Bill Summary – FastDemocracy

HB 593
                       Department of Legislative Services
                              Maryland General Assembly
                                    2021 Session
                            FISCAL AND POLICY NOTE
                                  Third Reader
House Bill 593               (Delegate Fraser-Hidalgo)
Environment and Transportation                                          Judicial Proceedings
       Condominiums and Homeowners Associations - Meeting Requirements
This bill establishes procedures by which a homeowners association (HOA) may call an
additional meeting of the board of directors or other governing body, if the number of
lot owners present in person or by proxy at a meeting is insufficient to constitute a quorum.
The bill also makes numerous clarifying and technical changes to corresponding provisions
of the Maryland Condominium Act (MCA) and (1) specifies that the notice of the original
meeting must contain the date, time, and place of the additional meeting; (2) specifies that
an additional meeting called must occur no less than 15 days after the initial properly called
meeting; (3) specifies that notice of the additional meeting must be provided, as specified,
no less than 10 days before the additional meeting; and (4) newly authorizes delivery of
notice of the additional meeting by advertising in a newspaper published in the county
where the condominium is located or, if the condominium has a website, by posting on the
homepage of the website.
                                     Fiscal Summary
State Effect: The bill is not anticipated to impact State finances or operations.
Local Effect: The bill is not anticipated to impact local government finances or operations.
Small Business Effect: Minimal.
                                         Analysis
Bill Summary:
Homeowners Associations
If the number of lot owners present in person or by proxy at a properly called meeting is
insufficient to constitute a quorum, an additional meeting of the lot owners may be called
for the same purpose if (1) the notice of the initial meeting stated that the procedure
authorized under the bill might be invoked, as well as the date, time, and place of the
additional meeting and (2) a majority of the lot owners present vote in person or by proxy
to call for the additional meeting. The additional meeting must occur no less than 15 days
after the initial meeting.
No less than 10 days before the additional meeting, a separate and distinct notice of the
date, time, place, and purpose of the additional meeting must be (1) delivered, mailed, or
sent by electronic transmission to each lot owner at the address shown on the roster
maintained by the HOA; (2) advertised in a newspaper published in the county where the
HOA is located; or (3) if the HOA has a website, posted on the homepage of the website.
The notice must contain specified information about quorum and voting provisions.
At the additional meeting, the lot owners present in person or by proxy constitute a quorum,
and unless the bylaws provide otherwise, a majority of the lot owners present in person or
by proxy may (1) approve or authorize the proposed action at the additional meeting and
(2) take any other action that could have been taken at the original meeting if a sufficient
number of lot owners had been present. This authorization may not be construed to affect
the percentage of votes required to amend the declaration or bylaws or to take any other
action that is required to be taken by a specified percentage of votes.
Current Law: Statute does not specify procedures for an HOA to call an additional
meeting of the board of directors or other governing body if the number of lot owners
present in person or by proxy at a meeting is insufficient to constitute a quorum.
Condominiums
Generally, under MCA, unless the bylaws provide otherwise, a quorum is deemed present
if persons entitled to cast 25% of the total number of votes appurtenant to all units are
present in person or by proxy.
If the number of persons present in person or by proxy at a properly called meeting of the
council of unit owners is insufficient to constitute a quorum, another meeting of the council
of unit owners may be called for the same purpose if (1) the notice of the meeting stated
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that the procedure to call an additional meeting due to lack of a quorum might be invoked
and (2) by majority vote, the unit owners present in person or by proxy call for the
additional meeting.
Fifteen days’ notice of the time, place, and purpose of the additional meeting must be
delivered, mailed, or sent by electronic transmission to each unit owner at the address
shown on the roster maintained by the condominium. The notice must contain specified
information about quorum and voting provisions.
At the additional meeting, the unit owners present in person or by proxy constitute a
quorum. Unless the bylaws provide otherwise, a majority of the unit owners present in
person or by proxy (1) may approve or authorize the proposed action at the additional
meeting and (2) may take any other action that could have been taken at the original
meeting if a sufficient number of unit owners had been present. This authorization may not
be construed to affect the percentage of votes required to amend the declaration or bylaws
or to take any other action required to be taken by a specified percentage of votes.
For more information about condominiums and HOAs, which are broadly referred to as
common ownership communities, see the Appendix – Common Ownership
Communities.
                               Additional Information
Prior Introductions: HB 1037 of 2019, as amended, passed the House and received a
hearing the Senate Judicial Proceedings Committee, but no further action was taken.
Cross File: SB 535 (Senator King) - Judicial Proceedings.
Information Source(s): Judiciary (Administrative Office of the Courts); Department of
Legislative Services
Fiscal Note History:     First Reader - February 5, 2021
rh/jkb                   Third Reader - February 26, 2021
Analysis by: Donavan A. Ham                           Direct Inquiries to:
                                                      (410) 946-5510
                                                      (301) 970-5510
HB 593/ Page 3
          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
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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);
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      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.
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Statutes affected: 
Text - First - Condominiums and Homeowners Associations - Meeting Requirements: 11-109 Real Property
Text - Third - Condominiums and Homeowners Associations - Meeting Requirements: 11-109 Real Property