Cowie Law Group, P.C. is hiring an Associate Attorney licensed in Maryland for our law practice focused on Construction / Real Estate Litigation & Condo / HOA Law

Job Posting:

COWIE LAW GROUP, P.C. • Full-time • Washington DC-Baltimore Area (Hybrid)

Job description

Linkedin Job Post

Associate Attorney – Construction / Real Estate Litigation & HOA Law

Cowie Law Group, P.C. is hiring and seeking  it’s for an associate attorney position

Qualifications:

3 – 5 years of litigation experience.

Maryland Bar required, Maryland and DC preferred.

Associate Attorney Role Description:Work remotely or in-office.

Opportunity for growth and advancement in an expanding law practice.

Competitive compensation, health / dental benefits, and retirement savings plan.

Our firm is known for handling construction defect litigation and practicing Condominium / HOA law in Maryland and Washington, D.C. We also practice business/commercial litigation and handle general construction law and real estate matters (e.g., mechanic’s liens, contracts and land development).This is a full-time hybrid role for an Associate Attorney. The primary responsibilities include providing legal advice on construction and real estate disputes, Condo / HOA general counsel matters, representing clients in litigation, drafting legal documents, negotiating contracts and settlements, conducting detailed legal research, attending meetings, mediations, court hearings, and site inspections.

INQUIRIES:

Please submit resume and writing sample in confidence to: cmc@cowielawgroup.com with subject heading “ Maryland / DC Associate Attorney Position”

Maryland & Washington DC Attorneys

410-327-3800 | 301-830-8315

#MarylandAttorneyJobPosting

#WashingtonCAttorneyJobPosting

#MarylandHOALawyerPosition

#MarylandCondominiumAttorneyPosition

#MarylandConstructionLawAttorneyPosition

The post Cowie Law Group, P.C. – Hiring Associate Attorney licensed in Maryland for our Construction / Real Estate Litigation & Condo / HOA Law Practice appeared first on COWIE LAW GROUP, P.C.

Maryland Community Association Law Updates

Condos, HOA & Co-ops

2025-2026

In October 2025 the Maryland General Assembly enacted legislation that reshapes the legal obligations and governance frameworks for condominium associations (“Condos”), homeowners associations (“HOAs”), and housing cooperative corporations (‘Co-ops”) (collectively “Community Associations” or “Associations”). Here’s a summary of this legislation:

1. Reserve Account Budgeting Reforms, including “Funding Plans” and Hardship Exception (SB 63/HB 292)
2. Restrictions on Association Ability to Regulate Family Child Care Businesses (HB 785)
3. Associations Prohibited from Collecting Owners’ Sensitive Information and Data  (SB 540 / HB 755)
4. Election Reforms, including Independent Party Requirement for Conducting Elections (SB 758)
5. Books and Records – No Fee for Reviewing Financial Statements (SB 758)
6. Expanded Consumer Protection Enforcement of Condo & HOA Acts (SB 758)
7. Required Accessory Dwelling Unit Accommodation for HOAs (SB 891 / HB 1466)
8. Updated Permissible Standards for Owner Installation of Solar Collector Systems (SB 120 / HB 4)
9. Mandatory Registration for PG County Community Associations (HB 360)

“SB” and “HB” refer to Senate Bill and House Bill, respectively. Legislators introduced these bills in the 2025 Regular Legislative Session of the Maryland General Assembly, and the Governor has approved them. Now, the bills are enacted and part of the Maryland Condominium Act (“MD Condo Act”), Maryland Homeowners Association Act (“MD HOA Act”), and Maryland Cooperative Housing Corporation Act (“MD Co-Op Act”). Details below.

Reserve Funding Reforms: Reserve Studies, Funding Plans, Borrowing, Funding Deadline, and “Catch Up” / Hardship Exceptions

SB 63 and HB 292 (enacted as Chapters 518 & 519 of the 2005 Legislative Session), effective October 1, 2025

This legislation introduced significant changes affecting reserve account funding, including new criteria for reserve studies and a requirement that Associations adopt a “funding plan” to achieve their legal funding obligations.

What are Reserve Accounts and Reserve Studies?

As of October 1, 2022 all Maryland Community Associations  are required to maintain a reserve account which must be funded annually based upon a reserve study that is updated every 5 years. See, Cowie Law Group article, “Reserve Studies and reserve Funding in Maryland.” A reserve account is where a Community Association accumulates and saves funds for expensive future repairs or replacement of major common facilities or “components” for which an association is responsible (e.g., replacement of aging roofs, exterior siding, recreational facilities, street paving, stormwater management facilities, etc.).

A reserve study is the budgeting tool a Community Association uses to determine the  amount of money that should be deposited in the reserve account annually to ensure it will have sufficient funds available to pay for the future repair or replacement. A “normal useful life” and “the estimated remaining useful life” expectancy is assigned to each major components (e.g., a 25-year roof) as well as an estimated cost to repair or replace those components at the end of their useful life. MD Condo Act § 11-109.4(a)(2)(i) and (iii); MD HOA Act § 11B-112.3(a)(2)(ii)and (iii);  MD Co-op Act § 5–6B–26.1(a)(2)(ii) and (iii). Based on these projections, an engineer or reserve analysist estimates the amount of money a Community Association should allocate to its reserve account each year to ensure necessary funds will be available when the time comes to repair and replace the component. MD Condo Act § 11-109.4(a)(2)(iv); MD HOA Act § 11B-112.3(a)(2)(iv);  MD Co-op Act § 5–6B–26.1(a)(2)(iv). These findings along with backup information are presented to the Board of Directors in the form of a written report typically called a “reserve study.”

Reserve study estimates are updated every 5 years and annual reserve fund allocations adjusted to account for changing circumstances (e.g., aging of building components, inflation and construction costs, common area components added or removed, etc.). MD Condo Act § 11-109.4(c)(3) and (d)(3); MD HOA Act §§ 11B-112.3(c)(3)and (d)(3); MD Co-op Act § 5–6B–26.1(b)(3) and (c)(3). Minor, regularly occurring, maintenance, repair or replacement expenses are not included in reserve studies because they are designed to plan for large, infrequent and predictable expenses, not routine operating costs addressed by the annual operating budget.

Practice Tip for Hiring a Reserve Study Analysts:

When hiring a reserve study analyst, consider where the company and its employees are located. Many reserve study companies who perform reserve studies in Maryland are located in the Midwest. This can be problematic when an Association needs to have its reserve study specialist come to the community in person, such as to review unanticipated issues that arise or attend in person board meetings or site inspections with developers/ builders. For this reason many Community Associations prefer to have a reserve analyst whose office is within driving distance of their community.

New Reserve Study Criteria

Itemized Lists & Quantities of Components:

Reserve study criteria have been updated. Reserve Studies must now include:

(i) an “itemized list” identifying each of the included components (structural, mechanical, electrical, plumbing and other components that are the responsibility of the Association); as well as

(ii) the “quantity or size” of each component (e.g., number of units or square footage).

MD Condo Act § 11-109.4(a)(2)(i) and (v); MD HOA Act § 11B-112.3(a)(2)(i) and (v);  MD Co-op Act § 5–6B–26.1(a)(2)(i) and (v). Itemizing and quantifying each included component was already common practice but is now expressly required by law.

Minor Component Exclusion:

Community Associations are now authorized to exclude components from the reserve study that do not meet “a minimum cost of repair or replacement” threshold to be established by the Association. This allows an association to exclude components that do not need to be funded over long periods of time because the repair / replacement cost is minimal or the component is otherwise reasonably addressed by expenses allocated to the association’s yearly operating budget. MD Condo Act § 11-109.4(a)(2)(i)2; MD HOA Act § 11B-112.3(a)(2)(i)2;  MD Co-op Act § 5–6B–26.1(a)(2)(i)2. Excluding minor components from a reserve study was already a common practice but is now expressly permitted by law.

Updated Reserve Studies Defined:

Maryland law already required Community Associations to update the initial reserve study every 5 years. The purpose of a basic “updated reserve study” is to update the prior reserve study by revising, as necessary, the previously estimated replacement costs and remaining useful life estimates while taking into account: the current condition (aging) of the components; any interim repair or replacement work performed and reserve spending that has occurred since the last reserve study; any existing maintenance contracts which may affect needed reserves. Based on this new data, the reserve analyst comes up with an adjusted annual reserve funding contribution amount to ensure reserve funding stays on track.

The law now defines an “updated reserve study,” as a report which:

• • updates the previous reserve study completed 5 years earlier;
  • revises replacement costs, remaining life, and useful life estimates;
  • analyzes repair or replacement work performed and amount spent; and
  • identifies existing maintenance contracts.

MD Condo Act § 11-109.4(a)(3); MD HOA Act §§ 11B-112.3(a)(3); MD Co-op Act § 5–6B–26.1(a)(3).

Reserve Account Funding Plans

The Funding Plan:

All Community Association’ are now required to develop a “funding plan,” in consultation with a reserve specialist, architect, or engineer, for the purposes of determining how to achieve the legally required funding of the Association’s reserve account. MD Condo Act § 11-109.4(f)(1); MD HOA Act § 11B-112.3(f)(1);  MD Co-op Act § 5–6B–26.1(g)(1).

Selection of a Funding Method:

Each funding plan must be based on a one of the following recognized funding methods:

(i) The component method;

(ii) The cash flow method;

(iii) The baseline funding method;

(iv) The threshold cash flow method; or

(v) Any other funding method consistent with GAAP.

MD Condo Act § 11-109.4(f)(2); MD HOA Act § 11B-112.3(f)(2);  MD Co-op Act § 5–6B–26.1(g)(2). The reserve specialist, architect, or engineer will design a funding plan based on the funding method selected by the Association.

Comparison of Funding Methods:

The key difference between these funding methods is the level risk the Association is willing to accept. Each funding method reflects a different balance between risk, predictability, assessment impact, and long-term financial stability. See Cowie Law Group article: “Comparison of Permitted Reserve Funding Methods for Maryland Condominiums, HOAs and Co-ops.” Traditionally, most reserve funding has followed the so-called “component method,” which is considered the most conservative approach. While Maryland law now specifically allows other less conservative funding methods, boards must remember that choosing the least expensive option does not eliminate financial responsibility—it merely shifts risk to future boards and unit owners. Selecting a reserve funding method is a critical financial decision that directly impacts an Association’s long-term stability, disclosure obligations, and risk of future special assessments. The type of funding can also affect the ability of an Association to obtain favorable loans and insurance rates. Boards should ensure that the chosen method is clearly disclosed in the reserve study and annual budget materials and revisited regularly as conditions change. Likewise, boards should keep in mind that reserve funding decisions are evaluated through the lens of fiduciary duty, reasonableness, and foreseeability, especially when Associations face major repairs or litigation.

Funding Plan Priorities (the “prioritized items”):

Funding plans adopted by an Association must prioritize common element / area components necessary for “health, safety, and well-being of occupants.” MD Condo Act § 11-109.4(f)(3); MD HOA Act § 11B-112.3(f)(3);  MD Co-op Act § 5–6B–26.1(g)(3). This includes “ensuring structural integrity” and essential functioning of plumbing, sewer, HVAC, and electrical infrastructure, and “other essential or critical purposes determined by the Association.” MD Condo Act § 11-109.4(f)(3); MD HOA Act § 11B-112.3(f)(3);  MD Co-op Act § 5–6B–26.1(g)(3). Even in instances of “financial hardship” (discussed below”), the “prioritized items” must continue to be funded such that there will be adequate amounts for repair and replacement.

Annual Funding Plan Progress Reviews:

All Community Association governing bodies are now required to regularly review their “progress toward compliance with the funding plan …at each annual meeting.” MD Condo Act § 11-109.4(f)(5); MD HOA Act § 11B-112.3(f)(5); MD Co-op Act § 5–6B–26.1(g)(5). The statute specifically states that “the reserve and the most recent reserve study or updated reserve study” must be “annually review[ed] … to determine whether there is adequate funding in accordance with the funding plan.” MD Condo Act § 11-109.2(c)(4)(i); MD HOA Act § 11B-112.2 (d)(4)(i); MD Co-op Act § 5–6B–26.1(f)(1)(i). Community Associations are not required to commission a new “a reserve study or updated reserve study” as part of performing it annual review unless such a study is otherwise required by law in the ordinary course (i.e, every 5 years following the initial reserve study updated). MD Condo Act § 11-109.2(c)(4)(ii); MD HOA Act § 11B-112.2 (d)(4)(ii); MD Co-op Act § 5–6B–26.1(f)(2).

Permitted 5 Year Borrowing from Reserve Accounts

Associations are now specifically permitted to borrow from their reserve account funds so long as the funds are repaid “within 5 years after their use.” MD Condo Act § 11-109.4(f)(4); MD HOA Act § 11B-112.3(f)(4);  MD Co-op Act § 5–6B–26.1(g)(4). The borrowed funds may be used for purposes other than repair or replacement of the common element and common area components as specified in the Association’s funding plan. Borrowing from reserve funds has been a common practice for cash-strapped Community Associations, but now it is expressly authorized by the law under these conditions.

Amount and Timing Requirements for Annual Reserve Funding

This legislation mandates that the monetary amount of reserves specified in an Association’s annual budget to be placed in the reserve account must equal the funding amount recommended in the most recent reserve study “or updated reserve study” and the Association’s funding plan. MD Condo Act § 11-109.2(c)(1) (i); MD HOA Act § 11B-112.2 (d)(1) (i); and MD Co-op Act § 5–6B–26.1(f)(1)(i)1. Additionally, that monetary amount must be deposited in the Association’s reserve account “on before the last day of each fiscal year.” MD Condo Act § 11-109.2(c)(1)(ii); MD HOA Act § 11B-112.2 (d)(1)(ii); MD Co-op Act § 5–6B–26.1(f)(1)(i)1.

There are two exceptions to the amount and timing requirements: (i) the initial reserve study 5-year catch up exception; and (ii) the financial hardship exception, both discussed below.

5-Year Catch Up Exception for Initial Reserve Study Funding

Community Associations obtaining their first reserve study (the initial reserve study) now have a period of 5-years fiscal years (budget cycles) to meet (“catch up” with) the funding recommendations specified in the initial reserve study in accordance with the Association’s funding plan. MD Condo Act § 11-109.2(c)(2); MD HOA Act § 11B-112.2 (d)(2); and MD Co-op Act § 5–6B–26.1(f)(1)(ii).  The 5 year period commences following the fiscal year in which the initial reserve study was completed. This 5-year grace period is an exception to the legal requirement that the monetary amount of reserves specified in the reserve study must be placed in the Association’s reserve account “on before the last day of each fiscal year.” MD Condo Act § 11-109.2(c)(1) (i) and (ii); MD HOA Act § 11B-112.2 (d)(1) (i) and (ii); and MD Co-op Act § 5–6B–26.1(f)(1)(i)1.

Prior law gave an Association only 3-years from the initial reserve study to reach recommended reserve funding level levels. As such, the new legislation adds an additional 2 years.

2- Year Financial Hardship Exception

Associations facing “financial hardship” now have a statutory mechanism to delay or deviate from their budgeted reserve funding requirements for up to 2 budget cycles.

Financial Hardship Determination:

For this exception to apply, an Association must first declare a financial hardship. This requires the Association’s governing body to make a determination, by a 2/3rds vote, that the Association’s and its members “are experiencing a financial hardship that limits the ability to fund reserves required” to be deposited into the reserve account at the end of each fiscal year, or, in the case of an initial reserve study, required to be deposited within 5 fiscal years. MD Condo Act § 11-109.2(c)(3)(i); MD HOA Act § 11B-112.2 (d)(3)(i); MD Co-op Act § 5–6B–26.1(f)(2)(i).

Financial Hardship Deviation from Reserve Funding Requirement:

Once a “financial hardship determination” is made, an Association “may reasonably deviate from that reserve funding requirement.” Condo Act § 11-109.2(c)(3)(ii)1; MD HOA Act § 11B-112.2 (d)(3)(ii)1; MD Co-op Act § 5–6B–26.1(f)(2)(ii)1. However, the ability to “reasonably deviate” does not apply “prioritized items” in the Association’s funding plan. Even with a financial hardship determination, the Association must still “at least” continue to provide adequate reserve funding for repair or replacement of  the “prioritized items” in its funding plan (i.e., the common elements / areas identified as necessary for health, safety and structural integrity of the community, including essential systems, such as plumbing, HVAC, electrical). MD Condo Act § 11-109.2(c)(3)(ii)2; MD HOA Act § 11B-112.2 (d)(3)(ii)2; and MD Co-op Act § 5–6B–26.1(f)(2)(ii)2.

