MD
Maryland Senate Bill SB777

Maryland 2025 Regular Session

Maryland Senate Bill SB777 Compare Versions

Only one version of the bill is available at this time.
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33 EXPLANATION: CAPITALS INDICATE MAT TER ADDED TO EXISTIN G LAW.
44 [Brackets] indicate matter deleted from existing law.
55 *sb0777*
66
77 SENATE BILL 777
88 N1, C1 5lr0875
99
1010 By: Howard County Senators
1111 Introduced and read first time: January 27, 2025
1212 Assigned to: Judicial Proceedings
1313
1414 A BILL ENTITLED
1515
1616 AN ACT concerning 1
1717
1818 Howard County – Common Ownership Communities – Funding of Reserve 2
1919 Accounts and Preparation of Funding Plans 3
2020
2121 Ho. Co. 4–25 4
2222
2323 FOR the purpose of requiring that the annual budget of a cooperative housing corporation, 5
2424 a residential condominium, or a homeowners association in Howard County include 6
2525 certain funds; requiring that certain funds for the reserve account of a cooperative 7
2626 housing corporation, a residential condominium, or a homeowners association in 8
2727 Howard County be deposited by a certain day each fiscal year; requiring a 9
2828 cooperative housing corporation, a residential condominium, or a homeowners 10
2929 association in Howard County to obtain a certain recommended reserve funding level 11
3030 within a certain number of fiscal years; requiring that certain updated reserve 12
3131 studies in Howard County be prepared by a certain person; requiring a residential 13
3232 condominium or a homeowners association in Howard County to review the reserve 14
3333 study annually for accuracy; requiring the governing body of a cooperative housing 15
3434 corporation, a residential condominium, or a homeowners association in Howard 16
3535 County to prepare a certain funding plan subject to certain requirements; and 17
3636 generally relating to reserve studies and annual budgets of cooperative housing 18
3737 corporations, condominiums, and homeowners associations in Howard County. 19
3838
3939 BY repealing and reenacting, with amendments, 20
4040 Article – Corporations and Associations 21
4141 Section 5–6B–26.1 22
4242 Annotated Code of Maryland 23
4343 (2014 Replacement Volume and 2024 Supplement) 24
4444
4545 BY repealing and reenacting, with amendments, 25
4646 Article – Real Property 26
4747 Section 11–109.2(b) and (c), 11–109.4, 11B–112.2(c) and (d), and 11B–112.3 27
4848 Annotated Code of Maryland 28 2 SENATE BILL 777
4949
5050
5151 (2023 Replacement Volume and 2024 Supplement) 1
5252
5353 SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 2
5454 That the Laws of Maryland read as follows: 3
5555
5656 Article – Corporations and Associations 4
5757
5858 5–6B–26.1. 5
5959
6060 (a) (1) In this section[, “reserve] THE FOLLOWING WORDS HAVE THE 6
6161 MEANINGS INDICATED . 7
6262
6363 (2) “RESERVE study” means a study of the reserves required for future 8
6464 major repairs and replacement of the common elements of a cooperative housing 9
6565 corporation that: 10
6666
6767 [(1)] (I) Identifies each structural, mechanical, electrical, and plumbing 11
6868 component of the common elements and any other components that are the responsibility 12
6969 of the cooperative housing corporation to repair and replace; 13
7070
7171 [(2)] (II) States the normal useful life and the estimated remaining useful 14
7272 life of each identified component; 15
7373
7474 [(3)] (III) States the estimated cost of repair or replacement of each 16
7575 identified component; and 17
7676
7777 [(4)] (IV) States the estimated annual reserve amount necessary to 18
7878 accomplish any identified future repair or replacement. 19
7979
8080 (3) “UPDATED RESERVE STUDY ” MEANS, FOR THE COMMON 20
8181 ELEMENTS SINCE THE PRIO R RESERVE STUDY WAS COMPLETED : 21
8282
8383 (I) ANALYZING ANY WORK PE RFORMED; 22
8484
8585 (II) REVISING REPLACEMENT COST, REMAINING LIFE , AND 23
8686 USEFUL LIFE ESTIMATE S; AND 24
8787
8888 (III) IDENTIFYING: 25
8989
9090 1. WORK PERFORMED AND AM OUNTS SPENT; AND 26
9191
9292 2. WHETHER ANY MAINTENANCE CO NTRACTS ARE IN 27
9393 PLACE. 28
9494
9595 (b) (1) This subsection applies only to a cooperative housing corporation 29
9696 established in: 30 SENATE BILL 777 3
9797
9898
9999
100100 (i) Prince George’s County on or after October 1, 2020; 1
101101
