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New laws were enacted in 2008 regarding assessment liens, condominium insurance, and foreclosure procedures.
Maryland Governor Martin O'Malley signs a new law regarding assessment liens as Thomas C. Schild and others look on, April 24, 2008.
The CAI Maryland Legislative Committee represents the interests of CAI members before the Maryland General Assembly.
Tom Schild, right, and other members of the Maryland Legislative Committee of the Community Associations Institute (CAI), accepted the award for Legislative Committee of 2006 at the CAI National Conference in April 2007.
Close to Home -- and Out of Court
July 1, 2005
Thomas C. Schild represents homeowners associations in Montgomery County, where alternative dispute resolution system is in place. The biggest areas of contention are the 'the three P's -- pets, people and parking.' Schild says. He adds that the worst thing an association can do is end up in court.
Replacement Reserves. The Task Force recommended that the board of directors of a common ownership community be required to conduct a reserve study at least once every five years to determine the amount and necessity of reserves for anticipated capital replacements, repairs, and improvements. The reserve study should be reviewed annually to determine the amount of reserves to be included in the budget for such replacements to maintain adequate reserves for such replacements.
Manager Licensing. With regard to common ownership communities which hire outside management companies, the Task Force recommended that the management companies be licensed by the State of Maryland and should be required to post a bond in order to obtain a license. The bond is intended to protect common ownership communities by providing recourse in the event of financial losses caused by the management company.
Insurance Deductibles. With regard to condominium insurance deductibles, the Task Force noted that existing law allows up to $1,000 of the condominium insurance deductible for property damage losses to be shifted to the unit owner under certain circumstances. The Task Force recommended that the current $1,000 cap on the property insurance deductible be increased to $10,000.
Collection of Assessments. The Task Force recommended that common ownership community assessments be given lien priority as of the date of recording in the land records of the declaration or other document that authorized the imposition and collection of assessments by the common ownership community. The lien priority would be limited to an amount equal to six months' worth of delinquent assessments, plus any late fees, attorneys' fees, and costs of suit, if authorized under the declaration or other governing document.
During the 2007 legislative
session of the Maryland General Assembly, numerous bills were introduced to implement various Task Force recommendations. It is anticipated that bills to implement some Task Force recommendations will be introduced during the 2008 Maryland General Assembly session.
Click here to view the full Task Force report.
From the Courts... printer-friendly version
The court ruled that "the Maryland Condominium Act does not require the Council of Unit Owners to repair or replace property of an owner in an individual condominium unit after a casualty loss". The basis of the court ruling is its conclusion that the Condominium Act requires the unit owner to make all repairs to the unit regardless of the cause of the damage.
The court further concluded that "the master insurance provision was intended to cover only damage sustained to the common elements or the structure of the condominium" and the master policy is not meant to insure each owner's property or individual unit. The court's decision is contrary to the long-standing interpretation of the Act by managers, attorneys and insurance professionals regarding master insurance coverage for units. (The Anderson v. Gables on Tuckerman Condominium, decided April 15, 2008).
The court concluded that merely because a property owner received rental income is not inconsistent with the property being used for residential purposes. Moreover, the transitory or temporary nature of such use does not defeat the residential status. (Loudon v. Bosley, decided October 17, 2006)
At issue were two provisions from the condominium declaration and bylaws. The declaration contained a provision granting each unit owner a right of use easement in the common elements "for the purposes providing maintenance, support, repair, or service for such unit to and for the ducts, pipes, conduits, vents, plumbing , wiring, and other utility services to the unit."
Additionally, a provision of the bylaws provided that, except for purposes of proper maintenance and repair, a unit owner is prohibited from making any change or alteration to the exterior of any unit or the common elements until an application is submitted to, and approved in writing by the Board.
In a 4-3 decision, the Court of Appeals ruled that the owner was permitted by the easement in the declaration to install the dryer vent through the exterior common elements of the condominium without the prior approval of the condominium board. The three dissenting judges disagreed, concluding that nothing in the declaration easement provision or bylaw architectural change provision permit a unit owner to install a new vent on the exterior of the building without approval of the board. (Garfink v. The Cloisters at Charles Condominium, decided April 13, 2006).