Requirements for Continuing Deviation from Reserve Funding Beyond 1 Year:

A financial hardship deviation from reserve funding may continue for up to 2 consecutive fiscal years if the statutory procedures are followed. The initial financial hardship determination allows the Association to deviate from the reserve funding requirements for “1 fiscal year [after] the financial hardship determination” is made by a 2/3rds majority vote of the governing body. MD Condo Act § 11-109.2(c)(3)(iii)1; MD HOA Act § 11B-112.2 (d)(3)(iii)1; MD Co-op Act § 5–6B–26.1(f)(2)(iii)1. Thereafter, a financial hardship determination may be renewed by a 2/3rds majority vote the Association’s governing body, which allows the Association to deviate from the reserve funding requirements for one additional fiscal year following the hardship renewal. MD Condo Act § 11-109.2(c)(3)(iii)2; MD HOA Act § 11B-112.2 (d)(3)(iii)2; and MD Co-op Act § 5–6B–26.1(f)(2)(iii)2.

Prior Notice of Financial Hardship Determination:

The Association’s membership (i.e., condominium unit owners, homeowner association lot owners, or co-op members) must be given notice before a financial hardship determination is made. Specifically, a  vote on a financial hardship determination (“initial or renewal) “must be taken only at a regular or special meeting,”  and all Association members must “be given reasonable notice” of the vote “in advance.” MD Condo Act § 11-109.2(c)(3)(v); MD HOA Act § 11B-112.2 (d)(3)(v); and MD Co-op Act § 5–6B–26.1(f)(2)(v).

Efforts to Resolve & Document Financial Hardship Determination:

During the financial hardship, the Community Association must make efforts to resolve the financial hardship, document those efforts, and make records of those efforts available for inspection by its membership. Specifically, the governing body is required to “[m]ake good faith efforts to resolve the financial hardship and resume funding of reserves” annually as required under the funding plan and reserve study. MD Condo Act § 11-109.2(c)(3)(iv)1; MD HOA Act § 11B-112.2 (d)(3)(iv)1; and MD Co-op Act § 5–6B–26.1(f)(2)(iv)1. These good faith efforts must be documented by the governing body and made available for examination and copying. MD Condo Act § 11-109.2(c)(3)(iv)2 and 3; MD HOA Act § 11B-112.2 (d)(3)(iv) 2 and 3; and MD Co-op Act § 5–6B–26.1(f)(2)(iv) 2 and 3.

New Prohibitions Against Regulating “Family Child Care Homes”

HB 785 (enacted as Chapter 375 of the 2025 Legislative Session), effective October 1, 2025

This legislation aims to address the Maryland’s child care shortage by making it easier for individuals to operate “Family Child Care Homes” in residential communities. The law achieves this by overriding Association governing documents and other legal restrictions of Community Associations (condos, HOAs, and Co-ops) that hinder or prohibit the establishment of these businesses. The law also extents to local jurisdictions. The Maryland Chamber of Commerce supported the HB 785 as a critical step to boost workforce participation by increasing the supply of accessible and affordable childcare, especially for infants and toddlers.

What Is a Family Child Care Home?

A “Family Child Care Home” is a residential use in which a homeowner or resident (a “Family Child Care Provider”) provides childcare services for a small number of children in the provider’s primary residence. In Maryland, these homes and providers are licensed and registered by the Maryland State Department of Education. As such these homes are subject to limits on the number of children, health and safety requirements, and ongoing regulatory oversight. There are two types of regulated homes: “Family child care home” (up to eight children) and “Large family child care home” (nine children to 12 children) (jointly referred to herein as “family child care homes”). Maryland Education Article § 9.5–301(e) and (g). Family child care homes are distinct from child care centers because they are operated within a dwelling unit, limited in scale, intended to be compatible with residential neighborhoods and treated under Maryland law as a form of residential use rather than a commercial enterprise

Traditional Treatment of Family Child Care Homes by Associations

Historically, condominiums, HOAs and co-ops frequently prohibited or restricted family child care homes through their governing documents. Common approaches include blanket bans on “businesses” or “commercial activity,” restrictions on increased traffic, signage, or non-resident activity, and enforcement actions based on zoning-style arguments or nuisance concerns. As a result, many Community Associations treat family child care operations as incompatible with residential use, even when the provider was properly licensed by the State.

Shift in Maryland Law in Favor of Family Child Care Homes

In recent years, Maryland lawmakers have taken the position that licensed family child care homes should be protected residential uses, and that community associations should not categorically prohibit them. This new legislation requires condominiums, HOAs and Co-ops to allow family child care homes, while still permitting “reasonable regulation” to address legitimate concerns such as safety, common area use, parking, and noise.

New Restrictions on Association’s Right to Regulate Family Child Care Homes

Community Associations Cannot Ban Family Child Care Homes:

Association governing documents may no longer prohibit or unreasonably restrict the establishment and operation of licensed family child care homes in Maryland. MD Condo Act § 11-111.1(c)(1)(i); MD HOA Act § 11B-111.1(c)(1)(i); MD Co-op Act § 5–6B–22.1(c)(1)(i). Maryland law now dictates that the operation of a “family child care home” or ‘“large family child care home”(up to 12 children) is classified as a permitted residential activity. MD Condo Act § 11-111.1(c)(2); MD HOA Act § 11B-111.1(c)(2); MD Co-op Act § 5–6B–22.1(c)(2).This means general covenants that restrict commercial or business activity cannot be used to ban them, provided they meet state-specific operational requirements. Any existing covenant, bylaw, rule, or restriction that bans family child care homes is now rendered unenforceable.

Use of Common Areas: 

Association governing documents may no longer prohibit or restrict patrons of family child care homes (e.g., parents, children, staff) from using the common elements/areas of the community (e.g., roads and sidewalks), except for reasonable rules applicable to all residents. MD Condo Act § 11-111.1(c)(1)(ii); MD HOA Act § 11B-111.1(c)(1)(ii); MD Co-op Act § 5–6B–22.1(c)(1)(ii).

Capacity Limits: 

Associations are prohibited from limiting the number of children served by a family child care home can care below the capacity authorized by the Maryland State Department of Education (i.e., 8 for a “family child care home” and 9 to 12 for a “large family child care home”). MD Condo Act § 11-111.1(c)(3); MD HOA Act § 11B-111.1(c)(3); MD Co-op Act § 5–6B–22.1(c)(3).

Permitted Reasonable Restrictions Associations May Place on Family Child Care Homes:

Associations may impose the following conditions on family child care homes.

Association Insurance Increases:

Associations may require family child care providers to pay for Association insurance increases “solely and directly attributable” family child care operations on a on a pro rata basis. MD Condo Act § 11-111.1(e)(1); MD HOA Act § 11B-111.1(e)(1); MD Co-op Act § 5–6B–22.1(e)(1).

Common Area Use Fees:

Associations may impose a nominal fee on a family child care providers for use of the common elements/areas not to exceed $50 per year. MD Condo Act § 11-111.1(e)(2); MD HOA Act § 11B-111.1(e)(2); MD Co-op Act § 5–6B–22.1(e)(2).

Prior Notification:

Associations may require a owners/residents to notify the Association before opening a family child care home. MD Condo Act § 11-111.1(f)(1); MD HOA Act § 11B-111.1(f)(1); MD Co-op Act § 5–6B–22.1(f)(1).

Provider Insurance Requirements:

Associations may require a family child care provider to obtain liability insurance in the amount required by State law. MD Condo Act § 11-111.1(g); MD HOA Act § 11B-111.1(g); MD Co-op Act § 5–6B–22.1(g).

Exemption for Age Restricted Communities – Only Applies to Co-ops

Age-restricted Co-ops (e.g., 55+ Co-op communities) are exempt from the new prohibitions on regulating family child care homes:

“This section does not apply to a cooperative housing corporation that is restricted for occupancy to individuals over a specified age.”

MD Co-op Act § 5–6B–22.1(b).

However, this age-restricted community exemption was not extended to condominiums and HOAs. In fact, HB 785 removed language from the statute that had previously exempted age restricted Condos and HOAs from the statutory provision applicable to family child care homes.  See former MD Condo Act § 11-111.1(b)(1) and former MD HOA Act § 11B-111.1(b)(1), both now stricken.

Thus, unlike Co-ops, there is no explicit age-restriction exemption in the statute for Condos and HOAs. It is possible that there was some legislative confusion because the “Fiscal and Policy Note” for HB 785 indicates that the age restricted exemption applies to all types of communities (Condos, HOAs and Co-ops) affected by the statute:

“The bill’s [HB 785’s] provisions do not apply to housing that is restricted for occupancy to individuals over a specified age.”

Fiscal and Policy Note on HB 785. Legislators often rely upon these Fiscal and Policy Notes published by the Department of Legislative Services which are intended to summarize the effect of a Bill as enacted. There is no indication that this quoted language only applies to Co-ops as opposed to Condos and HOAs..

Associations Prohibited from Requiring Owners to Provide Sensitive Information and Data 

SB 540 / HB 755 (enacted as Chapters 522 & 523 of the 2025 Legislative Session), effective October 1, 2025

This legislation limits the ability of  Community Associations to collect “sensitive information,” defined as:

(i) Social Security card or Social Security number;

(ii) Individual Taxpayer Identification Number;

(iii) Birth certificate;

(iv) Racial or ethnic origin;

(v) National origin;

(vi) Citizenship or immigration status;

(vii) Religious or philosophical beliefs; or

(viii) Medical records.

MD Condo Act § 11-108.2(a)(1); MD HOA Act § 11B-111.11(a)(1); MD Co-op Act § 5–6B–23.2(a)(3). Associations may not require their members or occupants, or the guests or children of members or occupant, to provide this “sensitive information” as a condition to using a recreational common area. However, this new law does not prevent Community Associations from requiring a government issued photo identification, such as a driver’s license, as a condition use of a recreational common area. MD Condo Act § 11-108.2(a)(2); MD HOA Act § 11B-112.12(a)(2); MD Co-op Act § 5–6B–23.2(a)(ii).

Election Reforms – Independent Party Requirement

SB 758 (enacted as Chapter 512 of the 2025 Legislative Session), effective October 1, 2025

This legislation changes the way Maryland condominiums and HOA conduct board elections.  Only “independent parties,” may now conduct elections for officers and board members. The legislation is intended to exclude those parties with a potential conflict of interest in the outcome. Significantly, most community management companies, who traditionally handled these elections, are now disqualified under this new law.

The “Independent Party Requirement” – Who is an “Independent Party” Permitted to Conduct Elections

Elections for officers and board members, “including the collection and counting of ballots and certifying of results.” may only be conducted by “independent parties.” MD Condo Act § 11-109(c)(17)(i); MD HOA Act § 11B-118(a)(1). To be a qualify as an “independent party,”, one must not be candidate in the election and must have “no conflict of interest regarding any candidate in the election.” MD Condo Act § 11-109(c)(17)(i)(1)-(2); MD HOA Act § 11B-118(a)(1)(i)-(ii).

Individual owners, community owned management companies, third-party vendors, and commercial technology platforms can all satisfying the independent party requirement if they meet the following additional criteria:

Unit and Lot Owners who Qualify as Independent Parties:

Condominium unit owners and HOA lot owners qualify as an independent party if they don’t campaign as and “electioneer for any candidate,” and are not objected to by more than 25% of eligible voters. MD Condo Act § 11-109(c)(17)(ii); MD HOA Act § 11B-118(a)(2)(ii).

Management Companies who Qualify as Independent Parties:

The Community Association’s property management is not considered an “independent party” and excluded from conducting elections unless owned “in-house” by the Association or its parent Association (i.e., master association). MD Condo Act § 11-109(c)(17)(iii); MD HOA Act § 11B-118(a)(2)(i). This rules out most property management companies as because they are typically third-party vendors hired, but not owned, by the Association. Any involvement of the Association’s non-qualified management company, such as by distributing ballots, collecting and counting votes and certifying results, would allow for election challenges on grounds of violating the statute.

Third-Party Elections Vendors or Election Technology Platforms:

The statute authorizes a Community Association’s to retain third-party vendors to conduct its elections or, alternatively, use commercial technology platforms to conduct elections. MD Condo Act § 11-109(c)(18); MD HOA Act § 11B-118(a)(2)(iii). A third-party vendor or election technology company affiliated with the Association’s existing management company or an owner could present a problem for statutory compliance and allow for election challenges on grounds of violating the statute. Also, if persons using an election technology platform are not “independent parties” this could also spawn litigation.

Other Options: Independent Election Committee or Legal Counsel:

Other options that would satisfy the Independent Party Requirement include appointment of an independent election committee or utilizing the Association’s legal counsel. See “Compliance Tips for Independent Party Requirement” below.

Election Accountability and Immunity from Personal Liability

Individuals conducting elections are legally mandated to ensure fairness and accountability for the election process and results. MD Condo Act § 11-109(c)(19); MD HOA Act § 11B-118(b).  However, should there be a claim of election irregularity, a unit or lot owner designated to conduct an election is not personally liable in conducting the election if they acted “in good faith.” MD Condo Act § 11-109(c)(20); MD HOA Act § 11B-118(c).

Conflicting Election Provisions in Governing Documents

Any provisions in governing documents, rules or regulations, that conflict with these new elections law requirements are now unenforceable and void. MD Condo Act § 11-109(c)(22); MD HOA Act § 11B-118(d).

Common Element Accommodation for Condominium Unit Owners

 Condominium Associations must make reasonable accommodations for unit owners to engage in organizing activities, including reasonable use of common areas, such as a clubhouse conference room, related to governance of the condominium such as campaigning for a candidate. MD Condo Act § 11-109(c)(21)(i). Likewise, boards of directors cannot prevent, or retaliate against, a unit owners for exercising their rights guaranteed under the law or governing document. MD Condo Act § 11-109(c)(21)(i).

Exception to Independent Party Requirement for Smaller, Member-Managed Condominiums.

For Maryland condominiums, the independent party requirement applies to elections:

“for officers or members … other than the full membership of the council of unit owners ….”

MD Condo Act § 11-109(c)(17)(i)(emphasis added). This language can be read to create a “carve out” exception for very small or informal condominiums where all owners (i.e., “the full membership of the council of unit owners”) make decisions together as the governing body. If everyone in the condominium is part of the governing body ( the “full membership”), there isn’t a smaller group among the “full membership” being elected, so the requirement to use an independent party to run the election does not apply. The carveout language does not exist in the amendments to the Maryland Homeowners Association Act. See MD HOA Act § 11B-118(a)(1).

Compliance Tips for Independent Party Requirement

Election challenges remain one of the most common sources of association litigation. As such, until there is more defining caselaw, it is prudent to interpret the Independent Party Requirement broadly to cover most aspects of election process. Although the statute specifically mentions “collection and counting of ballots and certifying of results.” there is no doubt that the practice of “conducting elections” is not limited to these specified activities. Conducting an Election also includes the calling for and collecting of nominations, preparation and dissemination of election materials (e.g., ballots, notices, proxies), etc. To avoid potential challenges to election procedures based on the Independent Party Requirement, it would be prudent to exclude those who do not fall within the definition of “independent parties” from participating in any part of the election process. As such, Associations without “in-house” management have a few options that don’t involve a third-party elections vendor or technology platforms, including:

Qualified Board Members:

If there are enough Board members who qualify as independent parties (i.e. are not candidates, are not campaigning for candidates, do not have other conflict of interest, or are not objected to by 25% of the voting membership), they can conduct the election without involvement of property management or any disqualified board members.

Independent Election Committee:

The Board can appoint an independent election committee to conduct elections in compliance with the law.  The committee could consist of unit owners (including any board members) who will not be candidates in the election or engage in electioneering/campaigning, and do not have a conflict of interest with any candidate.  If committee members later decide to become a candidate, engage in electioneering or develop a conflict of interest, or if 25% of the voting membership objects to the service of any committee member, they would need to be removed from the election committee.  (Objection by 25 % of the voting membership would likely occur by the filing of a petition for a special meeting to vote on the matter in accordance with the governing documents.) The appointment of an election committee should be done in an open Board meeting with advance notice to the unit owners in accordance with the governing documents. Election committees should be appointed in time for them to receive nominations, the call for which must be sent to all unit owners at least 45 days before the notice of the election is sent per the MD Condominium Act.