102102 (ii) Montgomery County on or after October 1, 2021; or 2
103103
104104 (iii) Any county other than Prince George’s County or Montgomery 3
105105 County on or after October 1, 2022. 4
106106
107107 (2) The governing body of the cooperative housing corporation shall have 5
108108 an independent reserve study completed not less than 30 calendar days before the first 6
109109 meeting of the cooperative housing corporation at which the members other than the owner 7
110110 have a majority of votes in the cooperative housing corporation. 8
111111
112112 (3) The governing body shall have an updated reserve study completed 9
113113 within 5 years after the date of the initial reserve study conducted under paragraph (2) of 10
114114 this subsection, which shall be updated at least every 5 years thereafter. 11
115115
116116 (c) (1) (i) This paragraph applies only to a cooperative housing corporation 12
117117 established in Prince George’s County before October 1, 2020. 13
118118
119119 (ii) If the governing body of a cooperative housing corporation has 14
120120 had a reserve study conducted on or after October 1, 2016, the governing body shall have 15
121121 an updated reserve study conducted within 5 years after the date of that reserve study and 16
122122 at least every 5 years thereafter. 17
123123
124124 (iii) If the governing body of a cooperative housing corporation has 18
125125 not had a reserve study conducted on or after October 1, 2016, the governing body shall 19
126126 have a reserve study conducted on or before October 1, 2021, and an updated reserve study 20
127127 at least every 5 years thereafter. 21
128128
129129 (2) (i) This paragraph applies only to a cooperative housing corporation 22
130130 established in Montgomery County before October 1, 2021. 23
131131
132132 (ii) If the governing body of a cooperative housing corporation has 24
133133 had a reserve study conducted on or after October 1, 2017, the governing body shall have 25
134134 an updated reserve study conducted within 5 years after the date of that reserve study and 26
135135 at least every 5 years thereafter. 27
136136
137137 (iii) If the governing body of a cooperative housing corporation has 28
138138 not had a reserve study conducted on or after October 1, 2017, the governing body shall 29
139139 have a reserve study conducted on or before October 1, 2022, and an updated reserve study 30
140140 at least every 5 years thereafter. 31
141141
142142 (3) (i) This paragraph applies to a cooperative housing corporation 32
143143 established in any county other than Prince George’s County or Montgomery County before 33
144144 October 1, 2022. 34
145145 4 SENATE BILL 777
146146
147147
148148 (ii) If the governing body of a cooperative housing corporation has 1
149149 had a reserve study conducted on or after October 1, 2018, the governing body shall have 2
150150 an updated reserve study conducted within 5 years after the date of that reserve study and 3
151151 at least every 5 years thereafter. 4
152152
153153 (iii) If the governing body of a cooperative housing corporation has 5
154154 not had a reserve study conducted on or after October 1, 2018, the governing body shall 6
155155 have a reserve study conducted on or before October 1, 2023, and an updated reserve study 7
156156 at least every 5 years thereafter. 8
157157
158158 (d) Each reserve study AND, AS APPLICABLE , UPDATED RESERVE STUD Y 9
159159 required under this section shall: 10
160160
161161 (1) Be prepared by a person who: 11
162162
163163 (i) Has prepared at least 30 reserve studies within the prior 3 12
164164 calendar years; 13
165165
166166 (ii) Has participated in the preparation of at least 30 reserve studies 14
167167 within the prior 3 calendar years while employed by a firm that prepares reserve studies; 15
168168
169169 (iii) Holds a current license from the State Board of Architects or the 16
170170 State Board for Professional Engineers; or 17
171171
172172 (iv) Is currently designated as a reserve specialist by the Community 18
173173 Association Institute or as a professional reserve analyst by the Association of Professional 19
174174 Reserve Analysts; 20
175175
176176 (2) Be available for inspection and copying by any unit owner; 21
177177
178178 (3) Be reviewed by the governing body of the cooperative housing 22
