Common Ownership Communities - Reserve Accounts and Reserve Studies - Alterations

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
*hb1269*

HOUSE BILL 1269
N1, C1 6lr3437
CF SB 615
By: Delegate Bhandari
Introduced and read first time: February 12, 2026
Assigned to: Economic Matters

A BILL ENTITLED

AN ACT concerning 1

Common Ownership Communities – Reserve Accounts and Reserve Studies – 2
Alterations 3

FOR the purpose of requiring the governing body of certain cooperative housing 4
corporations, condominiums, or homeowners associations to adopt an annual budget 5
that includes certain calculations for the cost to repair or replace certain capital 6
components, and to deposit funds to a reserve account in accordance with the annual 7
budget; providing that a certain portion of the members, unit owners, or lot owners 8
of a common ownership community, rather than a certain portion of the governing 9
body, may determine that the community and its members are facing a financial 10
hardship and that a determination of financial hardship may be extended; requiring 11
the governing body of certain cooperative housing corporations, condominiums, and 12
homeowners associations to add funds to a reserve account after deviating from a 13
reserve funding requirement concerning a capital component; and generally relating 14
to reserve accounts and reserve studies of common ownership communities. 15

BY repealing and reenacting, with amendments, 16
Article – Corporations and Associations 17
Section 5–6B–26.1 18
Annotated Code of Maryland 19
(2025 Replacement Volume) 20

BY repealing and reenacting, with amendments, 21
Article – Real Property 22
Section 11–109.2, 11–109.4, 11B–112.2, and 11B–112.3 23
Annotated Code of Maryland 24
(2023 Replacement Volume and 2025 Supplement) 25

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 26
That the Laws of Maryland read as follows: 27

2 HOUSE BILL 1269

Article – Corporations and Associations 1

5–6B–26.1. 2

(a) (1) In this section the following words have the meanings indicated. 3

(2) “Reserve study” means a study of the reserves required for future major 4
repairs and replacement of the common elements of a cooperative housing corporation that: 5

(i) Using an itemized list, clearly identifies each structural, 6
mechanical, electrical, and plumbing component of the common elements and any other 7
components that: 8

1. Are the responsib ility of the cooperative housing 9
corporation to repair and replace; and 10

2. If applicable, meet a minimum cost of repair or 11
replacement, as determined by the governing body, that is: 12

A. Reasonably based on the expenses of the cooperative 13
housing corporation; and 14

B. Not a minor expense that is otherwise addressed by the 15
budget of the cooperative housing corporation; 16

(ii) States the normal useful life and the estimated remaining useful 17
life of each identified component; 18

(iii) States the estimated cost of repair or replacement of each 19
identified component; 20

(iv) States the estimated annual reserve amount necessary to BE 21
ADDED TO THE RESERVE ACCOUNT TO accomplish any identified future repair or 22
replacement OF AN IDENTIFIED COMPONENT WHEN THE COMPONENT REACHES THE 23
END OF THE COMPONENT’S USEFUL LIFE; and 24

(v) States the quantity or size of each identified component using the 25
appropriate measurement, such as unit amount, square footage, or cubic feet. 26

(3) “Updated reserve study” means , for the common elements since the 27
prior reserve study was completed within the previous 5 years, a study that: 28

(i) Revises replacement cost, remaining life, and useful life 29
estimates; 30

(ii) Analyzes work performed and amounts spent; and 31

HOUSE BILL 1269 3

(iii) Identifies whether any maintenance contracts are in place. 1

(b) (1) This subsection applies only to a cooperative housing corporation 2
established in: 3

(i) Prince George’s County on or after October 1, 2020; 4

(ii) Montgomery County on or after October 1, 2021; or 5

(iii) Any county other than Prince George’s County or Montgomery 6
County on or after October 1, 2022. 7

(2) The governing body of the cooperative housing corporation shall have 8
an independent reserve study completed not less than 30 calendar days before the first 9
meeting of the cooperative housing corporation at which the members other than the owner 10
have a majority of votes in the cooperative housing corporation. 11