Legal Counsel:

Alternatively, while property management representatives are precluded from conducting elections by the new law, counsel for the Association is not.  As such, association counsel could be asked to conduct an election or could assist an election committee in doing so.

Boards should work with legal counsel to adopt written policies for conducting elections in compliance with the new law to guide the board and to provide notice to owners of the details about how elections will be conducted.

Books and Records – No Fee for Reviewing Financial Statements:

SB 758 (enacted as Chapter 512 of the 2025 Legislative Session), effective October 1, 2025

This bill prohibits condominium associations and HOAs from charging their owner members any fees for examining financial statements in person or receiving them electronically. The bill amends existing law allowing members to inspect certain association. Although Associations may still impose reasonable charges for copying and delivering of records, no charge may be imposed for in person examination of financial statements where they are maintained or electronic transmission of financial statements. MD Condo Act § 11-116(d); MD HOA Act § 11B-112(b). In practice, this means that owners can inspect financial statements at the manager’s office or in the common area facilities without charge and may request that financial statements be emailed to them without charge, two circumstances where association expense is minimal.

Expanded Consumer Protection Enforcement:

SB 758 (enacted as Chapter 512 of the 2025 Legislative Session), effective October 1, 2025.

Expanded Authority of  Consumer Protection Division to Enforce the Condominium and HOA

The Maryland Attorney General’s office, through its Division of Consumer Protection,  has traditionally had authority to enforce Maryland’s Condominium and HOA Acts to the extent that a violation “affects a consumer.” This legislation  removes the “affects a consumer” limitation and expands the authority of the Division of Consumer Protection of the Office of the Attorney General to enforce any violation of the Maryland Condominium Act or Homeowners Association Act to the full extent of its authority as granted in the Maryland Consumer Protection Act (MCPA). MD Condo Act § 11-130(c); MD HOA Act § 11B-115(c). Additionally, the Division of Consumer Protection is granted authority to adopt regulations to carry out enforcement of the Maryland Condominium and Homeowners Association Act. MD Condo Act § 11-130(d); MD HOA Act § 11B-115(d).

Clarification that the Maryland Consumer Protection Act Applies to Condominiums and HOAs

The definition of “consumer” was also expanded to include a condominium “unit owner,” and an HOA “lot owner,” and not just “an actual or prospective purchaser, lessee, assignee or recipient” of a unit or a lot. MD Condo Act § 11-130(b); MD HOA Act § 11B-115(b).  This is significant because the MCPA applies to “consumers,” including purchasers or prospective purchasers of “consumer realty,” including a residential condominium unit  or HOA home. See, MCPA § 13-101(c) and (d). By specifically amending the Condominium and HOA Acts to state that unit owners and lot owners constitute “consumers,” the legislature is making it clear a that the Maryland consumer protection act applies to residential condominium and homeowners associations and their members, including with regard to the construction, development, marketing, operation, managements and sale of these communities to the public. Under the MCPA, the Attorney General’s office or a private “consumer” may Bring legal claims for violation of the Maryland consumer protection act for unfair or deceptive trade practices. These practices can include misrepresentations, or concealment of material facts, by condominium or HOA developers about the quality or characteristics of a newly constructed condominium or HOA community. Under the Maryland law a condominium association can bring a private claim for violation of the MCPA on behalf of itself or two or more unit owners on matters affecting the condominium. See Cowie Law Group article, Resolving Condominium Construction Defect Claims in Maryland. Additionally, plaintiff who succeeds on its consumer protection act claim may be awarded reasonable attorney’s fees by the court. See Cowie Law Group articles, Maryland Condo Association’s Right To Recover Attorney’s Fees In Condominium Construction Defect Case, and Maryland Court Awards Condominium $6.6 Million for Construction Defects and $500,000 in Attorney Fees.

Required Accessory Dwelling Unit Accomodation for Homeowners Associations

SB 891 / HB 1466 (enacted as Chapters 196 & 197 of the 2025 Legislative Session), effective October 1, 2025

Maryland State Policy Regarding Accessory Dwelling Units

This legislation, known as the Accessory Dwelling Units Act of 2025, was enacted to promote and encourage the creation of Accessory Dwelling Units (ADUs) on properties zoned for single-family homes as part of a State-wide housing strategy to increase affordable housing availability and options, support multigenerational living, and make more efficient use of existing residential land.  ADUs could be a conversion within a primary residence (e.g., renovation of a an existing basement or garage into an apartment) or construction of a smaller house on the same lot as the primary residence, either attached by at least one common wall or completely detached (e.g., a guest house). All Charter Counties and Baltimore City must adopt laws authorizing ADU development. See Maryland Land Use Article § 4–501 through § 4-504.

Effect on Homeowners Associations

This legislation impacts homeowners associations as they are made up of multiple individual residential lots. The legislation specifically prohibits homeowners associations, through HOA declarations, bylaws, rules, or otherwise from imposing unreasonable limitations “on the ability of the property owner to develop or offer for rent an accessory dwelling unit.” Maryland Real Property Article § 2-126(b((1)). Maryland Condominiumand HOA Law Update Maryland Real Property Article § 2-126(b)(2) and (c).

As part of the accessory dwelling units act of 2025, the Maryland homeowners association was amended to incorporate the Act’s definition of “accessory dwelling unit,” MD HOA Act § 11B-101(a-1), and authorize a homeowners association to treat and accessory dwelling unit as a separate lot for purposes of voting, MD HOA Act §11B-111.11, and levying assessments. MD HOA Act § 11B-117(a)(2).  

HOAs must reconcile governing document restrictions with state-mandated ADU protections and revise enforcement authority.

Updated Permissible Restrictions on Owner Installation of Solar Collector Systems

SB 120 / HB 4 (enacted as Chapters 516 & 517 of the 2025 Legislative Session), effective October 1, 2025

Restrictions on Solar System in Areas Where Homeowners have Exclusive Use

Maryland law already protects homeowners’ rights to install solar panels or other solar collection systems on roofs or exterior walls for which they have a right of exclusive use by preventing condominium associations and HOA from imposing “unreasonable limitations” by way of declarations, bylaws, rules, or otherwise. Maryland Real Property Code (RP) MD RP § 2-119(b)(1). This legislation amends that law to provides more certainty for homeowners seeking to present proposals to their architectural committees by defining what type of Association restrictions constitute an “unreasonable limitation.” Specifically, a restriction on the use of solar panels is unreasonable if it: (i) increases the installation cost of the proposed system by over 5%, or (ii) decreases the energy generated by the proposed solar system by 10%.  MD RP § 2-119(b)(2). In short, this law is designed to ensure that owners in communities with rules, such as condominiums and HOAs, generally have a right to go solar. While Associations cannot prohibit solar in areas where a homeowner has exclusive use, they can enforce aesthetic rules as long as those rules don’t make the system prohibitively expensive to install or ineffective.

An owner who wishes to challenge an Association’s prohibition of a solar collection system proposal as an “unreasonable limitation,” must provide documentation prepared by an independent solar panel design specialist who is (i) certified by the North American Board of Certified Energy Practitioners or, (ii) alternatively, has experience designing at least 30 solar collector systems within the prior 3 years as attested by affidavit. MD RP § 2-119(b)(3).

Common Area /Element Restrictions on Solar Systems

Community Associations, however, may prohibit or restrict the installation of solar collector systems or otherwise create reasonable restrictions on the number size, place, or manner of placement or installation of solar collection systems within the common area or common elements served bay the Association, including restricting size number and location of solar panels in common areas and elements. MD RP § 2-119(b)(4)(i) and (ii). This legislation expressly grants board of Directors for a community Association the discretion to install a solar collector system in the common areas or elements, notwithstanding any contrary provisions in the governing documents, if otherwise permitted by law. MD RP § 2-119(b)(3)(iii).

Prior Maryland Case Law

These amendments to the statute appear, in part, to be in reaction to the Maryland Court of Appeals decision in the case of Blood, et ux. v. Stoneridge at Fountain Green Homeowners Association, Inc., where the  court upheld an HOA’s decision requiring a resident to remove solar panels on the front of their home. The court found this was not an unreasonable limitation under the prior, more general version of the statute, because the homeowners were allowed to keep the panels on the rear of their home.

Mandatory Registration for PG County Community Associations

HB 360 (enacted as Chapter 597 of the 2025 Legislative Session), effective October 1, 2025

Condos, HOAs, and Co-ops located in Prince George’s (“PG”) County must now register with the PG County Office of Community Relations and pay all required fees under Maryland Real Property Code (“RP”) § 14-131. Registration must be completed online at the PG County Community Association Registry, renewed on or before January 31 of each year. RP § 14-131(d)(1). As part of the registration process each PG County Community Association must provide contact information for its community property management company. See Common Ownership Community Registration Program Registration Page.

New Provisions:

• For PG County Condos this new law is codified at § 11-109.5 of the Maryland Condominium Act (“MD Condo Act”).
• For PG County HOAs this new law is codified at § 11B-112.4 of the Maryland Homeowners Association Act (“MD HOA Act”).
• For PG County Co-ops this new law is codified at § 5–6B–26.2 17 of the Maryland Corporations and Associations Article (“MD Co-op Act”).

Why this matters:

Community Associations that fail to register may face enforcement consequences including misdemeanor charges and potential fine not to exceed $1000. RP § 14-131(k).

CONCLUSION / RECOMENDATIONS

The 2025 legislative session reflects a continued trend toward increased regulation of community associations, in part resulting from of State priorities with regard resolving family healthcare shortage, issues pertaining to affordable housing availability and efficient use of existing residential real estate, promotion of efficient/clean solar energy, ensuring financial stability of Community Associations through reserve funding, election fairness and transparency, and owner data privacy. Boards and managing agents should not assume existing practices remain compliant after October 1, 2025.

Associations are encouraged to:

• Review governing documents
• Update policies and procedures
• Consult with legal counsel before implementing changes triggered by these new laws

Proper planning now can help avoid disputes, enforcement actions, and costly litigation later.

Maryland HOA Lawyers

Washington DC Condominium Attorneys

410-327-3800 | 202-670-6289 | 301-830-8315

The post Maryland Community Association Law – Key Legislative Updates Affecting Condos, HOA & Co-ops in 2026 appeared first on COWIE LAW GROUP, P.C.

Comparison of Permitted Reserve Funding Methods for Maryland Condominiums, HOAs and Co-ops

Maryland law requires condominium associations, homeowners associations (HOAs) and cooperative housing corporations(Co-ops) (collectively “Associations”) to conduct regular reserve studies to determine how much money should be budgeted annually for the repair and replacement of the major community common elements, such as roofs, exterior building façades, mechanical systems, recreational facilities, pavements and sidewalks. For a detailed discussion of these requirements, see Cowie Law Group article, “Reserve Studies and Reserve Account Funding for Maryland Condos, HOAs and Co-op Communities.” As part of the reserve study process, an Association must adopt a reserve funding plan using one of the following generally recognized funding methods:

(i) The component method;

(ii) The cash flow method;

(iii) The baseline funding method;

(iv) The threshold cash flow method; or

(v) Any other funding method consistent with GAAP.

Maryland Condominium Act § 11-109.4(f)(2); Maryland HOA Act § 11B-112.3(f)(2); and MD Co-op Act § 5–6B–26.1(g)(2). This article provides a brief comparison of these different permitted methods for funding reserve accounts.

The reserve study identifies the major common elements that will require replacement in the future and projects the estimated future replacement cost and remaining useful life of those components. The reserve funding methods determine how Associations spread the cost of those future replacement expenses over time by setting an annual reserve fund contribution. These permitted funding methods represent different ways to calculate how much money Associations should collect and hold to pay for future repairs and replacements. The key difference is how much risk the Association is willing to accept. Each funding method reflects a different balance between risk, predictability, assessment impact, and long-term financial stability.

1.  Component Method

The component method (also known as the “straight-line” or “fully funded” method) treats each major reserve item as a separate component or “account” within the reserve fund.

Under this approach:

• Each component (e.g., roof, pavement, elevator, clubhouse) is analyzed individually
• The total replacement cost of each component is divided by its remaining useful life
• The association contributes a fixed annual amount for each component so that the full replacement cost is accumulated by the time replacement is needed

For example, if a roof is expected to cost $1,000,000 to replace in 20 years, the association would contribute approximately $50,000 per year (adjusted for inflation and existing balances) specifically for that roof.

Key advantage of the Component Method:
This method provides clarity and precision by ensuring that each asset is fully funded by the end of its useful life.

Potential drawback of the Component Method:
Annual reserve contributions can be higher and may fluctuate significantly as new components are added or useful lives change.

How the Component Method Compares to other Funding Methods

• Most conservative funding approach
• Produces the highest reserve balances over time
• Minimizes the likelihood of special assessments
• Viewed most a favorably by lenders and insurers

2.  Cash Flow Method

The Cash Flow Method (a/k/a “Pooled Method”) for reserve funding is a modeling technique that looks at an Association’s reserve portfolio as a single pool of reserve funds overtime. Instead of fully funding each common element component separately by its replacement date, like the Component Method, under the Cash Flow Method, an Association contributes enough money each year so that the total reserve fund balance will always be sufficient to pay for repair/replacement expenditures when they are projected to occur. Contributions are adjusted so that the reserve balance does not go negative over the study period. This method ensures ongoing solvency of the reserve fund as opposed to full funding of each common element component. Temporary drops in reserve balance are acceptable as long as projections remain positive, i.e., funds are projected to recover before the next major expense. Interest earned on the pooled funds and increases due to inflation are part of the calculation. The Cash Flow Method typically leaves the reserve fund account with an ongoing cushion, depending on the goals of the Association.

Under this method:

• All reserve components are combined into a single cash flow projection
• The Association treats its reserves as a pooled fund and set contributions so that the balance overtime stays above a chosen minimum.
• Annual contributions are calculated so the reserve balance is sufficient when major expenses occur
• Reserve funds may temporarily drop due to payment for projected major repair expenses, but reserves are calculated to recover before the next major expense

Key advantage of Cash Flow Method:
Reserve contributions are often lower and more stable in the short term.

Potential drawback of Cash Flow Method:
This approach requires careful monitoring, as insufficient funding can lead to reserve shortfalls if projections or timing assumptions are incorrect.

How Cash Flow Method Compares:

• Less aggressive than the Component Method
• Lower annual contributions than component funding
• Relies more heavily on accurate long-term assumptions
• Greater exposure to unanticipated special assessments if actual costs exceed projections
• Requires regular updates and disciplined oversight

3.  Baseline Funding Method

The Baseline Funding Method is a sub-type of Cash Flow Method, allowing an Association to make the lowest annual reserve contributions possible by setting a minimum reserve fund balance of zero dollars or just above zero dollars ( the “baseline”). In other words, the Association contributes just enough to the reserve fund (i.e., the lowest level possible) to avoid a balance that drops below a $0. The reserve account is funded over time so just enough cash will be available to timely cover anticipated repairs/replacements of major common element components like roofs and pavement.

This method represents the lowest-cost, highest-risk strategy by minimizing the funding cushion to zero. While it often leads to lower monthly dues there is a much higher chance of future special assessments if costs are higher or unexpected issues arise. It prioritizes immediate cash flow over long-term stability, unlike the Component Method, which aims for 100% funding to avoid special assessments entirely. 

Under the baseline funding approach:

• The goal is to set contributions only high enough to ensure the reserve balance does not go negative.
• There is no target reserve balance or effort to achieve “fully funded” status
• The Association plans to have just enough money when expenses come due
• The Association funds at the lowest level that avoids a negative balance
• No cushion for unexpected repairs or inflation spikes

The key difference between Baseline Funding and Cash Flow Funding is that Baseline Funding is a financial objective (staying above $0) that can be pursued using different methods, though often calculated using cash flow method. The baseline is always zero to keep contributions to the lowest possible level. Cash Flow Method on the other hand is a financial technique (pooling assets) that that typically leaves the fund with an ongoing cushion, depending on the goals of the association.

Key advantage of Baseline Funding Method:
Minimizes annual reserve contributions, which can help control assessments in the short term for financially challenged Associations.

