State Department of Assessments and Taxation – Local Reimbursement for Administration Costs – Alterations
HB0292 requires cooperative housing corporations, residential condominiums, and certain homeowners associations to strengthen how they plan for and fund reserve accounts used for major repairs and replacements of common elements or common areas. The bill expands and clarifies reserve study requirements by defining what a reserve study must include, adding a concept of an updated reserve study, and requiring studies to identify components, estimated useful life, repair or replacement costs, and component size or quantity. It also requires annual review of the most recent reserve study and reserves, and it directs governing bodies to prepare a reserve funding plan in consultation with a qualified reserve professional.
The bill also changes how annual budgets must treat reserves. For covered associations and condominiums, the annual budget must include reserve funding, including replacement costs over $10,000 as determined by the most recent reserve study or updated reserve study, and the required reserve amount must generally be deposited by the last day of each fiscal year. For initial reserve studies, the bill extends the time to reach the recommended funding level from 3 fiscal years to 5 fiscal years. It further allows a governing body, by two-thirds vote, to make a financial hardship determination and reasonably deviate from reserve funding requirements for up to one fiscal year, with a possible one-year renewal, provided the entity documents good-faith efforts to restore funding and gives notice to members before the vote.
The bill amends provisions in the Corporations and Associations Article and the Real Property Article governing cooperative housing corporations, residential condominiums, and homeowners associations. It updates statutory definitions of reserve studies, adds updated reserve studies, requires annual review of reserve adequacy, and mandates reserve funding plans that prioritize essential health, safety, structural, and infrastructure needs. It also changes budget and reserve-account rules by requiring reserve amounts to be included in annual budgets and deposited on a set schedule, while preserving limited flexibility for hardship-based deviations. These changes affect governing boards, unit owners, lot owners, and reserve-study professionals, and they apply differently depending on when and where the community was established.
The bill appears generally supportive of stronger long-term financial planning for common-interest communities, with an emphasis on preventing underfunded reserves and ensuring money is available for critical repairs. The structure of the bill suggests a policy preference for more disciplined reserve budgeting, more frequent review, and greater transparency to owners. At the same time, the inclusion of a hardship exception indicates recognition that some communities may struggle to meet the new funding targets immediately.
The main point of contention is likely the balance between financial protection and affordability. Associations may view the new reserve-funding requirements, annual review obligations, and tighter study standards as necessary but potentially costly, especially where assessments must be increased to meet recommended funding levels. The hardship provisions appear designed to address that concern by allowing limited deviations, but only with a two-thirds vote, notice to owners, documentation of good-faith efforts, and a short duration. Another possible issue is the expanded authority for governing bodies to determine minimum-cost thresholds and select among funding methods, which may raise questions about discretion, consistency, and owner oversight.