179179 corporation in connection with the preparation of the annual proposed budget; and 23
180180
181181 (4) Be summarized for submission with the annual proposed budget to the 24
182182 unit owners. 25
183183
184184 (e) (1) To the extent that a reserve study conducted in accordance with this 26
185185 section indicates a need to budget for reserves, the budget shall include: 27
186186
187187 [(1)] (I) For the capital components, the current estimated: 28
188188
189189 [(i)] 1. Replacement cost; 29
190190
191191 [(ii)] 2. Remaining life; and 30
192192
193193 [(iii)] 3. Useful life; 31 SENATE BILL 777 5
194194
195195
196196
197197 [(2)] (II) The amount of accumulated cash reserves set aside for the 1
198198 repair, replacement, or restoration of capital components as of the beginning of the fiscal 2
199199 year in which the reserve study is conducted and the amount of the expected contribution 3
200200 to the reserve fund for the fiscal year; 4
201201
202202 [(3)] (III) A statement describing the procedures used for estimation and 5
203203 accumulation of cash reserves in accordance with this section; and 6
204204
205205 [(4)] (IV) A statement of the amount of reserves recommended in the study 7
206206 and the amount of current cash for replacement reserves. 8
207207
208208 (2) (I) THIS PARAGRAPH APPLIE S ONLY TO A COOPERATIVE 9
209209 HOUSING CORPORATION IN HOWARD COUNTY. 10
210210
211211 (II) TO THE EXTENT THAT A RESERVE STUDY CONDUCTED IN 11
212212 ACCORDANCE WITH THIS SECTION INDICATES A NEED TO BUDGET FOR R ESERVES, 12
213213 THE BUDGET SHALL INC LUDE THE CURRENT ESTIMATE D REPLACEMENT COST FOR 13
214214 CAPITAL COMPONENTS IF THE ESTIMATED REP LACEMENT COST IS GRE ATER THAN 14
215215 $10,000 AS DETERMINED BY THE MOST RECENT RESERVE STUDY O R UPDATED 15
216216 RESERVE STUDY . 16
217217
218218 (f) (1) (i) THIS PARAGRAPH DOES NOT APPLY TO A COOPERATIVE 17
219219 HOUSING CORPORATION IN HOWARD COUNTY. 18
220220
221221 (II) Subject to subparagraph [(ii)] (III) of this paragraph, the 19
222222 governing body of a cooperative housing corporation shall provide funds to the reserve in 20
223223 accordance with the most recent reserve study and shall review the reserve study annually 21
224224 for accuracy. 22
225225
226226 [(ii)] (III) If the most recent reserve study was an initial reserve 23
227227 study, the governing body shall, within 3 fiscal years following the fiscal year in which the 24
228228 initial reserve study was completed, attain the annual reserve funding level recommended 25
229229 in the initial reserve study. 26
230230
231231 (2) (I) THIS PARAGRAPH APPLIE S ONLY TO A COOPERATIVE 27
232232 HOUSING CORPORATION IN HOWARD COUNTY. 28
233233
234234 (II) SUBJECT TO SUBPARAGRA PH (III) OF THIS PARAGRAPH , 29
235235 THE GOVERNING BODY O F A COOPERATIVE HOUS ING CORPORATION SHAL L DEPOSIT 30
236236 FUNDS TO THE RESERVE ACCOUNT IN ACCORDANC E WITH THE MOST RECE NT 31
237237 RESERVE STUDY AND TH E FUNDING PLAN REQUI RED UNDER SUBPARAGRAPH (IV) 32
238238 OF THIS PARAGRAPH ON OR BEFORE TH E LAST DAY OF EACH F ISCAL YEAR AND 33
239239 SHALL REVIEW THE RES ERVE STUDY ANNUALLY FOR ACCURACY . 34
240240 6 SENATE BILL 777
241241
242242
243243 (III) IF THE MOST RECENT RE SERVE STUDY WAS AN I NITIAL 1
244244 RESERVE STUDY , THE GOVERNING BODY S HALL, WITHIN 10 FISCAL YEARS 2
245245 FOLLOWING THE FISCAL YEAR IN W HICH THE INITIA L RESERVE STUDY WAS 3
246246 COMPLETED , ATTAIN THE ANNUAL RE SERVE FUNDING LEVEL RECOMMENDED IN 4
247247 THE INITIAL RESERVE STUDY. 5
248248
249249 (IV) 1. THE GOVERNING BODY OF A COOPERATIVE HOUSIN G 6
250250 CORPORATION SHALL , IN CONSULTATION WITH A PERSON IDENTIFIED UNDER 7
251251 SUBSECTION (D)(1) OF THIS SECTION, DEVELOP A FUNDING PL AN TO DETERMINE 8
252252 HOW TO FULLY FUND TH E RESERVES NECESSARY UNDER THIS SECTION . 9
253253
254254 2. IN DEVELOPING THE FUN DING PLAN UNDER THIS 10
255255 SUBPARAGRAPH , THE GOVERNING BODY S HALL CONSIDER THE FO LLOWING 11
256256 METHODS TO ACHIEVE T HE RESERVE FU NDING UNDER THIS SEC TION: 12
257257
258258 A. COMPONENT OR FULL FUN DING METHOD ; 13
259259
260260 B. CASH FLOW METHOD ; 14
261261
262262 C. BASELINE FUNDING METH OD; 15
263263
264264 D. THRESHOLD CASH FLOW M ETHOD; AND 16
265265
266266 E. OTHER FUNDING METHODS CONSISTENT WITH 17
267267 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. 18
268268
269269 3. A FUNDING PLAN DEVELOP ED UNDER THIS 19
