HB 313
Department of Legislative Services
Maryland General Assembly
2021 Session
FISCAL AND POLICY NOTE
Third Reader - Revised
House Bill 313 (Delegate Holmes)
Environment and Transportation Judicial Proceedings
Cooperative Housing Corporations, Condominiums, and Homeowners
Associations - Reserve Studies - Statewide
This bill requires an updated study every five years of the reserves needed for future major
repairs and replacement of the common elements of a cooperative housing corporation or
condominium, or the common areas of a homeowners association (HOA). The bill repeals
statutory provisions that limit applicability to required reserve studies and related
provisions only to these types of communities in Prince George’s County.
Fiscal Summary
State Effect: The bill does not materially affect State operations or finances.
Local Effect: The bill does not materially affect local operations or finances.
Small Business Effect: Minimal.
Analysis
Bill Summary: The bill generally extends statutory provisions (as shown below) that
currently require reserve studies in Prince George’s County only to be applicable statewide.
Cooperatives, Condominiums, and Homeowners Associations Established on or After the
Applicable Statutory Requirement/Effective Date of the Bill
If a cooperative or condominium is established on or after October 1, 2021, (or
October 1, 2020, in Prince George’s County only), the governing body of the cooperative
or condominium must have an independent reserve study completed at least 30 days prior
to the first meeting of (1) the cooperative at which members other than the owner have a
majority of votes in the cooperative or (2) the council of unit owners of a condominium to
elect a board of directors, as specified. For HOAs established on or after the dates specified
above, the governing body must have the study conducted at least 30 days, but no more
than 90 days, prior to the first meeting of the HOA to elect a governing body, as specified.
Within five years after this first required reserve study, and at least every five years
thereafter, the governing body of a cooperative, condominium, or HOA must have an
updated reserve study completed.
Cooperatives, Condominiums, and Homeowners Associations Established Before the
Applicable Statutory Requirement/Effective Date of the Bill
If a cooperative, condominium, or HOA is established before October 1, 2021, (or before
October 1, 2020, in Prince George’s County only), the governing body of the cooperative,
condominium, or HOA must have an updated reserve study conducted by October 1, 2022,
(or by October 1, 2021, in Prince George’s County only), unless the cooperative,
condominium, or HOA had a reserve study conducted within the past five years, as
specified. Within five years after this first required (or most recent) reserve study, and at
least every five years thereafter, the governing body of a cooperative, condominium, or
HOA must have an updated reserve study completed.
The bill does not apply to an HOA that issues bonds to meet capital expenditures and is
only applicable to an HOA that has responsibility under its declaration for maintaining and
repairing common areas. In addition, the bill specifies that the provisions regarding reserve
studies only apply to HOAs for which initial purchase and installation costs for all
components identified under existing statutory provisions total at least $10,000.
Other Provisions Related to Reserve Funding Now Applicable Statewide
The governing body of a cooperative housing corporation, condominium, or HOA must
provide funds to the reserve in accordance with the most recent reserve study, must review
the reserve study annually for accuracy, and has the authority to increase an assessment
levied to cover the reserve funding amount required – despite any provision of the articles
of incorporation, declaration, bylaws, or proprietary lease, as applicable, restricting
assessment increases or capping the assessment that may be levied in a fiscal year.
Current Law: Statutory provisions that require a “reserve study” are applicable only to
cooperatives, condominiums, and HOAs in Prince George’s County. Statutory provisions
specify the time by which initial and ongoing reserve studies must be conducted in
Prince George’s County (these dates are unchanged by the bill).
HB 313/ Page 2
“Reserve study” means a study of the reserves required for future major repairs and
replacement of the common elements of a cooperative or condominium, or the common
areas of an HOA, that:
 identifies each structural, mechanical, electrical, and plumbing component of the
common elements or common areas and any other components that are the
responsibility of the cooperative, condominium, or HOA to repair and replace;
 states the normal useful life (for cooperatives and condominiums) and the estimated
remaining useful life of each identified component;
 states the estimated cost of repair or replacement of each identified component; and
 states the estimated annual reserve amount necessary to accomplish any identified
future repair or replacement.
Additional Requirements of the Reserve Study
Each reserve study must be prepared by an individual who:
 has prepared at least 30 reserve studies for the applicable type of community within
the prior three calendar years;
 holds a bachelor’s degree in construction management, architecture, or engineering,
or has equivalent experience and education;
 holds a current license from the State Board of Architects or the State Board for
Professional Engineers; or
 is currently designated as a reserve specialist by the Community Association
Institute or a professional reserve analyst by the Association of Professional Reserve
Analysts.