The ruling of the Court of Appeals -- the highest Maryland appellate court -- reversed the prior decisions of the trial court and Court of Special Appeals which had invalidated the foreclosure sale because the Condominium had refused to accept the condominium unit owner's good faith tender of payment prior to the sale.
The Maryland Court of Special Appeals -- the intermediate appeals court -- in September, 2004 upheld the trial court's decision and ruled that the sale was invalid because the Condominium impermissibly denied the owner the right to stop the foreclosure by requiring the owner to pay $31,114. The court agreed that the owner properly relied on the auditor's statement from a prior invalidated sale that the amount due at the time of the previous foreclosure was $3,411.
However, on further appeal, the Court of Appeals reached a different conclusion in June, 2005, ruling that the unit owner did not properly exercise the right to stop a foreclosure sale and redeem the property by tendering an amount less than that claimed by the Condominium.
Rather, a debtor must offer to pay the stated outstanding debt or must file a court motion to enjoin the sale from occurring. (Greenbriar Condominium v. Brooks, decided June 22, 2005).
New Laws and Legislation . . .
Reasonable modifications may also be made to public and common use areas, such as widening entrances to fitness centers or laundry rooms, or for changes to exteriors of dwelling units, such as installing a ramp at the entrance to a dwelling.
Among the new laws enacted was a bill to authorize the Maryland Attorney General's Consumer Protection Division to enforce provisions of the Maryland Homeowners Association Act which affect consumers. This enforcement authority is similar to existing authority for the Attorney General to enforce provisions of the Maryland Condominium Act which affect consumers.
Also enacted was a new law to permit a court to appoint a receiver to conduct the affairs of a condominium or homeowners association where the owners fail to establish a board of directors with enough members to establish a board of directors with enough members to establish a quorum under the association bylaws.
These new laws take effect October 1, 2007.
In 2006, the Maryland Condominium Act was amended to include mentally disabled individuals among those entitled to a 3-year extended lease. Previously, the extended lease requirement only applied to a disability based on limited physical mobility. The new provision applies to any condominium where an application to register the condominium with the State is filed after March 15, 2006.
Also enacted was a law to allow counties and municipalities greater flexibility in setting income eligibility standards for qualifying for the 3-year extended lease. The provision applies to any condominium conversion where notice of intent to convert the building is given to tenants after March 16, 2006.
Other State condo conversion bills which did not pass included the proposals to increase the extended lease set-aside from 20% to 25% of the rental units, lower the income eligibility criteria, increase the amount of a tenant's moving expenses which a developer must pay, change the tenant notice requirement, and increase the extended lease period from 3 years to 5 years.
In 2007, the procedures regarding condominium conversion notice and tenant purchase offers were modified.
The new law requires disclosure of all books and records except to the extent they concern personnel records;
an individual's medical records; an individual's financial records; records relating to business transactions that are currently in negotiation; an the written advice of legal counsel; or minutes of a closed meeting of the board of directors or other governing body.
This new books and records disclosure law follows the existing law for homeowners associations with the additional exception for minutes of closed meetings.
The 2004 Maryland General Assembly also passed a new law which permits condominiums, homeowners associations, and housing cooperatives to provide meeting notices and deliver information to owners by electronic transmission where certain conditions are met. Such transmissions must be capable of creating a record which may be retained, retrieved, reviewed and reproduced in paper format by the recipient.
The electronic transmission law also permits an owner to submit a vote or proxy electronically where it is verified that the action is authorized by the owner.
Another new law will preempt association prohibitions on display of the United States flag. An association may not prohibit or unduly restrict the display of one portable, removable United States flag. However, an association may still adopt reasonable rules regarding the placement and manner of display of flags and flagpoles.