270270 SUBPARAGRAPH SHALL PRIORITIZE ADE QUATE AMOUNTS FOR RE PAIR AND 20
271271 REPLACEMENT OF COMMO N ELEMENTS WITH CONS IDERATION GIVEN TO T HE 21
272272 HEALTH AND SAFETY OF MEMBERS OF THE COOPE RATIVE HOUSING CORPO RATION. 22
273273
274274 4. A GOVERNING BODY SHALL REVIEW PROGRESS 23
275275 TOWARD COMPLIANCE WI TH THE FUNDING PLAN DEVELOPED UNDER THIS 24
276276 SUBPARAGRAPH AT EACH ANNUAL MEETI NG OF THE GOVERNING BODY. 25
277277
278278 [(2)] (3) The governing body of a cooperative housing corporation has the 26
279279 authority to increase an assessment levied to cover the reserve funding amount required 27
280280 under this section, notwithstanding any provision of the articles of incorporation, bylaws, 28
281281 or proprietary lease restricting assessment increases or capping the assessment that may 29
282282 be levied in a fiscal year. 30
283283
284284 Article – Real Property 31
285285
286286 11–109.2. 32 SENATE BILL 777 7
287287
288288
289289
290290 (b) (1) The annual budget shall provide for at least the following items: 1
291291
292292 [(1)] (I) Income; 2
293293
294294 [(2)] (II) Administration; 3
295295
296296 [(3)] (III) Maintenance; 4
297297
298298 [(4)] (IV) Utilities; 5
299299
300300 [(5)] (V) General expenses; 6
301301
302302 [(6)] (VI) Reserves; and 7
303303
304304 [(7)] (VII) Capital items. 8
305305
306306 (2) IN ADDITION TO THE RE QUIREMENTS OF PARAGR APH (1) OF THIS 9
307307 SUBSECTION, IN HOWARD COUNTY, THE ANNUAL BUDGET SHA LL PROVIDE FOR 10
308308 REPLACEMENT COST IF THE ESTIMATED REPLAC EMENT COST IS GREATER THAN 11
309309 $10,000 AS DETERMINED BY THE MOST RECENT RESERVE STUDY OR UPDATED 12
310310 RESERVE STUDY. 13
311311
312312 (c) (1) (I) THIS PARAGRAPH DOES NOT APPLY TO A CONDOMINIUM IN 14
313313 HOWARD COUNTY. 15
314314
315315 (II) Subject to [paragraph (2)] SUBPARAGRAPH (III) of this 16
316316 [subsection] PARAGRAPH , the reserves provided for in the annual budget under subsection 17
317317 (b) of this section for a residential condominium shall be the funding amount recommended 18
318318 in the most recent reserve study completed under § 11–109.4 of this title. 19
319319
320320 [(2)] (III) If the most recent reserve study was an initial reserve study, the 20
321321 governing body shall, within 3 fiscal years following the fiscal year in which the initial 21
322322 reserve study was completed, attain the annual reserve funding level recommended in the 22
323323 initial reserve study. 23
324324
325325 (2) (I) THIS PARAGRAPH APPLIE S ONLY TO A CONDOMINIUM IN 24
326326 HOWARD COUNTY. 25
327327
328328 (II) SUBJECT TO SUBPARAGRA PH (III) OF THIS PARAGRAPH AN D 26
329329 IN ACCORDANCE WITH T HE FUNDING PLAN UNDE R § 11–109.4(F) OF THIS TITLE, THE 27
330330 RESERVES PROVIDED FO R IN THE ANNUAL BUDGET UNDER SUBSECTION (B) OF THIS 28
331331 SECTION FOR A RESIDE NTIAL CONDOMINIUM SH ALL: 29
332332 8 SENATE BILL 777
333333
334334
335335 1. BE THE FUNDING AMOUNT RECOMMENDED IN THE 1
336336 MOST RECENT RESERVE STUDY OR UPDATED RES ERVE STUDY COMPLETED UNDER § 2
337337 11–109.4 OF THIS TITLE; AND 3
338338
339339 2. BE DEPOSITED I N THE RESERVE ACCOUN T ON OR 4
340340 BEFORE THE LAST DAY OF EACH FISCAL YEAR . 5
341341
342342 (III) IF THE MOST RECENT RE SERVE STUDY WAS AN I NITIAL 6
343343 RESERVE STUDY , THE GOVERNING BODY S HALL, WITHIN 10 FISCAL YEARS 7
344344 FOLLOWING THE FISCAL YEAR IN WHICH THE IN ITIAL RESERVE STUDY WAS 8
345345 COMPLETED , ATTAIN THE ANNUAL RE SERVE FUNDING LEVEL RECOMMENDED IN 9
346346 THE INITIAL RESERVE STUDY. 10
347347
348348 (IV) A RESIDENTIAL CONDOMIN IUM SHALL REVIEW THE 11
349349 RESERVE STUDY ANNUAL LY FOR ACCURACY . 12
350350
351351 11–109.4. 13
352352
353353 (a) (1) In this section[, “reserve] THE FOLLOWING WORDS HAVE THE 14
354354 MEANINGS INDICATED . 15
355355
356356 (2) “RESERVE study” means a study of the reserves required for future 16
357357 major repairs and replacement of the common elements of a condominium that: 17
358358
359359 [(1)] (I) Identifies each structural, mechanical, electrical, and plumbing 18
360360 component of the common elements and any other components that are the responsibility 19
361361 of the council of unit owners to repair and replace; 20
362362
363363 [(2)] (II) States the normal useful life and the estimated remaining useful 21
364364 life of each identified component; 22
