Legislation now pending in the Maryland General Assembly would double unit owner responsibility for the condominium’s insurance deductible when damage to components of the condominium originates from a unit. Under current law as established in Section 11-114 of the Maryland Condominium Act, the council of unit owners is required to maintain insurance “[f]or property and casualty losses to the common elements and units, exclusive of improvements and betterments installed in the units by the unit owners other than the developer.” An individual owner in whose unit the damage originates is responsible for the condominium’s insurance deductible up to a maximum of $5,000. Otherwise, the deductible remains a common expense. The result is that condominium master policies must cover property damage to all of the condominium structure, including both the common elements and units as originally constructed and finished by the developer, with the unit owners providing individual insurance for their improvements and personal contents. If damage originates in the unit, the owner is responsible for the insurance deductible up to a maximum of $5,000. Under House Bill 108 and Senate Bill 175, the $5,000 limit on unit owner responsibility would be raised to $10,000.
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.”
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.
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.