Each reserve study must:
 be available for inspection and copying by any unit owner or lot owner;
 be reviewed by the governing body of the cooperative, condominium, or HOA in
connection with preparing the annual budget; and
 be summarized for submission with the annual proposed budget to the unit owners
or lot owners.
For newly established condominiums and HOAs, the condominium developer or HOA
declarant must deliver to the condominium or HOA reserves equal to at least the reserve
funding amount recommended in the initial reserve study. This must be done within
30 days after (1) the meeting held to elect a board of directors for the council of unit owners
or (2) the meeting held to elect a governing body of the HOA.
HB 313/ Page 3
To the extent that a reserve study conducted for a cooperative indicates a need to budget
for reserves, the budget must meet specified requirements, including the inclusion of a
statement of the amount of reserves recommended in the study and the amount of current
cash for replacement reserves. The governing body of a cooperative must provide funds to
the reserve in accordance with the most recent reserve study and review the reserve study
annually for accuracy.
The annual budget of every condominium or HOA must include reserves equal to the
funding amount recommended in the most recent reserve study.
The governing body of a cooperative, board of directors of the condominium, or governing
body of the HOA has the authority to increase an assessment levied to cover the reserve
funding amount required, despite any provision of the articles of incorporation, declaration,
bylaws, or proprietary lease, as applicable, restricting assessment increases or capping the
assessment that may be levied in a fiscal year.
Provisions regarding reserve studies do not apply to an HOA that issues bonds to meet
capital expenditures and are only applicable to an HOA that has responsibility under its
declaration to maintain and repair common areas.
For more information on cooperatives, condominiums, and HOAs (commonly known as
common ownership communities or COCs), see the Appendix – Common Ownership
Communities.
Additional Information
Prior Introductions: HB 58 of 2020, a similar bill, received a hearing in the
House Environment and Transportation Committee, but no further action was taken. Its
cross file, SB 386, received a hearing in the Senate Judicial Proceedings Committee, but
no further action was taken. HB 900 of 2019, another similar bill, received a hearing in the
House Environment and Transportation Committee but was subsequently withdrawn.
Designated Cross File: None.
Information Source(s): Judiciary (Administrative Office of the Courts); Department of
Legislative Services
HB 313/ Page 4
Fiscal Note History: First Reader - January 22, 2021
rh/jkb Third Reader - March 29, 2021
Revised - Amendment(s) - March 29, 2021
Revised - Clarification - March 29, 2021
Analysis by: Donavan A. Ham Direct Inquiries to:
(410) 946-5510
(301) 970-5510
HB 313/ Page 5
 Appendix – Common Ownership Communities
When a person purchases a single-family home, condominium, or an interest in a
cooperative housing corporation, he or she may also be required to join an association of
owners, which is intended to act in the common interests of all the homeowners,
condominium unit owners, or cooperative owners in the community. Collectively, these
associations are often referred to as common ownership communities (COCs). In
Maryland, a growing number of newly constructed or newly converted residences are
located in some form of a COC.
The affairs of a condominium are governed by a council of unit owners, which comprises
all unit owners. Among other powers, the council of unit owners has the power to impose
assessments on the unit owners to pay common expenses. A council of unit owners may
delegate its powers to a board of directors, officers, or a managing agent. Condominiums
are governed under Title 11 of the Real Property Article.
Many new housing developments are subject to a homeowners association (HOA) that is
created by a governing document and has the authority to impose mandatory fees on lots
in the development in connection with the provision of services or for the benefit of the
lots, the lot owners, or the common areas. HOAs are governed under Title 11B of the Real
Property Article.
A cooperative housing corporation or “cooperative” is a corporation that owns real
property. A resident of a cooperative does not own his or her unit; rather, the person owns
an interest in the corporation, which leases the unit to the person for residential use.
Cooperatives are governed by the laws in Title 5, Subtitle 6B of the Corporations and
Associations Article.
Condominiums and HOAs may be authorized by their governing documents to impose
liens on units or lots to collect unpaid assessments or fees. In a cooperative, the governing
documents usually provide for the collection of delinquent fees, and evictions for unpaid
fees are generally pursued by way of a landlord-tenant action.
Since registration of the various COCs is not required statewide, the exact number of COCs
in Maryland is unknown. However, public offering statements for condominium regimes
are required by law to be registered with the Secretary of State (SOS). SOS registration
records show that, as of December 2020, 2,739 condominium regimes have been registered
with the State. The State Department of Assessments and Taxation, which maintains
assessment records based on class of property, reports that there are 221,999 condominium
units in the State as of July 2020. The Foundation for Community Association Research
HB 313/ Page 6
estimated that there were 6,785 community associations with an estimated 1 million
residents in these associations in the State in 2019, the most recent information available.
