2010 LEGISLATIVE UPDATE FOR COMMUNITY ASSOCIATIONS
Following the 2010 session of the General Assembly, Governor Martin O’Malley signed into law several bills enacted by the legislature that will affect condominiums and homeowners associations. These laws become effective on October 1, 2010. Condominium and homeowners association’s boards of directors should take note of these new laws and determine whether any further action on their part is required in order for their associations to obtain the benefit of the changes. In that regard, should you have any questions, please contact us, and we would be happy to assist you.
Installation and Use of Clotheslines.
This law does not apply to a condominium that contains more than four (4) dwelling units.
The Legislature has overridden all provisions contained within a Declaration, Bylaw, or Rules & Regulation that would absolutely prohibit the installation, maintenance or use of clotheslines. However, the law does permit a community association that is subject to the new statute to enact provisions that impose reasonable restrictions upon the dimension, placement, or appearance of clotheslines where those provisions are put into place to protect the aesthetic value of the community or to protect persons or property in the event of fire or other emergencies.
If a board of directors decides to impose reasonable restrictions on the installation, maintenance and use of clotheslines, it may only do so pursuant to an open meeting, advance notice of which must be provided.
Property Management Registration
This law is only applicable to firms providing management services to community associations located in Prince George’s County.
By January 1, 2011, the Prince George’s County Office of Community Relations must create a registry of all companies that provide certain management services for condominiums, homeowners associations, and cooperative housing corporations. Management companies must register/renew with the County by January 31st of each year. The County will provide the registration form, and there is a $100.00 fee to register or renew.
Annual Proposed Budget
This law only applies to homeowners associations, because a mirror provision already appears in the Maryland Condominium Act.
The law requires boards of directors to prepare and submit an annual proposed budget to all lot owners 30 days before the budget is adopted, whether by the board or the owners, as provided in the governing documents. The proposed budget must include the association’s income, and contain line items for administrative costs, maintenance costs, utilities, general expenses, reserves, and capital expenses. The budget must be adopted at an open meeting. The proposed budget and notice of the open meeting to discuss the budget may be sent to each lot owner by electronic transmission, posting the notice on the home page of the association’s website, or newsletter.
The new law also requires that any expenditure that would result in an increase in the amount of the owners’ annual assessments for the current fiscal year by more than 15% of the budgeted amount previously adopted must be approved by an amendment to the budget adopted at a special meeting However, if the expenditure in question is/was required because of a condition that, if not corrected, could reasonably result in a threat to the health or safety of the lot owners or a significant risk of damage to the development, no amendment to the budget is required, irrespective of the amount. If an amendment to the budget is required, necessitating a special meeting of the board or the owners, as the case may be, the lot owners must receive at least 10 days’ written notice of that special meeting.
Fidelity Insurance
In 2009, the legislature enacted a law requiring all community associations to maintain fidelity insurance covering the community in the event of a loss resulting from fraud, dishonesty, or criminal acts by a director, officer, managing agent, other agent, or employee who disburses funds on behalf of the community association. This year the legislature amended that law to allow community associations to satisfy the requirement to purchase fidelity insurance by purchasing a fidelity bond instead, a less expensive alternative for acquiring such protection.
The law was also amended to exempt certain community associations from the requirement of purchasing fidelity insurance if the association contains four or fewer units/lots and three months’ of its gross assessments totals less than $2,500.00.
Notice Prior to Cancellation of Insurance
This law is only applicable to condominiums.
The Legislature increased from 30 days to 45 days the amount of notice that an insurer is required to provide to a condominium before its property and casualty insurance may be canceled.
Description of Common Elements
This law is only applicable to condominium declarations, bylaws and plats recorded after October 1, 2010.
The law requires the description of the common elements to include roofs, foundations, external and supporting walls, mechanical, electrical, and plumbing systems, and other structural elements if the improvements are shared by or serve more than one unit or serve any portion of the common elements. Additionally, the law prohibits the condominium from amending the description and designation of the common elements until after the unit owners, other than the developer, first elect a controlling majority of the members of the board of directors.
Implied Warranties
Comparable versions of these changes appear in both the Condominium and Homeowners Association Acts.
For condominiums, the warranty on any common elements not completed as of the first transfer of title to a unit owner shall commence when that common element is completed or upon its availability for use by all unit owners, whichever occurs first. Additionally, the law extends the warranty period to three (3) years from its commencement date or two (2) years from the date upon which the unit owners, other than the developer and its affiliates, first elect a controlling majority of the members of the board of directors, whichever occurs first.
Essentially the same laws are applicable to homeowners associations, with the distinction being that the warranty on improvements to common areas not completed as of the first transfer of title to a lot begins with the completion of the improvement or with its availability for use by lot owners, whichever occurs later. Moreover, the warranty period was extended to two (2) years from its commencement date or two (2) years from the date upon which the lot owners, other than the declarant and its affiliates, first elect a controlling majority of the members of the board of directors, whichever occurs first.
Restriction on Cell Phone Use While Driving
This law is generally applicable to all drivers and is being included in our Community Association Legislative Update as a public service.
The law requires all Maryland drivers to use a hands free device when talking on a cell phone while operating a motor vehicle.
The law may only be enforced as a secondary offense, meaning that a driver must first be committing a primary offense such as speeding, reckless driving, etc. before they could be ticketed for a cell phone offense.
The fine for a first offense is $40 and $100 for subsequent offenses.
We trust that this summary has been helpful and informative. If you have any questions about the new laws outlined above, please do not hesitate to contact us.