Under the maintenance transfer program started in 2002, the County will provide structural maintenance for a facility after it has been inspected, and any repairs necessary to bring the facility into good operating condition have been made.
The responsibility for bringing the storm water facilities to good working condition and confirming the location and ownership of the facilities rests with the association. Although the association must bear the cost of inspection, repair and transfer, associations may save up to tens of thousands of dollars in future structural maintenance expense.
The actual transfer of maintenance responsibility for storm water facilities will be accomplished through recorded easements and covenants with Montgomery County.
Federal Update . . .
Aimed specifically at condominiums, homeowners associations, and housing cooperatives, the Freedom to Display the American Flag Act prohibits an association from restricting or preventing a member of an association from displaying the flag of the United States on the member's residential property or exclusive use area.
However, community associations may establish reasonable restrictions pertaining to the "time, place, and manner of displaying the United States flag" where such restrictions are "necessary to protect a substantial interest" of the association. Additionally, flags must be displayed in a manner consistent with the United States Flag Code and any rule or custom pertaining to proper display or use of the American flag.
Prevention of Bankruptcy Abuse
The new bankruptcy law makes it more difficult for individuals to eliminate personal obligations to pay debts through a chapter 7 bankruptcy. By establishing an income/expense-based "means" test, fewer people will qualify to file a chapter 7 bankruptcy and will only be eligible for a chapter 13 bankruptcy. In a chapter 13 bankruptcy, all or part of the debt is typically repaid in 3 to 5 years.
The 2005 Bankruptcy Act also increases the amounts debtors pay in a chapter 13 bankruptcy so associations will receive more of the pre-bankruptcy assessments than in the past.
Community Association Assessments
The 2005 Bankruptcy Act also includes a specific provision which aids community associations in collecting assessments which are due after a chapter 7 bankruptcy is filed. An individual will continue to be responsible for payment of condominium, cooperative and homeowner association assessments for so long as the individual or bankruptcy trustee has a legal, equitable, or possessory ownership interest in the property.
Previously, a chapter 7 debtor was not liable for post-bankruptcy condominium or cooperative assessments if he no longer occupied the dwelling or received rent from leasing it.
The 2005 Bankruptcy Act applies to any bankruptcy filed after October 16, 2005.
One type of disability discrimination prohibited by the Act is the refusal to make "reasonable accommodations" in rules, policies, or practices or services when such accommodations may be necessary to afford a person with a disability an equal opportunity to use and enjoy a
dwelling, including public and common use spaces. A "reasonable accommodation" is a change, exception, or adjustment to a rule, policy, practice or service. The joint statement issued by HUD and DOJ provides guidance on how to respond to requests for accommodations. (Joint Statement, Reasonable Accommodations under the Fair Housing Act, May 17, 2004).
This and That . . .
In April 2007, Tom Schild taught a two-day course on Community Governance in Las Vegas, Nevada, as part of the National Conference of the Community Associations Institute. . .He also taught that course in Charleston, South Carolina in August, 2005, in Cincinnati, Ohio in March 2006, Baltimore, Maryland and Alexandria, Virginia in November 2007. Tom Schild also taught a two-day course on The Manager and The Law to association managers in Naples, Florida in April, 2005. The courses are part of the Professional Manager Development Program of the Community Associations Institute.
In October, 2007 Tom Schild taught Essentials of Community Association Volunteer Leadership in Rockville, Maryland. Mr. Schild presented the portion of the all day course regarding association legal documents and rules enforcement. He also taught the Essentials Course in Germantown Maryland in April, 2007.
In February, 2006, Tom Schild presented a program in Washington, D.C. on Investor -- Owners and Tenants. The program was part of the Annual Conference and Expo of the Washington Metropolitan Chapter of the Community Association Institute (WMCCAI).
In November, 2006, Tom Schild received the 2006 Public Advocate Award from CAI's Washington Metropolitan Chapter in recognition of his volunteer work in representing Maryland community association interests.
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From the Courts/New Laws and Legislation/Federal Update/This and That
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