Maryland House Bill 107: What You Need to Know and Why It's Important
In 2022, Maryland passed legislation that has significant implications for homeowners and various housing associations, such as residential condominium associations, cooperatives, and similar entities. This legislation is known as Maryland House Bill 107, and here's a breakdown of what it entails and why it's crucial.
Understanding Maryland House Bill 107
MHB 107 establishes statewide regulations regarding reserve funding for homeowner and residential condominium associations, among others. The primary goal is to ensure that these associations have sufficient funds reserved for future repairs, maintenance, and unforeseen expenditures. To guarantee compliance, these associations are required to conduct regular reserve studies, with a mandate to update the reserve study at least once every five years. Moreover, these associations must adhere to the reserve study and ensure that they meet the recommended funding levels within three years after receiving the results.
Who is Affected by Maryland House Bill 107?
This legislation predominantly impacts those who own condominiums, especially in areas with a high density of multi-unit residential properties. Prime examples include Ocean City, Maryland, and Delaware beaches. Additionally, members of neighborhood homeowners association (HOA) boards will now be under new regulatory timeframes and obligations. It's essential to note that the bill affects HOAs with a minimum common asset level of $10,000.
The introduction of Maryland House Bill 107 could reveal considerable gaps between existing reserves and the optimal reserve levels identified in the study. As a result, HOAs and condominium associations may have to make challenging decisions. This could include:
- Temporarily or permanently increasing association dues.
- Introducing a temporary surcharge on dues to fulfill reserve criteria.
- Exploring other alternatives to ensure compliance with the new reserve demands.
Additionally, there's potential for significant special assessments and major reserve shortfalls. Coupled with rising interest rates, this could potentially exert downward pressure on housing prices and lead to an influx of units in the market.
Enforcement Timeline
While some Maryland counties had previously enforced similar reserve requirements, House Bill 107 standardizes these regulations across the state. Notably, Prince George’s County and Montgomery County were pioneers in this domain, with compliance deadlines set for October 1, 2021, and October 1, 2022, respectively. For other affected associations in Maryland, the compliance deadline is October 1, 2023.
At this juncture, there haven't been specific guidelines set for the enforcement or monitoring of House Bill 107. However, it's anticipated that non-compliant HOAs and associations may face penalties such as fines or other state-imposed sanctions.
Take Action Now
If you feel that these new regulations might affect you, it's essential to engage with your HOA or condominium association board promptly. And for those actively serving on these boards, addressing these requirements should be a top priority. Given the looming 2023 deadline, there might be a rush, potentially leading to a shortage of qualified professionals to conduct reserve studies.
Stay informed and proactive to navigate the challenges and opportunities that Maryland House Bill 107 presents.