Potential drawback of Baseline Funding Method:
This is the highest-risk funding model, leaving little margin for error and increasing the likelihood of special assessments or loans if unexpected costs arise.

How Baseline Funding Method Compares

• Lowest short-term reserve contributions
• Attractive to boards seeking to minimize assessments
• Least conservative funding approach
• Highest financial risk High likelihood of special assessments.
• Vulnerable to unexpected repairs, inflation, or deferred maintenance
• Requires regular updates and disciplined oversight may raise fiduciary concerns for the Board of Directors if foreseeable risks are ignored.
• The reserve fund is allowed to drop to near zero dollars after a big project and then start rebuilding, resulting in lower assessments in the immediate future.

• This method is often criticized by engineers, auditors, and attorneys because it prioritizes short-term assessment relief over long-term stability.

4.  Threshold Cash Flow Method

The Threshold Cash Flow Method is another application of the Cash Flow Method. This method designates a specific “threshold” reserve balance that must be maintained, safety buffer for unexpected expenses. The threshold reserve balance amount is typically a percentage of what the fully funded reserves would be under the component method (e.g., 10–30% of fully funded reserves). Annual contributions to the reserve fund are calculated only for the purpose of ensuring that the projective balance of the fund never falls below the designated threshold amount. Contributions can be adjusted over time to ensure sufficient funds to exist to pay projected expenses, and that the reserve balance never dropped below the threshold safety buffer.

Key advantage of Threshold Cash Flow Method:
Provides greater financial stability than baseline funding while avoiding the full cost of component method funding.

Potential drawback of Threshold Cash Flow Method:
Requires periodic updates to ensure the threshold remains appropriate as components age and costs change.

How the Threshold Cash Flow Method Compares

• More conservative than the Baseline or standard Cash Flow Methods
• Less aggressive than Component Method Funding
• Increasingly popular with professional reserve preparers
• Lower risk of emergency special assessments than the Baseline or standard Cash Flow Method
• Improved financial safety margin
• Higher contributions than the Baseline or standard Cash Flow Methods
• Still requires clear definition and periodic recalibration of the threshold reserve fund balance.

5.  Other GAAP-Consistent Funding Methods

Maryland law has a flexible catch all option that allows associations to adopt alternative funding methods so long as they are consistent with generally accepted accounting principles (GAAP). These funding methods are typically variations or hybrids of the above discussed funding methods customized by professional reserve analysis or CPAs. These GAAP-Consistent Funding Methods are often designed for the peculiar needs of large or complex Associations, phased construction communities where common elements are added over long periods of time, or Associations with unique capital assets or revenue streams.

Key consideration of GAAP-Consistent Funding Methods:
Alternative methods should be professionally prepared, clearly documented in the reserve study, and reviewed with legal and financial advisors to ensure statutory compliance.

How GAAP-Consistent Funding Methods Compare

• Allows for custom funding based on the unique needs of a particular community
• Must still meet statutory and fiduciary standards and should be fully documented.
• Adaptable to complex association needs
• Allows for flexibility depending sophistication and documentation
• Can address unique economic or structural issues
• Must be carefully documented and defended
• Greater scrutiny if challenged by owners, lenders, or regulators

Final Note & Practical Takeaway for Boards

Selecting a reserve funding method is a critical financial decision that directly impacts an Association’s long-term stability, disclosure obligations, and risk of future special assessments. The type of funding can also affect the ability of an Association to obtain favorable loans and insurance rates. Boards should ensure that the chosen method is clearly disclosed in the reserve study and annual budget materials and revisited regularly as conditions change.

While Maryland law allows multiple funding methods, boards must remember that choosing the least expensive option does not eliminate financial responsibility—it merely shifts risk to future boards and unit owners. Reserve funding decisions are evaluated through the lens of fiduciary duty, reasonableness, and foreseeability, especially when associations face major repairs or litigation.

Maryland HOA Lawyers & Washington DC Condominium Attorneys

 410-327-3800 I 301-830-8315

The post Comparison of Permitted Reserve Funding Methods for Maryland Condominiums, HOAs and Co-ops appeared first on COWIE LAW GROUP, P.C.

CLICK HERE FOR DIGITAL COPY

Contact us to request a hardcopy.

These Booklets contain all the new Condominium and HOA laws enacted during the 2025 Regular Session of the Maryland General Assembly, effective October 1, 2025, plus Condominium Act §11–109.5 and Homeowners Association Acts § 11B–112.4, affecting Prince George’s County only, which became effective July 1, 2025.

NEW LAWS  AND AMENDMENTS TO MARYLAND CONDO & HOA LAWS

Here is a quick summary new laws affecting Maryland Condos and HOAs in the 2025-26 edition of our MD Condo/HOA Booklet.

Below is a list of the statutes that have been updated in this 2025 – 2026 Edition of the Cowie Law Group Condominium and HOA Lawyers’ Maryland Condominium Act and the Maryland Homeowners Association Act:

MARYLAND CONDOMINIUM ACT

• 11-103 (correction to section (d)(1)(ii)2).
• 11-108.2 (added)
• 11-109 ((c)(17) through (c)(22) added)
• 11-109.2
• 11-109.4
• 11-109.5 (added)
• 11-111.1
• 11-116
• 11-130

MARYLAND HOMEOWNERS ASSOCIATION ACT

• 11B-101 ((a-1) added)
• 11B-111.1
• 11B-111.11 (added)
• 11B-111.12 (added)
• 11B-112
• 11B-112.2
• 11B-112.3
• 11B-112.4 (added)
• 11B-115
• 11B-117
• 11B-118 (added)
• 11B-119 (previous § 11B-118 renumbered)

OTHER LAWS INCLUDED 

This version of the Booklet contains Section 11-134.1 of the Maryland Condo Act, drafted by Nicholas D. Cowie to protect condominium purchasers from statute of limitations shortening provisions. See article by Nicholas D. Cowie concerning this amendment to the Maryland Condominium Act.

This version also contains the revisions to Sections 11B-110 of the HOA Act as well as Sections 11-131(d) and §11-103(a)(4) of the Maryland Condo Act, drafted by Nicholas D. Cowie to extends warranty periods for Maryland condominiums and homeowners associations, and also protects condominiums from tactics used to defeat common element warranty rights. See article by Nicholas D. Cowie concerning these revisions to the Maryland Homeowners Association Act and Maryland Condominium Act.

This version contains recent laws regarding reserve studies and reserve funding mandated by the Maryland Condominium Act and the Maryland Homeowners Association Act. See article on reserve studies and reserve funding fro Maryland condominiums and HOAs.

Cowie Law Group, P.C. is a law firm that represents condominium and homeowners associations throughout state of Maryland and the District of Columbia. Our Maryland Condominium and HOA Law Booklet contains a handy desk reference reproduction of the Maryland Condominium Act and Maryland Homeowners Association Act. The booklet contains a table of contents, page numbers and tabs for easy reference to the contents of the Maryland Condominium Act and the Maryland Homeowners Association Act.

The statutes, laws and acts reproduced in Cowie Law Group’s MD Condo & HOA Act Booklet may have been amended outside the Regular Legislative Session of the General Assembly, after the publication of the Booklet. Check back for updates. Any amendments to the Maryland Condominium Act and Homeowners Association Act are typically adopted during the yearly Regular Legislative Session and become effective as of October 1 of the year in question. Please contact our office should you have any concerns as to whether the reproduced statute, law or act you are viewing is current or has been amended. Additionally,  one should first consult with an experienced condominium lawyer or HOA attorney before taking action, or refraining from taking action, in reliance on these reproduced statutes, law and acts.

410-327-3800 | 202-670-6289 | 301-830-8315

Maryland HOA Lawyers – DC Condominium Attorneys

The post MARYLAND CONDOMINIUM & HOA ACT LAW BOOKLETS (2025-26 Ed.) appeared first on COWIE LAW GROUP, P.C.

“Payment Defense” to Subcontractor Mechanics’ Lien Claims in Washington DC and Maryland 

By Nicholas Cowie, Esq. – Maryland Mechanics’ Lien Attorney and Washington, D.C. Mechanics Lien Attorney

Overview: The Payment Defense to Washington DC and Maryland Mechanics’ Lien Claims 

Property owners engaged in construction projects (“owners”) in Maryland and Washington, D.C. face financial exposure when building subcontractors or material suppliers (“subcontractors”) file mechanics’ liens claims. This exposure occurs whenever an owner’s general contractor fails to pay its subcontractors, giving them a right to impose a lien on the owner’s property where the construction project is located. See, Mechanics’ Lien Law in Maryland and Washington, D.C. – by Cowie Law Group, a Maryland and Washington, D.C. mechanics lien attorneys. Once the lien attaches, it can be used to force a sale of the owner’s real property as a source of funds to satisfy the amount the general contractor owes the subcontractor for work and materials provided. All private construction projects in Maryland and Washington, D.C., from commercial real estate developments to private residential home construction, are potentially subject to mechanic’s lien claims.

However, before a mechanics lien can attach to the owner’s property in Maryland, or be enforced in Washington, D.C., the subcontractor must initially provide the owner with written notice of its intent to file and enforce a mechanics lien claim. This notice must include the unpaid amount owed the subcontractor for work performed at the owner’s property. Thereafter, the owner has an opportunity to dispute the subcontractor’s lien claim and prevent it from being enforced or attaching to the property. This notice will often be the first contact the owner has with the subcontractor because the owner has no contractual relationship with its general contractor’s subcontractors.

One defense an owner may seek to assert against a subcontractor’s mechanics’ lien claim is the so-called “payment defense” – a legal doctrine that may protect an owner who has already paid the general contractor in full before receiving the subcontractor’s notice of intent to file or enforce a lien claim. This article discusses the payment defense, which is recognized by the District of Columbia (Washington, D.C.) but statutorily limited to residential projects involving a single-family dwelling in the State of Maryland.

Washington, D.C. Mechanics’ Lien Law and the Payment Defense

Washington, D.C. mechanics lien law recognizes a payment defense against all subcontractor mechanics’ lien claims. The defense is only applicable to “good faith” owner payments made to the general contractor before receipt of the subcontractor’s notice of intent to enforce mechanic’s lien. Specifically, a subcontractor’s Washington, D.C. mechanics’ lien claim against the owner’s property is capped (i.e., cannot exceed) the amount of the unpaid balance owed by the owner to the general contractor at the time the owner receives the subcontractor’s notice of intent to enforce its mechanics’ lien claim. D.C. Code § 40-303.02(a). This “unpaid balance cap” on liens creates a valid and frequently successful payment defense for all property owners in Washington, D.C.

Thus, until the property owner receives the required written notice from a subcontractor that it has not been paid (i.e., notice of intent to enforce mechanic’s lien), the owner can make payments to its general contractor and rely upon the “payment defense” to defeat or reduce a subcontractor’s mechanic’s lien claim. DC Code §40-303.02. For example, if prior to receiving a subcontractor’s notice of intent, the owner has, in “good faith,” already paid the contractor in full (and the amount of payment is not in dispute), then the subcontractor is not entitled to a mechanic’s lien on the property. DC Code §40-303.02(b).

Subcontractor Protections Relative to the Payment Defense Once Owner is Given Notice Under Washington DC Mechanics Lien Law

Owner’s Duty to Withhold Payment After Receipt of Subcontractor’s Notice

Once the owner receives the subcontractor’s notice of intent to enforce a mechanic’s lien, it can no longer rely on the payment defense. At that point, the owner has a duty to withhold any payments it owes the general contractor in an amount sufficient to satisfy the general contractor’s debts to the subcontractor. DC Code §40-303.04. Thereafter, the property will be subject to a subcontractor mechanic’s lien not to exceed the amount the owner still owes its general contractor at the time the owner received the subcontractor’s notice. DC Code §40-303.04. An owner will not be able to use the payment defense regarding any general contractor payments it makes after receipt of the subcontractor’s notice of intent. DC Code §40-303.03(b).

Subcontractor’s Right to Know Contract Terms

The Washington, D.C. mechanics’ lien statute affords subcontractors the right to information regarding the agreement between the owner and the general contractor. Specifically, Subcontractors have a right to demand that an owner provide a statement of the terms of the contract between the owner and the contractor and the amount due thereunder. DC Code §40-303.05. Failure of the owner to respond to such a demand can result in liability to the owner for payments made to the contractor after receipt of the demand. DC Code §40-303.05. This ability to demand information from the owner better enables a subcontractor to protect its lien rights against the payment defense.

Key Legal Provisions:

• D.C. Code § 40-303.02(a): Caps subcontractor’s lien to the unpaid contract balance at time of notice
• D.C. Code § 40-303.02(a): If the owner has paid general contractor in full, and in good faith, at the time subcontractor’s notice is received, a subcontractor will not be entitled to a lien on the property.
• D.C. Code § 40-301.02(a)(1): Requires subcontractor to record a notice of intent to enforce mechanics lien in the land records within 90 days of completion or termination of the construction project.
• D.C. Code § 40-301.02(a)(2): require subcontractor send notice to the owner within 5 business days after recording the notice in the land records.
• DC Code §40-303.04: owner must withhold amounts to subcontractor once notice of intent to enforce mechanics lane is received.
• D.C. Code § 40-303.05: Provides that subcontractor entitled to know terms of contract between owner and general contractor.
• DC Code §40-303.08 and §40-303.13(a)(1)(A): Suit to enforce the mechanic’s lien must be filed in court within 180 days after the date that the notice of intent to enforce mechanic’s lien is recorded in the land records.
• DC Code §40-303.13(a)(1)(B): Notice of pendency of the lawsuit (a/k/a “lis pendens”) must be recorded in the land records office within 10 days of filing suit to enforce mechanic’s lien.

Key Points in D.C.:

• The notice of intent to enforce lien must be recorded within 90 days of days of completion or termination of the construction project and notice sent to owner within 5 business days thereafter.
• Suit to enforce the mechanic’s lien must be filed within 180 days after the date that the Notice of Intent to Enforce Mechanic’s Lien is recorded and notice of pendency of the suit must be recorded in the land records office within 10 days of filing suit.
• A subcontractor’s lien is limited to the amount the owner still owes the general contractor at the time notice is given.
• If the owner has already paid the general contractor in full before receiving notice, the subcontractor’s lien is defeated.
• This is commonly referred to as the “payment defense” or “unpaid balance rule.”

Risk Management Tip

In summary, Washington, D.C. mechanics’ lien law reduces the risk of double payment for an owner by shielding owners who act in good faith and pay their general contractor before receiving subcontractor lien notice. As such, the subcontractors in DC must proactively protect their mechanics’ lien rights.

Owners:

The owners can rely on the payment defense only to the extent of full payment to the general contractor prior to receipt of the subcontractors notice. So long as there is an unpaid balance, the owner’s property remains subject to a subcontractor’s mechanics’ lien. Therefore, property owners should work with an experienced Washington, D.C. mechanics lien attorney to implement lien risk management strategies, such as general contractor payment retainage connected to receipt of subcontractor lien releases / waivers for work performed and materials provided, with subcontractor’s acknowledging in writing that they have been paid in full or in part for specified work.

Subcontractors:

Likewise, subcontractors should work with an experienced Washington, D.C. mechanics lien attorney to protect their mechanics’ lien rights, such as serving early notice of intent to enforce mechanics lien on an owner while it still owes monies to the general contractor, and, when necessary, to demand information from the owner regarding its agreement with the general contractor so as to anticipate when  general contractor payments are to be made.

Maryland Mechanics Lien Law and the Payment Defense

In contrast to Washington, D.C., the Maryland mechanics’ lien statute only provides owners with a payment defense on residential construction projects. Maryland property owners engaged in commercial construction projects cannot assert a payment defense against a subcontractor’s mechanics claim.

Payment Defense to Maryland Mechanics’ Lien Claims not Available to Commercial Property Owners on Commercial Construction Projects

Maryland has no “payment defense” available to owners on commercial construction projects. As such, an owners payment of a general contractor is never a defense to a subcontractor’s mechanics’ lien claim on a commercial construction project. Even if the owner has paid the general contractor in full,  its subcontractor will be able to proceed to establish a mechanics’ lien on the owner’s property, in effect, forcing the owner to pay twice for the same work.