365365
366366 [(3)] (III) States the estimated cost of repair or replacement of each 23
367367 identified component; and 24
368368
369369 [(4)] (IV) States the estimated annual reserve amount necessary to 25
370370 accomplish any identified future repair or replacement. 26
371371
372372 (3) “UPDATED RESERVE STUDY ” MEANS, FOR THE COMMON 27
373373 ELEMENTS SINCE THE P RIOR RESERVE STUDY W AS COMPLETED : 28
374374
375375 (I) ANALYZING ANY WORK PE RFORMED; 29
376376
377377 (II) REVISING REPLACEMENT COST, REMAINING LIFE , AND 30
378378 USEFUL LIFE ESTIMATE S; AND 31
379379 SENATE BILL 777 9
380380
381381
382382 (III) IDENTIFYING: 1
383383
384384 1. WORK PERFORMED AND AM OUNTS SPENT; AND 2
385385
386386 2. WHETHER ANY MAINTENAN CE CONTRACTS ARE IN 3
387387 PLACE. 4
388388
389389 (b) This section applies only to a residential condominium. 5
390390
391391 (c) (1) This subsection applies only to a condominium established in: 6
392392
393393 (i) Prince George’s County on or after October 1, 2020; 7
394394
395395 (ii) Montgomery County on or after October 1, 2021; or 8
396396
397397 (iii) Any county other than Prince George’s County or Montgomery 9
398398 County on or after October 1, 2022. 10
399399
400400 (2) The governing body of the condominium shall have an independent 11
401401 reserve study completed not less than 30 calendar days before the meeting of the council of 12
402402 unit owners required under § 11–109(c)(16) of this title. 13
403403
404404 (3) The governing body shall have an updated reserve study completed 14
405405 within 5 years after the date of the initial reserve study conducted under paragraph (2) of 15
406406 this subsection and at least every 5 years thereafter. 16
407407
408408 (d) (1) (i) This paragraph applies only to a condominium established in 17
409409 Prince George’s County before October 1, 2020. 18
410410
411411 (ii) If the governing body of a condominium has had a reserve study 19
412412 conducted on or after October 1, 2016, the governing body shall have an updated reserve 20
413413 study conducted within 5 years after the date of that reserve study and at least every 5 21
414414 years thereafter. 22
415415
416416 (iii) If the governing body of a condominium has not had a reserve 23
417417 study conducted on or after October 1, 2016, the governing body shall have a reserve study 24
418418 conducted on or before October 1, 2021, and an updated reserve study at least every 5 years 25
419419 thereafter. 26
420420
421421 (2) (i) This paragraph applies only to a condominium established in 27
422422 Montgomery County before October 1, 2021. 28
423423
424424 (ii) If the governing body of a condominium has had a reserve study 29
425425 conducted on or after October 1, 2017, the governing body shall have an updated reserve 30
426426 study conducted within 5 years after the date of that reserve study and at least every 5 31
427427 years thereafter. 32
428428 10 SENATE BILL 777
429429
430430
431431 (iii) If the governing body of a condominium has not had a reserve 1
432432 study conducted on or after October 1, 2017, the governing body shall have a reserve study 2
433433 conducted on or before October 1, 2022, and an updated reserve study at least every 5 years 3
434434 thereafter. 4
435435
436436 (3) (i) This paragraph applies only to a condominium established in any 5
437437 county other than Prince George’s County or Montgomery County before October 1, 2022. 6
438438
439439 (ii) If the governing body of a condominium has had a reserve study 7
440440 conducted on or after October 1, 2018, the governing body shall have an updated reserve 8
441441 study conducted within 5 years after the date of that reserve study and at least every 5 9
442442 years thereafter. 10
443443
444444 (iii) If the governing body of a condominium has not had a reserve 11
445445 study conducted on or after October 1, 2018, the governing body shall have a reserve study 12
446446 conducted on or before October 1, 2023, and an updated reserve study at least every 5 years 13
447447 thereafter. 14
448448
449449 (e) Each reserve study AND, AS APPLICABLE , UPDATED RESERVE STUD Y 15
450450 required under this section shall: 16
451451
452452 (1) Be prepared by a person who: 17
453453
454454 (i) Has prepared at least 30 reserve studies within the prior 3 18
455455 calendar years; 19
456456