(3) The governing body shall have an updated reserve study completed 12
within 5 years after the date of the initial reserve study conducted under paragraph (2) of 13
this subsection, which shall be updated at least every 5 years thereafter. 14

(c) (1) (i) This paragraph applies only to a cooperative housing corporation 15
established in Prince George’s County before October 1, 2020. 16

(ii) If the governing body of a cooperative housing corporation has 17
had a reserve study conducted on or after October 1, 2016, the governing body shall have 18
an updated reserve study conducted within 5 years after the date of that reserve study and 19
at least every 5 years thereafter. 20

(iii) If the governing body of a cooperative housing corporation has 21
not had a reserve study conducted on or after October 1, 2016, the governing body shall 22
have a reserve study conducted on or before October 1, 2021, and an updated reserve study 23
at least every 5 years thereafter. 24

(2) (i) This paragraph applies only to a cooperative housing corporation 25
established in Montgomery County before October 1, 2021. 26

(ii) If the governing body of a cooperative housing corporation has 27
had a reserve study conducted on or after October 1, 2017, the governing body shall have 28
an updated reserve study conducted within 5 years after the date of that reserve study and 29
at least every 5 years thereafter. 30

(iii) If the governing body of a cooperative housing corporation has 31
not had a reserve study conducted on or after October 1, 2017, the governing body shall 32
have a reserve study conducted on or before October 1, 2022, and an updated reserve study 33
at least every 5 years thereafter. 34

4 HOUSE BILL 1269

(3) (i) This paragraph applies to a cooperative housing corporation 1
established in any county other than Prince George’s County or Montgomery County before 2
October 1, 2022. 3

(ii) If the governing bo dy of a cooperative housing corporation has 4
had a reserve study conducted on or after October 1, 2018, the governing body shall have 5
an updated reserve study conducted within 5 years after the date of that reserve study and 6
at least every 5 years thereafter. 7

(iii) If the governing body of a cooperative housing corporation has 8
not had a reserve study conducted on or after October 1, 2018, the governing body shall 9
have a reserve study conducted on or before October 1, 2023, and an updated reserve study 10
at least every 5 years thereafter. 11

(d) Each reserve study and updated reserve study required under this section 12
shall: 13

(1) Be prepared by a person who: 14

(i) Has prepared at least 30 reserve studies within the prior 3 15
calendar years; 16

(ii) Has participated in the preparation of at least 30 reserve studies 17
within the prior 3 calendar years while employed by a firm that prepares reserve studies; 18

(iii) Holds a current license from the State Board of Architects or the 19
State Board for Professional Engineers; or 20

(iv) Is currently designated as a reserve specialist by the Community 21
Association Institute or as a professional reserve analyst by the Association of Professional 22
Reserve Analysts; 23

(2) Be available for inspection and copying by any unit owner; 24

(3) Be reviewed by the governing body of the cooperative housing 25
corporation in connection with the preparation of the annual proposed budget; and 26

(4) Be summarized for submission with the annual proposed budget to the 27
unit owners. 28

(e) To the extent that a reserve study conducted in accordance with this section 29
indicates a need to budget for reserves, the GOVERNING BODY OF A COOPERATIVE 30
HOUSING CORPORATION SHALL ADOPT AN ANNUA L budget [shall include ] THAT 31
INCLUDES: 32

(1) For the capital components IDENTIFIED IN THE RESERVE STUDY, the 33
current estimated: 34
HOUSE BILL 1269 5

(i) Replacement cost CALCULATED IN THE RESERVE STUDY; AND 1

(ii) Remaining [life; and 2

(iii) Useful] USEFUL life CALCULATED IN THE RESERVE STUDY; 3

(2) The amount of [accumulated]: 4

(I) ACCUMULATED cash reserves set aside for the repair [,] OR 5
replacement[, or restoration] of capital components IDENTIFIED IN THE RESERVE STUDY 6
as of the beginning of the fiscal year in which the reserve study is conducted ; and [the 7
amount of the] 8