Thus, in commercial projects, the Maryland’s mechanics lien statute places the burden on the commercial property owner to make sure subcontractors are paid by the general contractor. The owner has the duty and a right to withhold from the general contractor amounts due it determines to be due an unpaid subcontractor on the project.

Owners can protect themselves by requiring their general contractor to provide subcontractor lien releases before making payment. A subtractor’s lien release can be used as a defense against any mechanics’ lien claim filed by that subcontractor such that owner will not be required to pay twice for a subcontractor’s work identified in its mechanics’ lien release.

Also, once an owner receives a subcontractor’s written notice of its intent to file a mechanics lien claim, the owner has a right to retain amounts owed its general contractor up to the amount claimed in the subcontractor’s notice. If a subcontractor is successful in obtaining a mechanics’ lien against the property, the owner may pay the subcontractor the established lien amount monies withheld from the general contractor up to the amount of the lien established.

Payment Defense to Maryland Mechanics’ Lien Claims is Available to Residential Property Owners on Single Family Dwellings Projects.

The Maryland mechanics’ lien statute does provide a statutory payment defense for homeowners constructing a “single family dwelling” or an addition thereto. A homeowner who has made “full payment” to a general contractor before receiving a subcontractor’s notice has an absolute defense to the mechanic lien claim under § 9-104(a)(2) of the Maryland mechanics’ lien statute. If the homeowner has only made partial payment to the general contractor before receiving the subcontractor’s notice, then the subcontractor’s right to obtain a lien against the property is capped by the amount the homeowner still owes the general contractor. § 9-104(f).

The intent of this legislation is to protect homeowners’ single family dwelling property from subcontractor mechanics’ liens in amounts that exceed what the homeowner still owes the general contractor at the time the owner receives a subcontractor’s notice of intent file a mechanics’ lien claim. Once that notice is received, the homeowner can withhold the claimed lien amount from its general contractor pending resolution of the mechanics’ lien claim.

Key Maryland Mechanics’ Lien Legal Provisions:

• Md. Code Ann., Real Prop. § 9-104(a): Requires subcontractors to provide written notice of intent to file a mechanics’ lien claim within 120 days after last furnishing labor or materials.
• Md. Code Ann., Real Prop. § 9-104(a)(2): Requires, in the case of a single-family dwelling, that the 120-day notice be received by the owner before full payment has been made to the general contractor.
• Md. Code Ann., Real Prop. § 9-105: Subcontractors must file suit  (a/k/a “petition to establish mechanic’s lien”) within 180 days after last performing work.

Key Case Law:

• Diener v. Cubbage, 259 Md. 555, 270 A.2d 471 (1970). Maryland courts rejected the commercial owner’s argument that double payment barred the subcontractor’s lien.
• Ridge Heating, Air Conditioning and Plumbing, Inc. v. Brennen, 783 A.2d 691, 366 Md. 336 (2001) and Winkler Construction Co. v. Jerome, 355 Md. 231, 734 A.2d 212 (1999). Discussing payment defense applicable to single-family dwellings

Key Points in Maryland:

• Strict compliance with statutory notice deadlines is required (notice of intent to file mechanic lien within 120 days of last work and lawsuit filed within 180 days).
• Subcontractors do not need to have a direct contractual relationship with the owner.
• Commercial Owners are not protected by statute from liens by simply proving payment to the general contractor (i.e., no statutory payment defense on commercial projects).
• Maryland courts have held that equitable (non-statutory) defenses like double payment are not recognized when a lien claimant complies with the Maryland mechanics’ lien statute.
• Maryland does have a statutory payment defense applicable to single family dwellings.

Risk Management Tip

In summary, Maryland mechanics’ lien law only recognizes a payment defense for single-family dwelling construction projects, thereby reducing the risk of double payment for homeowners building their own home or adding an addition. Commercial owners, on the other hand, cannot avail themselves of the payment defense, and are subject to a risk of double payment if they pay a general contractor that has failed to pay its subcontractors. Thus, the burden is on the owner in a commercial project to ensure subcontractors have been paid.

Owners:

Because of this framework, property owners should work with an experienced Maryland mechanics lien attorney to implement lien risk management strategies, such as general contractor retainage connected to receipt of subcontractor lien releases (a/k/a “lien waivers”) and other construction escrow procedures. Owners can require a contractor to obtain signed mechanic’s lien releases from all subcontractors on a project for work performed and materials provided, acknowledging that they have been paid in full or for a specified portion of the work. The general contractor can be contractually obligated to provide subcontractor lien releases to the owner upon completion of the subcontractor’s work or a portion thereof, and, in either case, this will provide some assurance that payment was made and protect owners from subcontractor mechanic’s lien claims.

Subcontractors:

Likewise, subcontractors who have not received payment from the general contractor, should consult with an experienced Maryland mechanics’ lien attorney to discuss strategies for ensuring payment, especially on financially challenged projects. One of the best strategies to ensure payment is for the subcontractor to assert a valid mechanics lien claim against the owner’s property. In the case of a single-family dwelling construction project, subcontractors who have not been timely paid must consider serving notice of intent to file mechanics lien on the owner as soon as possible so that notice is received before the owner pays the general contractor in full.

Note About Spelling of Term “Mechanics”:

The Maryland and Washington, D.C. Mechanics’ Lien Acts spell the term “mechanics lien” differently by placement of an apostrophe in the word “mechanics:”

• “Mechanic’s lien” (apostrophe before the “s”) is the spelling used in the Washington, D.C. Mechanics’ Lien Act in the Code of the District of Columbia 40–301.01 et seq.
• “Mechanics’ lien” (apostrophe after the “s”) is the spelling used in the Maryland Mechanics’ Lien Act in the Annotated Code of Maryland, Real Property Article 9-101 et seq. and Maryland Rule 12-301 et seq.

For the sake of consistency, the spelling adopted by Maryland (“mechanics’ lien”) is generally used herein.

WASHINGTON DC MECHANICS’ LIEN ATTORNEYS

MARYLAND MECHANICS’ LIEN ATTORNEYS

CONSTRUCTION LAW ATTORNEYS

Washington, D.C. and Maryland

Cowie Law Group, P.C. Law is a construction law firm practicing construction and real estate law throughout the State of Maryland and Washington, D.C. We handle construction industry performance and payment disputes, including Maryland mechanics’ lien claims and Washington, D.C. mechanic’s lien claims for owners, general contractors, design, professionals, subcontractors, and material suppliers. Law Partner George A. Bealefeld III is the Author of the Lexis Maryland Mechanics’ Lien Law Practical Guidance® Practice Note. Contact Cowie Law Group to speak with a Maryland or Washington DC mechanics’ lien attorney.

The post Owner’s “Payment Defense” to Subcontractor Mechanics’ Lien Claims in Washington DC and Maryland appeared first on COWIE LAW GROUP, P.C.

As of March 26, 2025, the Department of the Treasury, Financial Crimes Enforcement Network (FinCEN) has issued an interim final rule that exempts all U.S.-based entities, including condominium and homeowners associations (HOAs), from the requirement to report beneficial ownership information (BOI) under the Corporate Transparency Act (CTA).

The FinCEN homepage contains the following notice:

ALERT [Updated March 26, 2025]: All entities created in the United States — including those previously known as “domestic reporting companies” — and their beneficial owners are now exempt from the requirement to report beneficial ownership information to FinCEN…. For more information, see press release and alert.

As noted in our prior Transparency Act Update, this interim final rule was expected when FinCen extended the BOI Reporting Requirements to March 21, 2025.

Key Highlights for Community Associations

1. Exemption for U.S. Entities

FinCEN’s revised definition of “reporting company” now includes only entities formed under foreign law and registered to do business in the U.S. Consequently, domestic entities such as condominiums and HOAs are no longer obligated to submit BOI reports.

2. Relief for Board Members and Officers

Previously, board members and officers of community associations were considered beneficial owners due to their substantial control over the entity, necessitating the submission of personal information to FinCEN. With the new exemption, these individuals are relieved from such reporting requirements.

3. No Penalties for Non-Compliance

FinCEN has clarified that no penalties or fines will be imposed on domestic entities or their beneficial owners for failing to file BOI reports under the CTA.

For frequently asked questions regarding the term final rules, see Interim Final Rule: Questions and Answers.

Maryland & Washington DC

410-327-3800 | 202-670-6289 | 301-830-8315

Note: This article is for informational purposes only and does not constitute legal advice. Associations should consult with legal professionals for guidance specific to their circumstances.

The post Corporate Transparency Act Update: U.S. Condos and HOAs Exempt from BOI Reporting appeared first on COWIE LAW GROUP, P.C.

“In Maryland Condominium and HOA Construction Defect Cases, the 10-year statute of repose comes into play whenever damage or injury from a latent common area construction defect first occurs more than 10-years after the community was completed. If the statute applies, it bars a condominium association or HOA from bringing a construction defect claim against a contractor that would otherwise be permissible under Maryland’s “discovery rule.” However, the statute does not bar a construction defect claim against a condominium or HOA developer whose ongoing involvement with a community take it outside the definition of a typical “contractor.” 

Nicholas D. Cowie, Maryland and Washington DC Condominium and HOA Lawyer and Construction Defect Attorney

Introduction

This article explores how Maryland’s 10-year Contractor statute of repose (Courts and Judicial Proceedings Article (“CJ”) §5-108(b) works and whether its protections for “contractors” extend to condominium and HOA developers. While developers often argue that they qualify for protection because their roles overlap with contractors, the better view is that condominium and HOA developers should not benefit due to their ongoing control over the property post-construction and their broader obligation to homeowners. This distinguishes them from typical “contractors” who perform discreet construction tasks and have little or no further involvement with the community.

For clarity, this article refers to CJ §5-108(b) as the “10-year Contractor Statute of Repose” to distinguish it from Maryland’s broader 20-year statute of repose applicable to all construction defect claims.

How the 10-Year Contractor Statue of Repose Works in Relation to Maryland Condominium HOA Construction Defects Claims

The 10-Year Contractor Statute of Repose bars condominium and HOA construction defect legal claims (“causes of action”) against contractors, architects, and engineers, when the resulting injury to property or person for which damage is sought occurred more than 10 years after the completion of an “improvement to real property.”

The “completion” date is defined as “the date the entire improvement first became available for its intended use.” CJ §5-108(b).

An “improvement to real property” generally refers to buildings, such as a condominium building or clubhouse, but may also include any permanent structure that is constructed on or added to real property, such as a stormwater management pond or retaining wall. See, Craven v. Hickman, 135 Md. App. 645, 658 (2000).

If the resulting property damage or injury occurs within the 10-year period, a cause of action can “accrue” under Maryland’s general 3-year statue limitations (CJ §5-101). If the resulting damage or injury occurs after the 10-Year Period, the cause of action does not accrue, and the claim is barred.

Example: If a condominium roof collapses 15 years after the building’s completion due to defects in the original construction, a claim against the roofing contractor would likely be barred. If the roof collapse occurred within 10 years, the association would typically have 3 years from the collapse to file a lawsuit.

The 20-Year Statue of Repose

Maryland also has a broader 20-year statute of repose (CJ §5-108(a)) that applies to construction defect claims asserted against any person or entity, including developers. It applies to legal claims where the resulting property damage or personal injury occurs more than 20 years after construction is completed. This article, however, focuses on the narrower 10-year contractor-specific statute of repose (CJ §5-108(b)).

“Accrual of a Cause of Action” and the Discovery Rule

To understand how the 10-year Contractor Statute of Repose applies to any given condominium or HOA construction defect claim, it is essential to understand the concept of “accrual” of a cause of action under Maryland’s general 3-year statute of limitations (CJ §5–101). Maryland follows the “discovery rule” first adopted in the case of Poffenberger v. Risser, 290 Md. 631 (1981), under which a cause of action “accrues,” when plaintiff knew or should reasonably have known it has suffered an injury and its likely cause (“discovery”). Once accrual occurs, a plaintiff has three (3) years to bring a lawsuit under the general statute of limitations (CJ §5–101) and the Statute of Repose CJ §5–108(c).

In construction defect cases, delayed discovery of a defect is common. As such, a cause of action for construction defects may not accrue under the “discovery rule” for many years after construction is completed. Maryland’s 10-year Contractor Statue of Repose (CJ §5–108(b)) is designed to protect contractors, architects, and engineers from extended liability by placing an outside limit on how long a cause of action against them is permitted to “accrue.” Namely, there can be no accrual of a cause of action for damages against a contractor, architect or engineer when the property damage or personal injury caused by the construction defect occurs more than 10-years after completion of the buildings or other “improvement to real property” they design or construct.

Maryland’s 10- Year Contractor Statue of Repose Applies to Causes of Action Subject to Delayed Accrual Under the Discovery Rule

Maryland’s 10-Year Contractor Statute of Repose applies to causes of action that are governed by Maryland’s general 3-year statute of limitations (CJ §5–101) under which there can be delayed accrual of a cause of action under the discovery rule. This encompasses all civil causes of action which do not have a specified statutory time period within which a cause of action must be filed in court. For example, in a construction defect case, a claim for negligent construction would be governed by the general 3-year statute of limitations under CJ §5–101 because there is no other statute that specifies a time within which a claim for negligent construction can be brought. On the other hand, statutory warranty claims under the Maryland Condominium Act, Section 11–131, the Maryland Homeowners Association Act, Section 11B–110 are not governed by Maryland’s general 3-year statute of limitations (CJ §5–101) because they have their own specified statutory time period within which a claim must be pursued. As such, the concept of  “accrual” and the discovery rule does not apply. For a discussion of statutory warranties that apply to condominiums and HOA, see, Condominium Construction Defect Warranties in Maryland and The Maryland HOA Common Area Warranty.

Delayed Accrual is Typical in Construction Defect Cases, Especially in Condominium and HOA Communities Where Developers Retain Control Over the Association Following Completion of Construction

In a traffic accident case, accrual typically occurs at the moment of impact. The injured person immediately knows they have a cause of action for negligent driving because the crash is obvious. However, in construction defect case, homeowners may not discover negligent construction of a building for many years, thus delaying accrual of a construction defect cause of action. Building defects that occur during construction are often hidden behind exterior walls or beneath floors or are just not apparent to the average layperson. Homeowners are not present during construction nor are they familiar with proper construction techniques. It is not until the defect manifest itself to the homeowner in the form of visible property damage or personal injury that underlying defects are discovered. Examples of defects manifesting themselves might be the sudden appearance of a structural failure (e.g., cracking walls, uneven floors, balcony collapse, bricks falling from exterior walls) or interior water intrusion at windows or roof leaks. Under the “discovery rule,” if a building contractor’s negligent construction is hidden, accrual of the cause of action and the commencement of the 3-year general statute of limitations does not occur until the legal claim is or reasonably should have been discovered, rather than the date on which the builder’s negligence occurred.

Developer control of the condominium association or HOA can also delay accrual of a construction defect cause of action. In newly constructed condominium and HOA communities, the developer controls the association by appointing its own representatives and employees to the association’s board of directors. As such, the developer effectively controlls maintenance, repair and monitoring of the community common elements and common area facilities. This is known as the “period of developer control.” See, Developer Transition for Maryland Condominiums and Declarant Transition for Maryland Homeowners Associations. It is not until the resident homeowners take control of the Association that it can first independently assess the construction of the common elements and common areas of the community, typically by hiring an engineer to perform a transition deficiency report identifying construction defects. See, Multi-Million Dollar Construction Defect Jury Verdict for Condo Demonstrates Importance of Timely Transition Study Identification of Construction Defects.

A developer-controlled board may not be motivated to fully investigate and address an underlying defect, and may, instead, perform  inexpensive “cosmetic” repairs. As a result, even when defects manifest themselves in the form of damage to the building, the underlying defect causing that damage may go undiscovered. Homeowners will be told that the issue has been resolved, even though the defect remains hidden, further delaying the discovery of the construction defect cause of action. The type of conflict of interest inherent in a developer-controlled association board of directors, has led to the adoption of the “Adverse Domination Doctrine” in Maryland which can prevent claims from accruing while a developer controls the board of directors. See, Adverse Domination Doctrine Tolls Statue of Limitations on Maryland Condo Association Legal Claims During Period of Developer Control.