457457 (ii) Has participated in the preparation of at least 30 reserve studies 20
458458 within the prior 3 calendar years while employed by a firm that prepares reserve studies; 21
459459
460460 (iii) Holds a current license from the State Board of Architects or the 22
461461 State Board for Professional Engineers; or 23
462462
463463 (iv) Is currently designated as a reserve specialist by the Community 24
464464 Association Institute or as a professional reserve analyst by the Association of Professional 25
465465 Reserve Analysts; 26
466466
467467 (2) Be available for inspection and copying by any unit owner; 27
468468
469469 (3) Be reviewed by the governing body of the condominium in connection 28
470470 with the preparation of the annual proposed budget; and 29
471471
472472 (4) Be summarized for submission with the annual proposed budget to the 30
473473 unit owners. 31
474474
475475 (F) (1) THIS SUBSECTION APPLI ES ONLY TO A CONDOMINIUM IN 32
476476 HOWARD COUNTY. 33
477477 SENATE BILL 777 11
478478
479479
480480 (2) THE GOVERNING BODY OF A CONDOMINIUM SHALL , IN 1
481481 CONSULTATION WITH A PERSON IDENTIFIED UN DER SUBSECTION (E)(1) OF THIS 2
482482 SECTION, DEVELOP A FUNDING PL AN TO DETERMINE HOW TO FULLY FUND THE 3
483483 RESERVES NECESSARY U NDER THIS SECTION . 4
484484
485485 (3) IN DEVELOPING THE FUN DING PLAN UNDER THIS SUBSECTION, 5
486486 THE GOVERNING BODY S HALL CONSIDER THE FO LLOWING METHODS TO A CHIEVE 6
487487 THE RESERVE FUNDING UNDER THIS SECTION : 7
488488
489489 (I) COMPONENT OR FULL FUN DING METHOD; 8
490490
491491 (II) CASH FLOW METHOD ; 9
492492
493493 (III) BASELINE FUNDING METH OD; 10
494494
495495 (IV) THRESHOLD CASH FLOW M ETHOD; AND 11
496496
497497 (V) OTHER FUNDING METHODS CONSISTENT WITH GENERALLY 12
498498 ACCEPTED ACCOUNTING PRINCIPLES. 13
499499
500500 (4) A FUNDING PLAN DEVELOP ED UNDER THIS SUBSEC TION SHALL 14
501501 PRIORITIZE ADEQUATE AMOUNTS FOR REPAIR A ND REPLACEMENT OF CO MMON 15
502502 ELEMENTS WITH CONSID ERATION GIVEN TO THE HEALTH AND SAFETY OF MEMBERS 16
503503 OF THE CONDOMINIUM . 17
504504
505505 (5) A GOVERNING BODY SHALL REVIEW PROGRESS TOWA RD 18
506506 COMPLIANCE WITH THE FUNDING PLAN DEVELOP ED UNDER THIS SUBSECTIO N AT 19
507507 EACH ANNUAL MEETING OF THE GOVERNING BOD Y. 20
508508
509509 11B–112.2. 21
510510
511511 (c) (1) The annual budget shall provide for at least the following items: 22
512512
513513 [(1)] (I) Income; 23
514514
515515 [(2)] (II) Administration; 24
516516
517517 [(3)] (III) Maintenance; 25
518518
519519 [(4)] (IV) Utilities; 26
520520
521521 [(5)] (V) General expenses; 27
522522
523523 [(6)] (VI) Reserves; and 28
524524 12 SENATE BILL 777
525525
526526
527527 [(7)] (VII) Capital expenses. 1
528528
529529 (2) IN ADDITION TO THE RE QUIREMENTS OF PARAGR APH (1) OF THIS 2
530530 SUBSECTION, IN HOWARD COUNTY, THE ANNUAL BUDGET SHA LL PROVIDE FOR 3
531531 REPLACEMENT COST IF THE ESTIMATED REPLACEMEN T COST IS GREATER TH AN 4
532532 $10,000 AS DETERMINED BY THE MOST RECENT RESERVE STUDY OR UPDATED 5
533533 RESERVE STUDY . 6
534534
535535 (d) (1) (I) THIS PARAGRAPH DOES NOT APPLY TO A HOMEOWNERS 7
536536 ASSOCIATION IN HOWARD COUNTY. 8
537537
538538 (II) Subject to [paragraph (2)] SUBPARAGRAPH (III) of this 9
539539 [subsection] PARAGRAPH , reserves provided for in the annual budget under subsection (c) 10
540540 of this section shall be the funding amount recommended in the most recent reserve study 11
541541 completed under § 11B–112.3 of this title. 12
542542
543543 [(2)] (III) If the most recent reserve study was an initial reserve study, the 13
544544 governing body shall, within 3 fiscal years following the fiscal year in which the initial 14
545545 reserve study was completed, attain the annual reserve funding level recommended in the 15
546546 initial reserve study. 16
547547
548548 (2) (I) THIS PARAGRAPH APPLIE S ONLY TO A HOMEOWNERS 17
549549 ASSOCIATION IN HOWARD COUNTY. 18
550550
551551 (II) SUBJECT TO SUBPARAGRA PH (III) OF THIS PARAGRAPH AN D 19
552552 IN ACCORDANCE WITH T HE FUNDING PLAN UNDE R § 11B–112.3(F) OF THIS TITLE, 20
553553 RESERVES PROVIDED FOR IN THE ANNUAL BU DGET UNDER SUBSECTIO N (C) OF THIS 21
554554 SECTION SHALL : 22
555555
556556 1. BE THE FUNDING AMOUNT RECOMMENDED IN THE 23
557557 MOST RECENT RESERVE STUDY OR UPDATED RES ERVE STUDY COMPLETED UNDER § 24
