Maryland Passes Priority Lien Bill and other Legislative Updates for 2011

Date: July 11, 2011

Priority Lien - PASSES!!!

After 17 years of pursuing this legislation, Maryland has passed a priority lien bill. Pursuant to this new law, Association liens have a limited priority over the claim of a mortgage holder whose loan is entered into on or after October 1, 2011. The Association's priority is limited to four months of assessments with a cap of $1,200. This priority amount will be paid from the funds of any foreclosure sale prior to the claim of any other creditor, including a mortgage holder. While this law applies only to future mortgages, it will quickly become an important collection tool for Associations, who today often see their liens extinguished by foreclosure with no payment made towards the delinquency.

Two other notable bills affecting community associations were also passed by the General Assembly and will take effect October 1, 2011. They are:

HO6 Policies
Condominiums may now amend their Bylaws to require individual owners to obtain HO6 policies covering their units. Pursuant to the new law, such an amendment can be adopted by a majority vote of all owners. In recognition of the importance of this issue, the legislature has reduced the required approval vote for this type of amendment from the usual 66 2/3% vote. Ensuring that owners have necessary insurance is important for Condominiums, particularly given an owner's obligation to pay $5,000 of a deductible under Section 11-114 of the Maryland Condominium Act.

Division of Consumer Protection
The enforcement powers of the Division of Consumer Protection in the Office of the Attorney General have been expanded to include review of election procedures for Homeowners Associations in Maryland. Anyone in an HOA will be able to file a complaint concerning an election with the Division of Consumer Protection and request that they investigate.

Finally, there has been recent legislation affecting community associations in Prince George's County. On June 14, 2011, the County Council adopted legislation creating a Common Ownership Communities Program to provide educational and dispute resolution services in a manner similar to the CCOC existing in Montgomery County. Regulations for the operation of this program are currently being drafted, and it is anticipated that it will be operational in Prince George's County starting on or about August 1, 2011.