The Critical Cutoff Date for Accrual of a Construction Defect Cause of Action is the Date on which the Resulting Damage or Injury Occurs

Under the Maryland’s 10-Year Contractor Statute of Repose, a construction defect cause of action against “architects, engineers, and contractors” cannot accrue if the resulting injury to property or person for which damages are sought occur more than 10 years after the completion of construction:

“… a cause of action for damages does not accrue [against an] … architect, professional engineer, or contractor … when … injury to real or personal property, resulting from the defective … condition of an improvement to real property… occurs more than 10 years after the date the entire improvement first became available for its intended use [emphasis added].”

CJ 5-108(b). Thus, the crucial date determining whether a construction defect cause of action can accrue under the discovery rule is the date the resulting property damage or injury occurs. If damage caused by a construction defect first occurs after the 10-year period, there can be no delayed accrual under the discovery rule.

On the other hand, if damage caused by the construction defect first occurs within the 10-year period, a condominium association or HOA’s cause of action for the damages against the responsible contractor can “accrue” under the discovery rule. In such a case, Maryland’s Statute of Repose specifies that the plaintiff has three (3) years to file suit from the date of accrual:

“Upon accrual of a cause of action referred to in subsections (a) and (b) of this section, an action shall be filed within 3 years.”

CJ §5-108(c). This statutory language confirms that claims for damage or injury occurring within the 10-year period, is subject general 3-year statute of limitations (CJ §5-101), which also provides 3 years to file suit from the date of accrual.

Filing Suit More Than After 10 Years After Completion of Construction

There is a common misconception that the 10-Year Contractor Statue of Repose prevents the filing of a construction defect lawsuit against a contractor more than 10 years after completion of a building. However, the date a suit is filed is not determinative. If resulting damage or injury occurs within the 10-year period, a Condominium Association or HOA, under CJ § 5-108(c), has 3-Years from accrual to file suit against a contractor for construction defects, even if that suit is filed more than 10 years after the completion of the improvement.

Example: A retaining wall collapses on the last day of the 10-year period following completion of construction. On that date the condominium association is advised that the retaining wall was negligently constructed and the cause of action against the contractor accrues. At this point, the condominium association has three years to file suit against the contractor, meaning that suit could be filed up to 13 years after construction of the retaining wall was completed (i.e., the 10-year statute of repose + 3-year statute of limitations = 13 years).

Maryland’s 10-Year Statute of Repose Should Not Shield Condominium and HOA Developers from Liability for Condominium and HOA Construction Defect Claims

Although no Maryland appellate court has ruled directly on the issue, the U.S. District Court for the District of Maryland has ruled that the Maryland’s 10-Year Statute of Repose (CJ§ 5-108(b)) does not shield condominium developers from liability for condominium construction defect claims unless they act solely as contractors performing the construction work. See Council of Unit Owners of Milestone Townhouse Condos. v. Beazer Homes, LLC, No. GJH-18-1572, 2019 U.S. Dist. LEXIS 45914 (D. Md. Mar. 20, 2019) (the “Milestone”). Milestone is unreported and non-binding on Maryland courts; however, it may foreshadow how Maryland courts would rule on the issue.

In Milestone, the Court addressed whether a condominium developer, Beazer Homes, LLC, was protected from liability under Maryland’s statute of repose. The case stemmed from allegations that Beazer failed to install weather-resistant barriers on the condominium buildings, leading to significant water intrusion and structural damage. The plaintiff, a condominium association, argued that Beazer, the condominium Developer, concealed these defects, preventing timely repairs and legal recourse.

Beazer Homes moved to dismiss the lawsuit, asserting that the claims against it were time-barred by the Maryland’s 10-Year contractor statute of repose, which shields contractors, architects, and engineers from liability for property damage occurring more than ten years after a project’s completion. However, the court ruled that the 10-year statute of repose applies only to those who act strictly in the capacity of a contractor or design professional and does not necessarily apply to developers in all cases.

A. Circumstances under which Developers are Not Protected from Maryland Condominium and HOA Construction Defect Claims by the 10- Year “Contractor” Statute of Repose

The court in Milestone reasoned that a developer is not automatically entitled to the protection of the 10-year contractor statute of repose unless it can establish that its role was solely that of a contractor. In distinguishing between a contractor and a developer, the court pointed to the following factors:

1. Direct Involvement in Construction vs. Oversight

   – A contractor is defined as one who directly procures labor and materials and is responsible for executing a construction project. By contrast, a developer typically oversees construction but does not necessarily engage in the hands-on work of building improvements. In this case, Beazer hired and supervised third-party contractors, architects, and engineers, which suggested it was acting in a broader capacity than a contractor.

2. Continued Role of Developer as Seller with Disclosure Obligations

   – The court noted that Beazer not only supervised the construction of the condominium but also marketed and sold units to purchasers. Unlike a general contractor whose obligations typically end when construction is complete, a developer’s involvement often extends into post-construction sales and disclosures. The plaintiff alleged that Beazer knowingly sold defective units without disclosing material defects, which raised claims beyond mere construction issues.

3. Overlap Between Developer and Contractor Roles

   – While a developer can also function as its own general contractor, the court held that this does not necessarily mean it is entitled to the statute of repose protections granted to contractors. Because Beazer allegedly functioned as both a developer and a seller while also overseeing the work of subcontractors, its liability exposure was broader.:

“ … a developer that serves as its own general contractor has more expansive exposure to liability than an entity serving solely in the contractor role. … The Complaint alleges that Defendant served both as the developer/seller of the Milestone condominium units … and that Defendant “hired and supervised contractors, architects, professional engineers, and others to make real property improvements to what became the Milestone common areas and condominium units.” … Thus, while Defendant may have also played the role of a general contractor—procuring the performance of works and services on a large scale and overseeing the completion of the construction project, the Defendant’s role as the general contractor does not shelter it from liability for its actions as the developer. If discovery demonstrates that Defendant’s only role was that of a contractor and some other entity operated as the developer, then the ten-year statute of repose may bar Plaintiff’s claim. However, based on the allegations in the Complaint, assumed to be true at this stage, the ten-year statute of repose is inapplicable to Defendant.”

Milestone, LLC, No. GJH-18-1572, 2019 U.S. Dist. LEXIS 45914, pp.7-8 (D. Md. Mar. 20, 2019).

The court denied Beazer’s motion to dismiss the condominium’s construction defect lawsuit under Maryland’s 10-Year Contractor Statue of Repose (CJ§ 5-108(b)), concluding that the allegations in the complaint suggested that Beazer was not merely a contractor but a developer with additional responsibilities, including selling and marketing the condominium units. Because the 10-Year Contractor Statute of Repose protects only contractors, architects, and engineers—and not developers who do more than just perform construction work—the court found that Beazer’s role did not qualify for the statute’s protection at this stage of the litigation.

This ruling serves as a crucial reminder that developers who take on multiple roles in a condominium project, including sales and oversight, may not benefit from the protections afforded contractors under Maryland’s 10-Year Contractor” Statue of Repose.

B. Other Reasons Why the 10-Year Contractor Statute of Repose Should Not Protect Developers from Maryland Condominium and HOA Construction Defect Claims.

The Milestone Court recognized that developers have ongoing obligations after construction, such as sales and disclosure duties. However, there are additional post-construction responsibilities of developers that further distinguished them from traditional contractors whose role typically ends once construction is complete.

First, developers often retain long-term control over a condominium or HOA during the developer control period. By reason of the governing documents they draft and their ownership of unit or lots, developers can appoint their employees and representatives to the association’s board of directors, allowing them to control the management of an association – often for many years. See, Developer Transition for Maryland Condominiums and Declarant Transition for Maryland Homeowners Associations.

Second, under Maryland law, developer-controlled condominium associations and HOA’s are now required conduct reserve studies prior to transferring control of the association to the resident homeowners. See, Reserve Studies in Maryland. These reserves studies estimate the future cost of replacing common area components and constitute ongoing representations about the condition of the property.

Third, condominium developers must update their Public Offering Statement filed with the State of Maryland to ensuring accurate disclosure regarding any material changes in the condition of the common elements.

Fourth, under Maryland Law, Condominium and HOA Developers have continuing warranty obligations to repair construction defects long after construction has been completed. See, Condominium Construction Defect Warranties in Maryland and The Maryland HOA Common Area Warranty. Condominiums and HOAs can enforce these warranties against developers regardless of whether they personally performed the construction work.

These ongoing statutory and contractual obligations reinforce the conclusion that developers are not similarly situated to traditional “contractors” and should not receive the same protections under the 10-year Contractor Statute of Repose.

Conclusion

Maryland’s 10-Year Contractor Statute of Repose was designed to protect contractors, architects, and engineers from extended liability for latent construction defects under the “discovery rule.” I was not intended to protect developers from Maryland condominium and HOA construction defect claims. These Developers retain control of, sell, and market residential Condo and HOA communities, and their ongoing responsibilities and unique role in managing associations and disclosing conditions to homeowners make them fundamentally different from contractors and design professionals hired to perform a specific task and whose relationship to the project ends upon completion of construction.

While Maryland appellate courts have not definitively ruled on this issue, the Milestone decision and the statutory language suggest that developers should not receive protection under the 10-year Contractor Statute of Repose unless they can show their role was purely that of a contractor. Until Maryland’s higher courts issue binding authority, associations should remain vigilant about construction defect claims and perform transition deficiency studies early, ensuring timely action long before the 10-year period expires.

Maryland & Washington DC

410-327-3800 | 202-670-6289 | 301-830-8315

The post Maryland’s 10-Year “Contractor” Statute of Repose and Developer Liability for Condominium and HOA Construction Defect Claims appeared first on COWIE LAW GROUP, P.C.

Protecting Your Construction Contracts Against Tariffs:

Material Escalation Clauses and Other Strategies for Dealing with Sudden Material Cost increases

Cowie Law Group, P.C. – Maryland and Washington DC Construction Law Attorneys

The construction industry is particularly vulnerable to market fluctuations, especially regarding material costs. One of the most unpredictable factors impacting construction projects in Maryland and Washington, DC, is the actual and threatened imposition of tariffs on essential building materials such as steel, aluminum, and lumber. These tariffs can drive up costs significantly, leading to budget overruns and financial strain for contractors, suppliers, and project owners.

Given the risks associated with potential tariff increases and broader economic instability, it is crucial for contractors, suppliers, and owners to implement strong contractual protections. One of the most effective tools available to Maryland and Washington DC construction law attorneys is the inclusion of escalation clauses in construction contracts. These provisions help mitigate the financial risks posed by unexpected material price increases.

What is a Construction Contract Escalation Clause?

An escalation clause is a contractual provision that adjusts the contract price based on changes in the cost of specified materials. It helps protect contractors and suppliers from unexpected price surges, ensuring that unforeseen tariff hikes do not jeopardize project profitability or completion timelines.

However, given the current political climate, tariff increases and material cost fluctuations are no longer “unforeseen” events. Therefore, construction law contracts in Maryland and Washington, DC, should be drafted accordingly to anticipate and address these risks.

It is highly recommended that Maryland and Washington DC construction law attorneys review all construction contracts—whether for owners, general contractors, subcontractors, equipment and material suppliers, architects, engineers, or other professionals—to ensure that tariff-related risks are adequately addressed. A proactive legal review can prevent significant financial losses and contractual disputes.

Key Elements of an Effective Escalation Clause

A well-drafted escalation clause in a Maryland or Washington DC construction contract should include:

1. Triggering Events – Clearly define the conditions that activate the clause, such as a percentage increase in material costs or the imposition of new tariffs.
2. Covered Materials – Specify the materials subject to price adjustments, such as steel, aluminum, copper, petroleum-based products, and lumber.
3. Verification Methodology – Detail how cost increases will be measured and verified, using sources like the Producer Price Index (PPI) or supplier pricing data.
4. Adjustment Mechanism – Establish how cost increases will be allocated, whether through direct pass-through pricing, lump-sum adjustments, or a cost-sharing formula.
5. Notice and Documentation Requirements – Set clear guidelines for notifying parties of construction cost increases and documenting price fluctuations.
6. Dispute Resolution Mechanisms – Owners may require a process to verify construction cost increases, including an opportunity to investigate and, if necessary, challenge a notice of cost increase. This could include an owner’s opportunity to source materials from alternative suppliers or right to utilize alternative available construction materials as permitted by Maryland and Washington DC construction law.

Additional Strategies to Manage Tariff Risks

While escalation clauses are crucial, Maryland and Washington DC construction law attorneys recommend incorporating additional risk mitigation strategies, such as:

1. Material Substitution Provisions – Allowing for alternative, non-tariffed materials that meet development and construction project specifications.
2. Advance Procurement & Bulk Purchasing – Secure materials in advance or lock in prices with suppliers before tariffs take effect.
3. Expanded Force Majeure Clauses – Including tariff-related disruptions, whether or not deemed “unforseen,” to serve as legal justifications for contract modifications or extensions.
4. Contingency Budgeting – Allocating reserve funds to cover unexpected material cost increases as well as material cost associated the imposition of new tariffs, whether or not deemed “unexpected” or “unforeseen.”
5. Supplier Agreements – Negotiating long-term supplier contracts to stabilize prices.

Negotiating Escalation Clauses and Risk Allocation

Escalation clauses in Maryland and Washington DC construction contracts often require careful negotiation. While contractors seek cost protections, project owners generally prefer fixed-price contracts to maintain budget certainty. A balanced approach may involve cost-sharing arrangements, escalation caps, or limiting adjustments to high-volatility materials.

For public construction projects in Maryland and Washington, DC, additional regulatory compliance may apply, making it essential to consult with experienced Maryland and Washington DC construction law attorneys to ensure contractual alignment with government procurement regulations.

Conclusion

Tariffs on construction materials continue to pose significant risks to projects in Maryland and Washington, DC. However, by incorporating well-drafted escalation clauses and adopting proactive risk management strategies, construction professionals can mitigate these risks effectively. Given that tariffs are now a foreseeable economic factor, construction law contracts should be structured accordingly.

To ensure that your construction contracts comply with Maryland and Washington DC construction laws, consulting with experienced Maryland and Washington DC construction law attorneys is critical. Proper legal guidance can help prevent costly disputes and protect financial interests in an unpredictable economic landscape.

By implementing these strategies, construction firms, developers, and project owners can maintain financial stability and keep projects on schedule despite external economic pressures.

REAL ESTATE & CONSTRUCTION LAW ATTORNEYS

Maryland & Washington DC

410-327-3800 | 202-670-6289 | 301-830-8315

The post Tariffs & Escalation Clauses – Maryland and Washington DC Construction Law Attorneys appeared first on COWIE LAW GROUP, P.C.

BOTTOM LINE: The Corporate Transparency Act (CTA) is now fully enforceable. Most business entities—including condominiums and HOAs—must now report their beneficial ownership information by March 21, 2025.

All Injunctions Lifted; New BOI Reporting Deadline Set

On February 18, 2025, a U.S. District Court lifted the last nationwide injunction that had blocked enforcement of the CTA by the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of the Treasury.

As a result, business entities  (“reporting companies”) must now report their beneficial ownership information (BOI) to FinCEN. This information includes the identities of the business owners. For most companies, FinCEN has set a new reporting deadline of March 21, 2025. For further details, see the FinCEN Extension Notice.

What Businesses Need to Know Now

BOI Reporting is Mandatory Once Again

BOI reporting requirements are reinstated nationwide. All reporting companies must comply by March 21, 2025 unless FinCEN announces further deadline modifications or your business falls into an exception specified in the FinCEN Extension Notice. According to the Community Associations Institute this includes community association, such as condominium associations and homeowners associations (HOAs). See, “On Again: Corporate Transparency Act reporting requirements reinstated.”

FinCEN Expected to Issue Additional Guidance

FinCEN is expected to provide further guidance regarding possible clarifications or modifications to the reporting rule to reduce burdens on low-risk entities, including small businesses. FinCEN is reportedly working on a “interim final rule.”See, FinCEN Homepage,stating that the proposed rulemaking that will narrow the scope of the rule to foreign reporting companies only.

FinCEN Not Issuing Fines or Penalties Pending Passage of Interim Rule 

FinCEN announced on its website that it will not be issuing fines or penalties in connection with beneficial ownership reporting deadlines “until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed.” See, FinCEN Announcement. See also Department of Treasury Press Release  indicating that the “rulemaking will narrow the scope of the rule,” possibly “to foreign reporting companies only.” FinCEN also states it will issue “an interim final rule that extends BOI reporting deadlines by March 21,2025,” and will “solicit public comment on potential revisions to existing BOI reporting requirements.” See, FinCEN Announcement.

