Pursuant to legislation passed in the closing hours of this year’s session of the Maryland General Assembly, four (4) months of unpaid assessments due to condominiums and homeowner associations, up to a maximum of $1,200, will now receive priority over mortgages, but only those recorded after October 1, 2011. As reported in my post of March 18, legislation was pending in the General Assembly that would afford some limited relief to condominiums in the case of unpaid assessments for units that become lender-owned as a result of foreclosure. House Bill 1246 passed both houses on Monday, April 11, 2011, and once signed by the Governor, will take effect on October 1, 2011. The new law amends Section 11-110 of the Condominium Act to provide that four (4) months of unpaid assessments shall receive a priority over a first mortgage or deed of trust in a foreclosure action. However, there are significant limitations attached to the provision. Only the principal amount of regular assessments are given a priority. It does not extend to interest, costs of collection, late charges, fines, attorney’s fees, special assessments, or other charges that are normally considered part of the delinquency under the Contract Lien Act. Additionally, the Legislature imposed a $1,200 cap on assessments receiving a priority. Moreover, the priority only applies against mortgages and deeds of trust recorded after October 1, 2011. Lenders holding liens are also entitled to request written information from the condominium concerning the unpaid assessments, and, if the information is not provided, the priority is voided.
The original bill proposed a priority for six months of assessments in accordance with the recommendation of the 2006 Maryland Task Force on Common Ownership Communities, but that provision was amended to four months. An amendment also added the $1,200 cap.
The new law also amends Section 11B-117 of the Homeowners Association Act to provide the same four month priority for unpaid assessments due to homeowner associations. The same limits applicable to condominium assessments apply; that is, assessments are capped at $1,200; only the principal amount of regular assessments receives a priority; the homeowners association must provide requested written information to the lender; and the priority is applicable to only mortgages and deeds of trust recorded after October 1, 2011.