(II) THE expected contribution to the reserve fund for the fiscal year 9
CALCULATED IN THE RESERVE STUDY; 10

(3) A statement describing the procedures used for estimation and 11
accumulation of cash reserves in accordance with this section; and 12

(4) A statement of the amount of reserves recommended in the RESERVE 13
study and the amount of current cash for replacement reserves. 14

(f) (1) [(i) 1.] Subject to paragraph (2) of this subsection [and 15
subparagraph (ii) of this paragraph ], the governing body of a coo perative housing 16
corporation shall deposit funds to the reserve account in accordance with the [most recent 17
reserve study or updated reserve study and the funding plan required under subsection (g) 18
of this section on or before the last day of each fiscal year and shall review the reserves and 19
the most recent reserve study or updated reserve study annually to determine whether 20
there is adequate funding in accordance with the funding plan required under subsection 21
(g) of this section. 22

2. The annual revie w under subsubparagraph 1 of this 23
subparagraph does not require a reserve study or updated reserve study in addition to the 24
reserve study requirements under subsections (b) and (c) of this section. 25

(ii) Subject to paragraph (2) of this subsection, if t he most recent 26
reserve study was an initial reserve study, the governing body shall, within 5 fiscal years 27
following the fiscal year in which the initial reserve study was completed, attain the annual 28
reserve funding level recommended in the initial reserv e study in accordance with the 29
funding plan under subsection (g) of this section ] ANNUAL BUDGET ADOPTE D BY THE 30
COOPERATIVE HOUSING CORPORATION UNDER SUBSECTION (E) OF THIS SECTION. 31

(2) (i) The [governing body ] MEMBERS of a cooperative housing 32
corporation may determine by a two –thirds majority vote that the cooperative housing 33
6 HOUSE BILL 1269

corporation and the members are experiencing a financial hardship that limits the ability 1
to fund reserves that are required under paragraph [(1)(i) or (ii)] (1) of this subsection. 2

(ii) Subject to [subparagraphs (iii) through (v) ] SUBPARAGRAPH 3
(III) of this paragraph, if [a governing body makes] THE MEMBERS OF A COOPERATIVE 4
HOUSING CORPORATION MAKE a financial hardship determination [based on the reserve 5
funding requirements of paragraph (1)(i) or (ii) of this subsection: 6

1. The] IN ACCORDANCE WITH S UBPARAGRAPH (I) OF 7
THIS PARAGRAPH, THE cooperative housing corporation may reasonably deviate from that 8
reserve funding requirement[; and 9

2. The funding level under that requirement shall be at least 10
the funding amount necessary for the purposes specified under subsection (g)(3) of this 11
section]. 12

(iii) 1. Except as provided in subsubparagraph 2 of this 13
subparagraph, a cooperative housing corporation may not deviate from the reserve funding 14
requirements of paragraph [(1)(i) or (ii)] (1) of this subsection for a period of more than 1 15
fiscal year following the financial hardship determination. 16

2. The [governing body ] MEMBERS OF A COOPERA TIVE 17
HOUSING CORPORATION may re new a financial hardship determination under 18
subparagraph (i) of this paragraph by a two–thirds majority vote to extend the period that 19
a cooperative housing corporation may deviate from the reserve funding requirement by 1 20
fiscal year following the renewal. 21

(iv) IF A COOPERATIVE HOUS ING CORPORATION DEVI ATES 22
FROM A RESERVE FUNDI NG REQUIREMENT WITH RESPECT TO A CAPITAL 23
COMPONENT IDENTIFIED IN A RESERVE STUDY , THE NEW ESTIMATED AN NUAL 24
AMOUNT THE COOPERATIVE HOUSING CORPORATION IS REQUIRED TO ADD TO THE 25
RESERVE ACCOUNT IN A CCORDANCE WITH THE R ESERVE STUDY SHALL B E 26
RECALCULATED SO THAT THE RESERVE ACCOUNT WILL HAVE SUFFICIENT MONEY 27
TO REPAIR OR REPLACE AN IDENTIFIED COMPON ENT WHEN THE COMPONE NT 28
REACHES THE END OF ITS USEFUL LIFE. 29

