The new law expressly only applies prospectively, and does not affect any governing documents recorded or contracts executed prior to October 1, 2018.
The House of Delegates of the Maryland General Assembly has passed legislation that authorizes a condominium declaration to provide for the suspension of the use of parking or recreational facility common elements by a unit owner that is more than 60 days in arrears in the payment of assessments. House Bill 575 would amend Section 11-103 of the Maryland Condominium Act by adding new subsection (d). The measure would require the condominium to provide the delinquent unit owner with 10 days notice, within which the unit owner may pay the delinquent assessment or request a hearing to contest the suspension. The proposed law also allows an amendment to a declaration to add such a suspension provision with the approval of only 60% of the unit owners, regardless of what super majority is otherwise called for in the governing documents. The bill is now under consideration in the Senate.
House Bill 179 filed in the Maryland General Assembly would reduce the percentage of votes required to amend a condominium declaration. Under current law, as provided in Section 11-103(c) of the Maryland Condominium Act, “80 percent of the unit owners listed on the current roster” must consent to an amendment of the declaration. The proposed bill would reduce the required percentage to 60 percent. Moreover, it would potentially have the effect of further reducing the number of affirmative votes needed by changing the voting pool from including “the unit owners listed on the current roster” to including only “unit owners in good standing.” “Good standing” is defined in the bill as “not being more than 90 days in arrears in the payment of any assessment or charge due to the condominium.” Accordingly, unit owners who do not qualify as being in “good standing” would be excluded from the pool of voters, of which 60 percent would be need to approve an amendment.
Both the Senate and House of Delegates are considering legislation that would preclude a condominium developer from including provisions in the community’s governing documents or the sales contracts that limit the ability of the council of unit owners or individual unit owners to bring claims against the developer for construction defects. Senate Bill 258 and House Bill 77 are similar to legislation that was introduced and passed in the House during the 2017 legislative session. The proposed new law would cover claims relating to the developer’s failure to comply with applicable building codes; approved plans and specifications; product manufacturer’s installation instructions; or the implied warranties provided under Maryland law. The legislation would prevent a developer from including language in the condominium’s governing documents or in the purchase agreements that (1) shortens the applicable statute of limitations; (2) waives the application of the discovery rule or other means of determining the claim’s accrual date; (3) requires that the claim be submitted to arbitration within a period shorter than the applicable statute of limitations; or (4) operates to prevent the assertion of a claim within the applicable statute of limitations. (more…)
The Maryland Court of Appeals has invalidated a rule adopted by a condominium to suspend access to common elements for unit owners who are delinquent in paying assessments. In an opinion issued on June 23, 2017 in the case of Elvation Towne Condominium Regime II, Inc. v. Rose, No. 33, Sept. 2016, the Court held that, in order to restrict access to the common elements as a means of enforcing payment of condominium assessments, such a restriction must be provided in the condominium’s declaration. It may not be adopted by rule promulgated by the board of directors. The ruling affirmed prior rulings in the case by the Circuit Court for Anne Arundel County and the Maryland Court of Special Appeals. (more…)
The Maryland Senate failed to vote on SB 670, which would prevent condominium developers from limiting the ability of the council of unit owners and individual unit owners to bring claims for building defect issues. The House of Delegates version of the bill was approved by a vote of 136-0, but the Senate version did not make to the floor for a vote. The legislation was intended to prevent condominium developers from limiting the ability of a council of unit owners and individual unit owners to bring claims for building issues. The proposed law would prevent developers from including certain provisions in condominium governing documents or contracts of sale that act as an impediment to claims alleging the failure of the developer to comply with (1) applicable building codes; (2) plans and specifications for the project approved by the local governing authority; (3) manufacturer’s installation instructions for building products used the condominium; and (4) warranty provisions under Sections 10-203 and 11-131 of the Real Property Article. Under the bill passed by the House, a developer would be precluded from including provisions that: (a) shorten the statute of limitations for filing claims; (b) waive application of the “discovery rule” for purposes of determining when a claim accrued; (c) require the council or a unit owner in an arbitration proceeding to assert a claim within a period shorter than the applicable statute of limitations; or (d) operate to prevent a council or unit owner from filing a law suit, initiating arbitration proceedings, or otherwise asserting a claim within the applicable statute of limitations.
The Maryland Senate Judicial Proceedings Committee has issued a favorable report on legislation, which has already been passed by the House of Delegates, that would reduce the number votes required to amend condominium bylaws. Under Section 11-104(e) of the Maryland Condominium Act, condominium bylaws may only be amended upon a vote of two-thirds (66 2/3 percent) of the unit owners. Approved House Bill 789 would reduce this to 55 percent. Significantly, it would also permit the bylaws themselves to establish a percentage as low as 51%. Additionally, the bill would 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 original version of the bill would have also allowed voting to be denied to any member in violation of a provision of the declaration, bylaws or rules and regulations, but this provision was removed in the final version that was approved.
The proposed legislation contains similar provisions to reduce the percentage vote required for bylaw amendments under Section 11B-116 of the Maryland Homeowners Association Act.