558558 11B–112.3 OF THIS TITLE; AND 25
559559
560560 2. BE DEPOSITED IN THE R ESERVE ACCO UNT ON OR 26
561561 BEFORE THE LAST DAY OF EACH FISCAL YEAR . 27
562562
563563 (III) IF THE MOST RECENT RE SERVE STUDY WAS AN I NITIAL 28
564564 RESERVE STUDY , THE GOVERNING BODY S HALL, WITHIN 10 FISCAL YEARS 29
565565 FOLLOWING THE FISCAL YEAR IN WHICH THE IN ITIAL RESERVE STUDY WAS 30
566566 COMPLETED , ATTAIN THE ANNUAL RESERVE F UNDING LEVEL RECOMME NDED IN 31
567567 THE INITIAL RESERVE STUDY. 32
568568
569569 (IV) A HOMEOWNERS ASSOCIATI ON SHALL REVIEW THE 33
570570 RESERVE STUDY ANNUAL LY FOR ACCURACY . 34 SENATE BILL 777 13
571571
572572
573573
574574 11B–112.3. 1
575575
576576 (a) (1) In this section[, “reserve] THE FOLLOWING WORDS HAVE THE 2
577577 MEANINGS INDICATED. 3
578578
579579 (2) “RESERVE study” means a study of the reserves required for future 4
580580 major repairs and replacement of the common areas of a homeowners association that: 5
581581
582582 [(1)] (I) Identifies each structural, mechanical, electrical, and plumbing 6
583583 component of the common areas and any other components that are the responsibility of 7
584584 the homeowners association to repair and replace; 8
585585
586586 [(2)] (II) States the estimated remaining useful life of each identified 9
587587 component; 10
588588
589589 [(3)] (III) States the estimated cost of repair or replacement of each 11
590590 identified component; and 12
591591
592592 [(4)] (IV) States the estimated annual reserve amount necessary to 13
593593 accomplish any identified future repair or replacement. 14
594594
595595 (3) “UPDATED RESERVE STUDY ” MEANS, FOR THE COMMON 15
596596 ELEMENTS SINCE THE PRIOR RESERVE STUDY WAS COMPLETED : 16
597597
598598 (I) ANALYZING ANY WORK PE RFORMED; 17
599599
600600 (II) REVISING REPLACEMENT COST, REMAINING LIFE , AND 18
601601 USEFUL LIFE ESTIMATE S; AND 19
602602
603603 (III) IDENTIFYING: 20
604604
605605 1. WORK PERFORMED AND AM OUNTS SPENT; AND 21
606606
607607 2. WHETHER ANY MAINTENAN CE CONTRACTS ARE IN 22
608608 PLACE. 23
609609
610610 (b) (1) This section applies only to a homeowners association: 24
611611
612612 (i) That has responsibility under its declaration for maintaining and 25
613613 repairing common areas; and 26
614614
615615 (ii) For which the total initial purchase and installation costs for all 27
616616 components identified in subsection (a)(1) of this section is at least $10,000. 28
617617 14 SENATE BILL 777
618618
619619
620620 (2) This section does not apply to a homeowners association that issues 1
621621 bonds for the purpose of meeting capital expenditures. 2
622622
623623 (c) (1) This subsection applies only to a homeowners association established 3
624624 in: 4
625625
626626 (i) Prince George’s County on or after October 1, 2020; 5
627627
628628 (ii) Montgomery County on or after October 1, 2021; or 6
629629
630630 (iii) Any county other than Prince George’s County or Montgomery 7
631631 County on or after October 1, 2022. 8
632632
633633 (2) The governing body of the homeowners association shall have an 9
634634 independent reserve study completed not more than 90 calendar days and not less than 30 10
635635 calendar days before the meeting of the homeowners association required under § 11
636636 11B–106.1(a) of this title. 12
637637
638638 (3) The governing body shall have an updated reserve study completed 13
639639 within 5 years after the date of the initial reserve study conducted under paragraph (2) of 14
640640 this subsection and at least every 5 years thereafter. 15
641641
642642 (d) (1) (i) This paragraph applies only to a homeowners association 16
643643 established in Prince George’s County before October 1, 2020. 17
644644
645645 (ii) If the governing body of a homeowners association has had a 18
646646 reserve study conducted on or after October 1, 2016, the governing body shall have an 19
647647 updated reserve study conducted within 5 years after the date of that reserve study and at 20
648648 least every 5 years thereafter. 21
649649
650650 (iii) If the governing body of a homeowners association has not had a 22
651651 reserve study conducted on or after October 1, 2016, the governing body shall have a reserve 23
652652 study conducted on or before October 1, 2021, and an updated reserve study at least every 24
653653 5 years thereafter. 25
654654