Nonetheless, we recommend complying with the new March 21, 2025 deadline given ongoing uncertainty as to when the “Final Rule” will take effect and what it will require. Additionally, the March 21, 2025 deadline is still in effect, See FinCEN’s BOI Information webpage.

Potential Legislative Relief Still Uncertain

Congress has been considering modifications to the CTA’s reporting deadlines. The House of Representatives recently passed H.R. 736, a bipartisan bill proposing an extension of the BOI filing deadline until January 1, 2026. However, the Senate has yet to act on this measure.

What This Means for Businesses

✅ Take Action Now—File to Avoid Compliance Issues

Given the reinstated CTA requirements, businesses should file their BOI reports as soon as possible. Even with FinCEN’s extension, waiting could lead to compliance risks and potential penalties if the compliance deadline is missed. FinCEN has an E-Filing system available at https://boiefiling.fincen.gov.

🚨 Monitor FinCEN for New Guidance

Businesses should stay informed about any upcoming announcements from FinCEN regarding additional extensions, exemptions, or enforcement priorities. See the FinCEN website for updates

🔍 Stay Prepared for Possible Changes

With legal challenges and pending legislation still in motion, the regulatory landscape could shift again. However, unless new legal action or legislative intervention occurs, businesses should assume compliance is required immediately.

Conclusion

CTA reporting obligations are back in effect, and businesses must ensure they meet their BOI reporting requirements. While a formal extension from FinCEN provides some relief, companies should still prepare to file as soon as possible. FinCEN may introduce further modifications, but businesses should remain vigilant and stay ahead of any updates. Additionally, the pending appeal of the Smith and other CTA court decisions has the potential to change the reporting obligations again, so continued monitoring of legal developments is crucial. For latest updates, access the FinCEN website.

Maryland & Washington DC

410-327-3800 | 202-670-6289 | 301-830-8315

The post Corporate Transparency Act Update: BOI Reporting Now Required by March 21, 2025 appeared first on COWIE LAW GROUP, P.C.

CORPORATE TRANSPARENCY ACT

UPDATE

Supreme Court Weighs in

Compliance Remains Voluntary Amid Legal Battles

Recent developments surrounding the Corporate Transparency Act (CTA) have left reporting companies in a state of uncertainty. While the U.S. Supreme Court granted the government’s motion to stay a nationwide injunction in Texas Top Cop Shop, Inc. v. McHenry on January 23, 2025, a separate injunction issued in Smith v. U.S. Department of the Treasury remains in place. As a result, compliance with the CTA’s beneficial ownership reporting requirements is still not mandatory at this time.

Current Status: Reporting Remains Paused

Following the Supreme Court’s decision, the Financial Crimes Enforcement Network (FinCEN) issued guidance on January 24, 2025, confirming that reporting companies are not required to file beneficial ownership information while the Smith injunction is in effect. See,  Alert: Ongoing Litigation – Texas Top Cop Shop, Inc., et al. v. McHenry, et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions [Updated January 24, 2025]

Companies will also not face liability for failing to submit reports during this period. However, businesses may still choose to voluntarily submit their information.

This pause impacts corporations, nonprofits, and community associations that would otherwise be required to comply with the CTA’s reporting mandates.

Ongoing Legal and Legislative Challenges

The Community Associations Institute (CAI) has also taken legal action against the U.S. Department of the Treasury, Secretary Janet Yellen, and FinCEN, challenging the application of the CTA on community associations. While CAI’s preliminary injunction request was denied, its appeal in the Fourth Circuit is ongoing, with the government’s response due by January 31, 2025.

Meanwhile, legislative efforts to repeal the CTA are gaining traction in Congress. Lawmakers have introduced H.R. 425 and S. 100, both of which aim to fully repeal the Corporate Transparency Act and its beneficial owner reporting requirements.

What’s Next ?

With litigation and legislative challenges still pending, the fate of the Corporate Transparency Act’s reporting mandates remains uncertain. Businesses, nonprofits, and community associations should continue to monitor these developments, as compliance requirements may change depending on court rulings and congressional action. See our prior article for recommendations and links to the FinCEN Website to keep updated.

Maryland & Washington DC

410-327-3800 | 202-670-6289 | 301-830-8315

The post CTA Update: Supreme Court Weighs in, Compliance Still Voluntary Amid Legal Battles appeared first on COWIE LAW GROUP, P.C.

The U.S. Court of Appeals for the Fifth Circuit removed and then reinstated the December 3, 2024 U.S. Texas District Court injunction halting enforcement of the Corporate Transparency Act (CTA).  As such, compliance is still voluntary pending appeal. Details below.

Background on the CTA

The CTA mandates that certain business entities report beneficial ownership information (BOI) to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). This requirement aims to prevent the misuse of anonymous shell companies for activities such as money laundering and tax evasion.

Recent Judicial Developments

• December 3, 2024 Preliminary CTA Injunction: The U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction, halting the enforcement of the CTA and its reporting requirements. The court expressed concerns about the constitutionality of the act, particularly regarding federal overreach into areas traditionally managed by states. See Court Temporarily Blocks CTA, Compliance Voluntary Pending Appeal
• December 23, 2024, Preliminary CTA Injunction Lifted: U.S. Court of Appeals for the Fifth Circuit (“Fifth Circuit”) granted a stay of the District Court’s preliminary injunction, effectively reinstating the CTA’s enforcement of the ownership reporting requirements. In response, FinCEN extended the reporting deadline to January 13, 2025, acknowledging the need for additional compliance time.
• December 26, 2024, Preliminary CTA Injunction Reinstated Pending Appeal: The Fifth Circuit vacated its previous stay, reinstating the nationwide preliminary injunction. This action suspends the CTA’s enforcement and reporting deadlines until the court can fully assess the substantive arguments concerning the act’s constitutionality.
• Pending Appeal Spring 2025: the Fifth Circuit issued an expedited briefing schedule with a hearing Scheduled on March 25, 2025. Any court ruling as to the constitutionality and enforcement of CTA will likely come after that date.

Current Status

As of now, entities are not required to file BOI reports with FinCEN. However, voluntary submissions are permitted. Businesses should remain vigilant and prepared to comply promptly should the injunction be lifted following the court’s forthcoming decision.

The FinCEN website Alert updated January 2, 2025, confirms that reporting requirements are still voluntary pending the U.S. Department of Treasury’s appeal:

“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

See, Alert: Ongoing Litigation – Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.) & Voluntary Submissions [Updated January 2, 2025]. See also the BOI filing website page.

Recommendations for Businesses

Companies should stay apprised of the status of the CTA

• Stay Informed: Monitor updates from FinCEN to remain aware of any changes in the CTA’s enforcement status at:
  • https://boiefiling.fincen.gov/fileboir

• • https://www.fincen.gov/boi

• Prepare Documentation: As a precaution, gather and organize the necessary beneficial ownership information to ensure readiness for potential compliance requirements.
• Voluntary Compliance: Some businesses have already complied or may choose to voluntarily comply. These business, should continue to stay informed as court rulings could alter compliance requirements.
• Consult Legal Counsel: Seek advice from legal professionals to understand the implications of these developments and to ensure compliance with any future obligations under the CTA.

Conclusion

In summary, while the enforcement of the Corporate Transparency Act is currently suspended due to ongoing judicial review, businesses should stay alert and prepared for potential reinstatement of reporting requirements pending the court’s final decision.

To explore the broader implications of the ruling, see recent coverage Wall Street Journal and Reuters articles.

Maryland & Washinton, D.C.

410-327-3800 | 202-670-6289 | 301-830-8315

The post Corporate Transparency Act Update: Injunction Reinstated, Compliance Still Voluntary Pending Appeal appeared first on COWIE LAW GROUP, P.C.

What the Nationwide Injunction Means for Condos & HOAs

A federal court has issued a nationwide injunction temporarily blocking the enforcement of the Corporate Transparency Act (CTA), originally set to take effect on January 1, 2025.

The CTA mandates condominium and HOA board members to report beneficial ownership information (BOI) to the Financial Crimes Enforcement Network (FinCEN). However, this recent ruling from a Texas court, issued on December 3, 2024, halts the U.S. Department of Treasury from enforcing the BOI reporting requirements for legal entities, including corporations, LLCs, and associations.

The court expressed concerns that the law imposes undue burdens on small organizations and potentially infringes on state sovereignty. For community associations, such as condos and HOAs, this injunction provides a temporary reprieve from compliance efforts until the legal challenges are resolved. Despite the pause, condominium and HOA boards should remain vigilant, as future rulings may reinstate CTA requirements or modify compliance obligations.

The Community Association Institute (CAI) legal team, which previously sought an injunction specifically for condos and HOAs (see CAI Injunction Denied), asserts that the Texas court’s ruling applies nationwide to all U.S.-incorporated community associations. For more details, refer to CAI’s article: CTA Temporarily Blocked Nationwide By Texas Court.

Following the Texas court decision, the FinCEN website has been updated with a new “BOI e-Filing Alert,” stating that BOI reporting requirements are currently voluntary while the US Department of Treasury appeals the Texas courts decision:

“Please note that beneficial ownership information reporting requirements have been affected by a recent federal court order. The Department of the Treasury is appealing that order. In the meantime, reporting companies are not currently required to file a BOIR and are not subject to liability if they fail to do so while the applicable order remains in force.

However, reporting companies may still opt to file a BOIR.”

Click her for Link to the BOI e-Filing Alert.

Additionally, the the home page for BOI reporting now contains a more detailed “Alert” link entitled: “Impact of Ongoing Litigation – Deadline Stay – Voluntary Submission Only.” Clicking on that link provides the reader with the following information regarding the voluntary nature of the BOI reporting requirements as well as the status of the appeal:

“In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

—

The Corporate Transparency Act (CTA) plays a vital role in protecting the U.S. and international financial systems, as well as people across the country, from illicit finance threats like terrorist financing, drug trafficking, and money laundering.  The CTA levels the playing field for tens of millions of law-abiding small businesses across the United States and makes it harder for bad actors to exploit loopholes in order to gain an unfair advantage.

On Tuesday, December 3, 2024, in the case of Texas Top Cop Shop, Inc., et al. v. Garland, et al., No. 4:24-cv-00478 (E.D. Tex.), a federal district court in the Eastern District of Texas, Sherman Division, issued an order granting a nationwide preliminary injunction that: (1) enjoins the CTA, including enforcement of that statute and regulations implementing its beneficial ownership information reporting requirements, and, specifically, (2) stays all deadlines to comply with the CTA’s reporting requirements. The Department of Justice, on behalf of the Department of the Treasury, filed a Notice of Appeal on December 5, 2024.

Texas Top Cop Shop is only one of several cases in which plaintiffs have challenged the CTA that are pending before courts around the country. Several district courts have denied requests to enjoin the CTA, ruling in favor of the Department of the Treasury. The government continues to believe—consistent with the conclusions of the U.S. District Courts for the Eastern District of Virginia and the District of Oregon—that the CTA is constitutional.

While this litigation is ongoing, FinCEN will comply with the order issued by the U.S. District Court for the Eastern District of Texas for as long as it remains in effect. Therefore, reporting companies are not currently required to file their beneficial ownership information with FinCEN and will not be subject to liability if they fail to do so while the preliminary injunction remains in effect. Nevertheless, reporting companies may continue to voluntarily submit beneficial ownership information reports.”

To explore the broader implications of the ruling, see Reuters’ coverage: Texas Judge Blocks Anti-money Laundering Law’s Enforcement Nationwide

CONDOMINIUM & HOA ATTORNEYS

Maryland & Washinton, D.C.

410-327-3800 | 202-670-6289 | 301-830-8315

The post COURT TEMPORARILY BLOCKS – CORPORATE TRANSPARENCY ACT appeared first on COWIE LAW GROUP, P.C.

New Laws

 Condos, HOAs & Co-Ops

Starting October 1, 2024, seven legislative bills changed Maryland Community Association Law for condominiums (“condos”), homeowners associations (“HOAs”) and cooperative housing corporations (“Co-ops”). Here’s a summary of these bills:

1. Fewer Unit Owners Needed to Amend Condo Docs (SB 665/HB 1496)
2. Associations Not Required to Insure Units in Certain Condos (SB 1015 / HB 1227)
3. New Asbestos Disclosure Requirement in Condo Sales (SB 46 / HB 143)
4. New Electric Vehicle Recharging Laws (SB 465/HB 159)
5. Expanded Authority for Condos to enter Clean Energy Leases (HB 216/SB 206)
6. Funding Assistance for Condo / HOA Infrastructure Replacement (SB 446 / HB 280)
7. New Dispute Resolution Procedures for Co-ops (SB 015 / HB 309)

“SB” and “HB” refer to Senate Bill and House Bill, respectively. Legislators introduced these bills in the 2024 Regular Legislative Session of the Maryland General Assembly, and the Governor has approved them. Now, the bills are part of the Maryland Condominium Act (“MD Condo Act”), Maryland Homeowners Association Act (“MD HOA Act”), and Maryland Cooperative Housing Corporation Act (“MD Co-Op Act”). Details on these new laws are provided below.

1. Fewer Unit Owners Needed to Amend a Maryland Condo Declaration 

Maryland lawmakers lowered the percentage of unit owner consent required to amend a condo declaration from 80% to 66 2/3%. MD Condo Act § 11–103(c)(1)(i). This change simplifies amendment approvals and promotes smoother condo governance. However, if any units remain under developer ownership, the original 80% threshold still applies (MD Condo Act § 11–103(c)(1)(ii).

2. Condo Associations Not Required to Insure Units in Certain Condos

Maryland law now clarifies that condominium associations are exempted from the obligation of insuring “units” only if the condo is “composed entirely of similar detached condominium units.” For example, a condo where all units are detached residential homes of similar design, separated by shared common element walls, would be exempt from the obligation to insure units.

Though rare, these “detached unit” condos do exist. In such cases, the condo associations only need to carry property insurance on the common elements (MD Condo Act § 11–114(a)(1)(i)), allowing them to require unit owners to carry homeowners insurance for their own individual detached units. MD Condo Act § 11–114(e)(2). Alternatively, the condo associations may choose to “carry homeowners insurance on the entirety of all detached units.” MD Condo Act § 11–114(e)(3). Regardless of whether they insure all or none of the detached units, these associations must still insure the common elements and provide annual notice to unit owners about their responsibility to insure their own units, including updates if this obligation changes. MD Condo Act § 11–114(b)(2)(i) and (ii).

This exemption applies only to condos “composed entirely of similar detached condominium units.” Associations for all other condo types must maintain property insurance on both “common elements and units, exclusive of improvements and betterments installed in units by unit owners, other than the developer.” MD Condo Act § 11–114(a)(1)(i).

3. New Asbestos Disclosure Requirement in Maryland Condo Sales

Maryland now requires sellers of condominium units to provide asbestos disclosures to purchasers. This requirement applies to both initial sales by condominium developers and resales by unit owners. If a seller fails to make the disclosure, the purchaser has the right to terminate the sale, making it unenforceable.

a. Initial Sale by Condo Developer:

A condominium developer must include in the initial sales contract a statement detailing whether it has actual knowledge of asbestos in the condominium. This statement must include: (i) the location of the asbestos; (ii) any asbestos abatement conducted and its timing; and (iii) the date of any such abatement. MD Condo Act § 11–126(a)(2)(iii). If the developer fails to provide this statement, the contract becomes unenforceable. MD Condo Act § 11–126(a).

b. Resale by Condo Unit Owner:

When reselling a unit, a condominium owner must provide the buyer with a statement disclosing whether they know of any asbestos in the unit. This disclosure must include: (i) the location of the asbestos; and (ii) whether abatement was performed during the seller’s occupancy. MD Condo Act § 11–135(a)(5)(iv). The seller must provide this statement no later than 15 days before closing; otherwise, the contract becomes unenforceable. MD Condo Act § 11–135(a).