Task Force on Common Ownership Communities
With a growing number of Marylanders residing in COCs, and evidence that some COCs
had issues with governance, dispute resolution, and financial stability, the
General Assembly created the Task Force on Common Ownership Communities in 2005
(Chapter 469 of 2005). The issues addressed by the task force included the education and
training needs of COC boards and prospective buyers, availability of alternative dispute
resolution services, special considerations of aging COCs, collection of assessments, and
resale of homes within COCs. The task force met 10 times, held five public hearings, and
submitted its final report in December 2006. The report’s findings and recommendations
have served, in subsequent years, as the basis for numerous pieces of legislation intended
to improve the operation of COCs. This legislation, enacted from 2007 through 2020:
 authorized a group of three or more unit or lot owners in a condominium or HOA
to petition a circuit court to appoint a receiver in specified situations frequently
found in aging communities (Chapter 321 of 2007);
 gave the Consumer Protection Division within the Office of the Attorney General
increased authority over violations of the Maryland Homeowners Association Act
(Chapter 593 of 2007);
 eased restrictions on the ability of condominiums and HOAs to amend their
governing documents (Chapters 144 and 145 of 2008 and Chapter 480 of 2017);
 strengthened the transition process from developer to the governing body of a
condominium or HOA by allowing the governing body to terminate specified
contracts and requiring the developer to provide specified documents (Chapters 95
and 96 of 2009);
 required the governing body of a COC to purchase fidelity insurance or a fidelity bond
covering various acts of malfeasance by COC officers, directors, and other specified
employees and agents (Chapters 77 and 78 of 2009 and Chapter 615 of 2010);
 granted priority to a specified portion of a lien of a condominium or HOA over the
claim of a holder of a first mortgage or first deed of trust in the event of a foreclosure
on a unit or lot (Chapter 387 of 2011);
HB 313/ Page 7
 limited the amount of damages for which the governing body of a condominium or
HOA may foreclose on a lien against a unit owner or lot owner (Chapters 448 and
449 of 2013);
 expanded the purposes for which a condominium’s board of directors may hold a
closed meeting, similar to the law for an HOA, by allowing a meeting to be closed
to consider terms or conditions of a business transaction in the negotiation stage if
disclosure could adversely affect the economic interests of the council of unit
owners (Chapter 110 of 2013);
 established meeting standards and standards for late charges for delinquent
payments, eviction restrictions, an auditing process for books and records, and a
dispute settlement mechanism for cooperatives under specified circumstances
(Chapter 567 of 2014);
 altered the contents of a required disclosure for the resale of a condominium unit,
authorized the assessment of specified fees by a condominium council of unit
owners or an HOA for providing specified information, and required the
Department of Housing and Community Development to adjust the maximum
authorized fees every two years (Chapter 735 of 2016 and Chapter 817 of 2017);
and
 increased to $10,000 the maximum amount of the council of unit owners’ property
insurance deductible for which a specific unit owner is responsible if the cause of
any damage to or destruction of the common elements or units of a condominium
originates from an event inside that owner’s unit (Chapters 56 and 57 of 2020).
The task force’s report also featured findings and recommendations relating to the creation
of an ombudsman in local governments. Since the report’s release, Prince George’s County
created its Common Ownership Communities Program in 2007 with the stated purpose of
assisting governing bodies as well as owners and residents of HOAs, residential
condominiums, and cooperative housing corporations with education, training, and
alternative dispute resolution. Charles County and Montgomery County have offices
dedicated to COCs that predate the task force.
Finally, findings and recommendations of the report that have not been codified in statute
pertain to reserves of COCs and the uniformity of COC depository requirements.
HB 313/ Page 8


Statutes affected:
Text - First - Cooperative Housing Corporations, Condominiums, and Homeowners Associations - Reserve Studies - Statewide: 2-017 Corporations and Associations, 11-109 Corporations and Associations, 11-109.2 Corporations and Associations, 11-109.4 Corporations and Associations, 11-110 Corporations and Associations
Text - Third - Cooperative Housing Corporations, Condominiums, and Homeowners Associations - Reserve Studies - Statewide: 2-017 Corporations and Associations, 11-109 Real Property, 11-109.2 Real Property, 11-109.4 Real Property, 11-110 Real Property