655655 (2) (i) This paragraph applies only to a homeowners association 26
656656 established in Montgomery County before October 1, 2021. 27
657657
658658 (ii) If the governing body of a homeowners association has had a 28
659659 reserve study conducted on or after October 1, 2017, the governing body shall have an 29
660660 updated reserve study conducted within 5 years after the date of that reserve study and at 30
661661 least every 5 years thereafter. 31
662662
663663 (iii) If the governing body of a homeowners association has not had a 32
664664 reserve study conducted on or after October 1, 2017, the governing body shall have a reserve 33
665665 study conducted on or before October 1, 2022, and an updated reserve study at least every 34
666666 5 years thereafter. 35 SENATE BILL 777 15
667667
668668
669669
670670 (3) (i) This paragraph applies only to a homeowners association 1
671671 established in any county other than Prince George’s County or Montgomery County before 2
672672 October 1, 2022. 3
673673
674674 (ii) If the governing body of a homeowners association has had a 4
675675 reserve study conducted on or after October 1, 2018, the governing body shall have an 5
676676 updated reserve study conducted within 5 years after the date of that reserve study and at 6
677677 least every 5 years thereafter. 7
678678
679679 (iii) If the governing body of a homeowners association has not had a 8
680680 reserve study conducted on or after October 1, 2018, the governing body shall have a reserve 9
681681 study conducted on or before October 1, 2023, and an updated reserve study at least every 10
682682 5 years thereafter. 11
683683
684684 (e) Each reserve study AND, AS APPLICABLE , UPDATED RESERVE STUDY 12
685685 required under this section shall: 13
686686
687687 (1) Be prepared by a person who: 14
688688
689689 (i) Has prepared at least 30 reserve studies within the prior 3 15
690690 calendar years; 16
691691
692692 (ii) Has participated in the preparation of at least 30 reserve studies 17
693693 within the prior 3 calendar years while employed by a firm that prepares reserve studies; 18
694694
695695 (iii) Holds a current license from the State Board of Architects or the 19
696696 State Board for Professional Engineers; or 20
697697
698698 (iv) Is currently designated as a reserve specialist by the Community 21
699699 Association Institute or as a professional reserve analyst by the Association of Professional 22
700700 Reserve Analysts; 23
701701
702702 (2) Be available for inspection and copying by any lot owner; 24
703703
704704 (3) Be reviewed by the governing body of the homeowners association in 25
705705 connection with the preparation of the annual proposed budget; and 26
706706
707707 (4) Be summarized for submission with the annual proposed budget to the 27
708708 lot owners. 28
709709
710710 (F) (1) THIS SUBSECTION APPLI ES ONLY TO A HOMEOWNERS 29
711711 ASSOCIATION IN HOWARD COUNTY. 30
712712
713713 (2) A HOMEOWNERS ASSOCIATI ON SHALL, IN CONSULTATION WITH A 31
714714 PERSON IDENTIFIED UN DER SUBSECTION (E)(1) OF THIS SECTION , DEVELOP A 32 16 SENATE BILL 777
715715
716716
717717 FUNDING PLAN TO DETE RMINE HOW TO FULLY FUND THE RE SERVES NECESSARY 1
718718 UNDER THIS SECTION . 2
719719
720720 (3) IN DEVELOPING THE FUN DING PLAN UNDER THIS SUBSECTION, 3
721721 THE HOMEOWNERS ASSOCIATION SHALL CONSIDER THE F OLLOWING METHODS TO 4
722722 ACHIEVE THE RESERVE FUNDING UNDER THIS S ECTION: 5
723723
724724 (I) COMPONENT OR FULL FUNDING METHOD ; 6
725725
726726 (II) CASH FLOW METHOD ; 7
727727
728728 (III) BASELINE FUNDING METH OD; 8
729729
730730 (IV) THRESHOLD CASH FLOW M ETHOD; AND 9
731731
732732 (V) OTHER FUNDING METHODS CONSISTENT WITH GENERALLY 10
733733 ACCEPTED ACCOUNTING PRINCIPLES. 11
734734
735735 (4) A FUNDING PLAN DEVELOP ED UNDER THIS SUBSECTION SHALL 12
736736 PRIORITIZE ADEQUATE AMOUNTS FOR REPAIR A ND REPLACEMENT OF CO MMON 13
737737 ELEMENTS WITH CONSID ERATION GIVEN TO THE HEALTH AND SAFETY OF MEMBERS 14
738738 OF THE HOMEOWNERS AS SOCIATION. 15
739739
740740 (5) A HOMEOWNERS ASSOCIATI ON SHALL REVIEW PROG RESS 16
741741 TOWARD COMPLIANCE W ITH THE FUNDING PLAN DEVELOPED UNDER THIS 17
742742 SUBSECTION AT EACH A NNUAL MEETING OF THE HOMEOWNERS ASSOCIATI ON. 18
743743
744744 SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 19
745745 October 1, 2025. 20
746746