4. New Electric Vehicle Recharging laws for Community Associations

Maryland has revised and expanded electric vehicle recharging laws for community associations.

a. Insurance of Electric Vehicle Charging Equipment

Maryland Condominium and HOA Acts already promote electric vehicle use by requiring associations to permit owners to install electric vehicle charging equipment at their parking spaces, subject to certain requirements, such reimbursement of association insurance premium increases due to installation of their charging equipment. MD Condo Act § 11-111.4 and MD HOA Act § 11B-111.8. Maryland law now permits owners to obtain their own insurance and provide the association with a certificate of insurance listing the association as an additional insured prior to installing the equipment. MD Condo Act § 11-111.4(g)(1)(i) and MD HOA Act § 11B-111.8 (g)(1)(i). Insurance overage must be maintain as long as the equipment remains installed. MD Condo Act § 11-111.4(g)(2) and MD HOA  Act § 11B-111.8 (g)(2).

b. Expanded Definition of  “Electric Vehicle Recharging Equipment”

Maryland has expanded the definition of “electric vehicle recharging equipment” in the Condo and HOA Acts to include equipment that recharges any “vehicles propelled by electricity.” MD Condo Act § 11-111.4(a) and MD HOA  Act § 11B-111.8(a). Previously the law only applied to “motor vehicles propelled by electricity.” This expanded definition encompasses other types of electricity propelled transportation such as “electric bicycles.”

c. Electric Vehicle Recharging Laws Extended To Maryland Co-Ops

Maryland added Section 5–6B–23.1 to the Cooperative Housing Corporation Act to establish guidelines and procedures for cooperative members to install electric vehicle recharging equipment in their parking spaces. This new law aligns with existing requirements for condominiums and HOAs.

d. DHCD to Publish Electric Vehicle Recharging Info on COC Website

The Maryland Department of Housing and Community Development (“HCD”) must now publish information on its common ownership community website to help owners who want to install electric vehicle charging stations. The website will include a summary of installation requirements for condos, HOAs, and cooperatives, a list of certified contractors and insurers, and a contact for assistance. HCD Article § 2-303(c)(3).

5. Expanded Authority for Condo Associations to Enter into Clean Energy Leases

Maryland has created laws that help condo boards streamline common element clean energy projects, such as installation and operation of solar panels and battery storage systems.

Condos boards now have authority to unilaterally grant leases to clean energy companies to utilize common elements for longer than one (1) year. Previously, such a lease, exceeding one (1) year, required approval from two-thirds of unit owners. MD Condo Act § 11-125(f). The Maryland Condominium Act now creates an exception for “clean energy equipment” (defined as “electric vehicle recharging equipment, solar energy equipment, and energy storage systems”). Under this exception, a condominium board can grant leases in excess of one year for clean energy equipment without needing unit owner approval, provided it follows specific protocols. The board must reach its decision to grant a clean energy lease by majority vote and it must grant the lease interest at a board meeting with at least 30 days’ prior notice to all unit owners. MD Condo Act § 11-125(f)(5)(ii) and (iii).

6. Funding Assistance for Condo / HOA Infrastructure Replacement 

To ensure long-term financial stability, upkeep, and safety of common ownership properties, Maryland requires condos and HOAs to conduct reserve studies every five (5) years and fund their replacement reserves according to these studies.  See,  Reserve Studies & Reserve Funding In Maryland.  Many older communities, however, have struggled to adequately fund their reserve accounts to meet projected replacement costs for shared facilities and infrastructure.

To support these communities, new legislation authorizes Maryland counties and municipalities to establish funds that assist condo associations and HOAs with repairing and rehabilitating their infrastructure. However, the infrastructure must be of the type typically maintained by government authorities for public benefit, such as sidewalks, roads, and stormwater management facilities. Local Government Article § 1–1319(b). These funds cannot be used for recreational facilities, such as playgrounds and clubhouses. Furthermore, local governments administering such funds must establish criteria for awarding monies, with priority given to associations most in need of infrastructure rehabilitation, as well as consideration of each association’s access to other financial resources. Local Government Article § 1–1319(d).

7. New Dispute Resolution Procedures for Co-ops

The Maryland Cooperative Housing Corporation Act now includes additional procedures to clarify how co-op members receive notice of rule violations and to ensure they understand their hearing rights. These new dispute procedures, added to MD Co-Op Act § 5-6B-30, must be followed before imposing any sanctions on members for rule violations. These new guidelines mirror those already applicable to condominiums and HOAs under MD Condo Act § 11-113 and MD HOA Act § 11B-111.10.

MD Condo & HOA Law Booklet

(2024-25 Edition)

Free Download or Hardcopy

Includes all updated laws as of October 1, 2024.

Community Association Law Attorneys

Condominiums, HOAs & Co-Ops

Maryland and Washington, D.C.

410-327-3800 | 202-670-6289 | 301-830-8315

cowielawgroup.com

The post Maryland Community Association Law – Key Legislative Updates for 2025 appeared first on COWIE LAW GROUP, P.C.

Corporate Transparency Act

Injunction Sought for Condos and HOAs

This is an update to the post (below) regarding an injunction sought by the Community Associations Institute (“CAI”) to temporarily prevent the application of the Corporate Transparency Act (“CTA”) to condominiums and HOAs.

CAI seeks injunction against application of Corporate Transparency Act to Condos and HOAs: On September 10, 2024, the Community Associations Institute (“CAI”) filed a lawsuit against the Department of the Treasury challenging the applicability of the Corporate Transparency Act (“CTA”) beneficial owner filing requirements to community associations. The CAI is seeking, among other things, a temporary injunction to prevent the Treasury Department from applying the CTA to associations pending the resolution of its lawsuit. The most-compelling CAI argument is that community associations are nonprofit organizations under Section 528 of the IRS Code and should therefore be exempt from the CTA’s reporting requirements. The deadline for compliance with the CTA is January 1, 2025. There are steep penalties for non-compliance with the CTA, which include fines of $500 per day (up to $10,000) and possible criminal charges.

Click Here for link for CAI Article with general overview of lawsuit. Contact us for additional information regarding the corporate transparency act and it’s application to condos and HOAs.

CONDOMINIUM & HOA ATTORNEYS

MARYLAND & WASHINGTON DC

410-327-3800 | 202-670-6289 | 301-830-8315

cowielawgroup.com

MD/DC Condo & HOA Law Website

Cowie Law Group on Google

MD/DC Condo & HOA Facebook Group

The post Corporate Transparency Act – CAI Injunction for Condos & HOAs Denied appeared first on COWIE LAW GROUP, P.C.

CONDOMINIUM BUDGETS AND DEFECT WARRANTY CLAIMS IN THE DISTRICT OF COLUMBIA

Understanding and identifying construction defect warranty claims is an important part of budgeting for the first unit owner-controlled condominium association board of directors. It is “preventative medicine” promoting healthy condo association finances.

Warranty Claims and the Effect on Condominium Association Finances and Budgets

The District of Columbia Condominium Act contains a statutory warranty known as the “warranty against structural defects.” The warranty applies to construction defects in both condominium common elements and each condominium unit. The warranty requires condominium developers to repair “structural defects” and damage caused by the “structural defects.”

If a condominium developer fails to repair a covered structural defect, a condominium association or unit owner may pursue a structural defect warrant claim, either in a court of law or by filing an administrative claim with the Mayor of the District of Columbia.

Understanding construction defect warranty claims is an important part of budgeting for the first unit owner-controlled condominium association board of directors.  The initial developer-created budget and reserve fund is calculated on the assumption that condominium facilities are constructed free of defects with a normal life expectancy (e.g., a “25-year roof”). Making such an assumption can be costly. Hidden construction defects in the original construction can cause unanticipated repair and replacement expenses that wreak havoc on in association’s financial condition. Accordingly, funds must be earmarked early on for a comprehensive engineering evaluation to identify construction defect warranty claims so they can be brought to the attention of the condominium developer for repair before warranties expire. This is basic “preventative medicine” for associations finances.

This article provides a general overview of structural defect warranty claims in the District of Columbia.

“Structural Defects” Defined

The warranty applies to “structural defects,” which are very broadly defined. Structural defects are not just construction defects in the supporting structure of the building. Rather, a structural defect can be any condition that:

“(A) Reduces the stability or safety of unit or common elements below standards commonly accepted in the real estate market,” or

(B) Restricts the normally intended use of all or part of the common elements of a unit and which requires repair, renovation, restoration, or replacement to serve the purpose for which it was intended.”

An example of a structural defect would be a roof leak in a newly constructed condominium. This would be a “structural defect” because it restricts the “normally intended use” of a roof which is to keep water out of the building and needs repair “to serve the purpose for which it was intended.”

A structural defect is “presumed” to exist as to any building code violation that is harmful to health or safety of unit owners.

Structural Defect Warranty Period

The warranty period is the time within which a structural defect must exist for the warranty against structural defects to apply. The warranty period for an individual unit is two years from the date the developer conveys the unit to the purchaser. The warranty period for structural defects in the common elements is also two years and will typically run from the later of: (1) the date the developer conveys the first unit in the entire condominium; or (2) the date of the completion of the common element in question.

Statute of Limitations on Structural Defect Warranty Claims

The statute of limitations for bringing a breach of warranty claim in a court of law or in a non-judicial, regulatory, or administrative proceeding is 5-years running from the commencement of the applicable warranty period in question.

Court Enforcement

If the developer refuses to repair a structural defect covered by the warranty, a condominium association or unit owner may file a lawsuit in the Superior Court of the District of Columbia to enforce the warranty and seek a damages award. This would include the cost of repairing the structural defects and resulting damage caused by the structural defects. Additionally, “attorney fees and costs” may be awarded to an association or unit owner who pursues a successful breach of warranty claim in a court of law.

Administrative Enforcement

Condominium Developer’s Warranty Security

The District Of Columbia administers a Warranty Security Program to assure compliance with the warranty against structural defects. Under this program, a condominium developer is required to post a bond, letter of credit or other form of security acceptable to the Mayor of the District of Columbia (“Mayor” or “Mayor’s Office”) that can be drawn upon, if necessary, to satisfy costs that arise from the developer’s failure or inability to fulfill its warranty obligations to repair structural defects (the “warranty security”). The warranty security must be delivered to the Mayor’s Office and must name the Mayor as beneficiary in an amount equal to 10% of the estimated construction or conversion costs.

If the developer fails to correct structural defects in the common elements or individual units, a condominium association or unit owner (“claimant”) can make a structural defect warranty security claim with the Mayor’s Office, asking it to secure and release funds from the developer’s warranty security to be used to pay the cost of repairing the structural defects and other permissible damages.

Bonds & Letters of Credit

Condominium developers typically satisfy their warranty security obligation by purchasing a bond or letter of credit. Generally, a bond is issued by an insurance company and a “letter of credit” is issued by a financial institution. These legal documents require payment to the Mayor or her/his designee if the developer fails to fulfill its obligation to repair covered structural defects. In short, a bond or letter of credit is an alternative, but limited, source of funds backed by an insurance company or financial institution that serves as security for the developer’s fulfillment of its warranty obligations.

Where and How to Make a Claim Against the Developer’s Warranty Security

The Warranty Security Program is administered for the Mayor by the agency known as the Rental Conversion and Sales Division of the District of Columbia Department of Housing and Community Development’s Housing Regulation Administration (“RCSD”). Structural defect claims made against a condominium developer’s warranty security (“warranty security claims”) are filed with and handled by RCSD.

A claimant must give the condominium developer 30 days prior written notice of its intent to file a warranty security claim. During this 30-day period the condominium developer has an “opportunity to respond” to the condominium association or unit owner claimant. If unresolved after 30 days prior notice, a claimant may file its warranty security claim with RCSD.

Mayor’s Decision on Structural Defect Claim

After receiving the warranty security claim and the developer’s response, RCSD, behalf of the Mayor, will decide whether the claimant has satisfied the standards for proving a structural defect claim (a “perfected claim”).  If the structural defect claim is determined to be “perfected,”  RCSD will determine the amount of money to be paid from the developer’s warranty security to cover the cost to repair or replace the structural defects and any resulting damages.

Second Bite at the Apple to Perfect a Claim

An initial determination by RCSD that a structural defect claim is “not perfected” is not fatal to a structural defect claim. A claimant may refile the warranty security claim “based on additional or different information.”

Reduction of the Developer’s Warranty Security After 2 Years

If a claimant waits too long to pursue a warranty security claim, there may be no funds left to make a claim against. The developer can begin reducing the amount of its warranty security beginning 2-years after it conveys the first condominium unit. However, the developer’s right to reduce and eventually release its warranty security terminates once a structural defect claim has been filed with the Mayor or in a court of law.

Conclusion: Warranty Investigations and Warranty Claims are Preventative Medicine for Association Finances

All condominium associations should have a transition construction defect / deficiency study performed by an engineer or other qualified construction consultant as soon as possible after the unit owners take control of the association. The purpose of the study is to identify, in a written report, construction defects so that they can be brought to the developer’s attention while construction defect warranty claims, and other non-warranty construction defect claims, are still enforceable. This is basic “preventative medicine” for  Washington DC condominium association finances because taking timely action to identify “structural defects” forces the developer to make repairs under its warranty or have its warranty security funds released by the Mayor’s Office to cover the cost of those repairs.

WASHINGTON DC CONDOMINIUM ATTORNEYS

CONDO CONSTRUCTION DEFECT WARRANTY LAWYERS

MD/DC Condo & HOA Facebook Group

MD/DC Condo & HOA Law Website

410-327-3800 | 202-670-6289 | 301-830-8315

cowielawgroup.com

Cowie Law Group on Google

The post CONDOMINIUM BUDGETS AND DEFECT WARRANTY CLAIMS IN THE DISTRICT OF COLUMBIA appeared first on COWIE LAW GROUP, P.C.

Cowie Law Group’s handy Maryland and DC Condominium & HOA Act Law Booklets are now available!

Free download or hardcopy.

Click links (or booklet covers) below to view or download a digital copy or contact us for a hard copy.

MD CONDO & HOA ACT BOOKLET LINK   

DC CONDO ACT LINK

NOTE ON MD CONDO / HOA ACT:

This edition of the Maryland Condo and HOA Act Booklet includes all new laws amendments adopted during the 2024 regular legislative session of the Maryland General Assembly, effective October 1. For an article summarizing these new laws and amendments to the condominium and HOA acts, see Maryland Community Association Law – Key Legislative Updates for 2025.

This edition of the Maryland Condo and HOA Act Booklet also includes Sections 11-131(d)(3), 11-134.1 and 11B – 110(a)(3), all of which were drafted by Nicholas D. Cowie and are designed to protect warranty claims and other legal rights of persons purchasing homes in condominiums and homeowners association communities. Click links (or photos) to see articles discussing this legislation.

New Law Prohibits Condo Developers from Shortening Statute of Limitations on Condominium Construction Defect Warranty Claims in Maryland, by Nicholas D. Cowie

New Amendments that Extend Warranties for Condominiums and Homeowners Associations in Maryland, by Nicholas D. Cowie

NOTE ON DC CONDO ACT:

This edition of the DC Condominium Act contains amendments made to the CondominiumWarranty Against Structural Defects § 42-1903.16. The amendments were enacted by the Condominium Warranty Claims Clarification Amendment Act, effective February 23, 2023. Below are links to articles discussing DC’s new structural defect warranty laws following these amendments:

The Warranty Against Structural Defects in the District of Columbia, Quorum Article (October 2023) – Community Associations Institue, Washington DC Metro Chapter Publication 

The Washington DC Condominium Warranty Against Structural Defects, Cowie Law Group Blog Post

Condominium and HOA Act Booklets by Cowie Law Group, Maryland and Washington DC Condominium and HOA law attorneys.

One booklet contains the Maryland Condominium & HOA Act and the other booklet contains the Washington DC Condominium Act.

WASHINGTON DC CONDOMINIUM ATTORNEYS

MARYLAND CONDO & HOA LAW ATTORNEYS

MD/DC Condo & HOA Facebook Group

MD/DC Condo & HOA Law Website

410-327-3800 | 202-670-6289 | 301-830-8315

cowielawgroup.com

Cowie Law Group on Google

Condo & HOA Law News – Maryland and DC

#MarylandCondominiumAct

#MarylandHOAAct

#MarylandCondominiumAttorneys

#MarylandHOAAttorneys

#MarylandCondominiumConstructionDefectAttorneys

#DistrictofColumbiaCondominiumConstructionDefectAttorneys

#DCCondominiumAttorneys

The post DC and Maryland Condo / HOA Act Booklets (2024-25 Ed.) appeared first on COWIE LAW GROUP, P.C.