(V) The governing body shall: 30

1. Make good faith efforts to resolve the financial hardship 31
and resume funding reserves as required under paragraph [(1)(i) or (ii) ] (1) of this 32
subsection; 33

2. Maintain detailed documentation of the good faith efforts 34
made under item 1 of this subparagraph; and 35

HOUSE BILL 1269 7

3. Treat the documents under item 2 of this subparagraph as 1
records for examination and copying under § 5–6B–26 of this subtitle. 2

[(v)] (VI) 1. All members shall be given reasonable notice in 3
advance of a vote on an initia l or a renewal of a financial hardship determination under 4
this paragraph. 5

2. A vote on an initial or a renewal of a financial hardship 6
determination under this paragraph may be taken only at a regular or special meeting of 7
the cooperative housing corporation. 8

[(3) The governing body of a cooperative housing corporation has the 9
authority to increase an assessment levied to cover the reserve funding amount required 10
under this section, notwithstanding any provision of the articles of incorporation, by laws, 11
or proprietary lease restricting assessment increases or capping the assessment that may 12
be levied in a fiscal year. 13

(g) (1) The governing body of a cooperative housing corporation shall, in 14
consultation with a person identified under subsection (d )(1) of this section, develop a 15
funding plan to determine how to fund the reserves necessary under this section. 16

(2) In developing the funding plan under this subsection, the governing 17
body shall select one of the following methods to achieve the reserv e funding under this 18
section: 19

(i) The component method; 20

(ii) The cash flow method; 21

(iii) The baseline funding method; 22

(iv) The threshold cash flow method; or 23

(v) Any other funding method consistent with generally accepted 24
accounting principles. 25

(3) A funding plan developed under this subsection shall prioritize 26
adequate amounts for repair and replacement of common elements of the cooperative 27
housing corporation that are necessary for: 28

(i) The health, safety, and well–being of the occupants; 29

(ii) Ensuring structural integrity, such as roofing replacements and 30
maintaining structural systems; 31

(iii) Essential functioning, such as plumbing, sewer, heating, cooling, 32
and electrical infrastructure; and 33
8 HOUSE BILL 1269

(iv) Any other essenti al or critical purpose, as determined by the 1
governing body. 2

(4) Reserves may be used for purposes other than those specified in the 3
funding plan if the funds are repaid to the reserve fund within 5 years after their use. 4

(5) A governing body shall r eview progress toward compliance with the 5
funding plan developed under this subsection at each annual meeting of the governing 6
body.] 7

Article – Real Property 8

11–109.2. 9

(a) The council of unit owners shall cause to be prepared and submitted to the 10
unit owners an annual proposed budget at least 30 days before its adoption. 11

(b) The annual budget shall provide for at least the following items: 12

(1) Income; 13

(2) Administration; 14

(3) Maintenance; 15

(4) Utilities; 16

(5) General expenses; 17

(6) Reserves; and 18

(7) Capital items. 19

(c) (1) [Subject to paragraphs (2) and (3) of this subsection and ] THE 20
COUNCIL OF UNIT OWNE RS OF THE CONDOMINIU M ASSOCIATION SHALL DEPOSIT 21
FUNDS TO THE RESERVE ACCOUNT in accordance with the funding plan under § 22
11–109.4(f) of this title[, the reserves provided for in the annual budget under subsection 23
(b) of this section for a residential condominium shall: 24

(i) Be the funding amount recommended in the most recent reserve 25
study or updated reserve study completed under § 11–109.4 of this title; and 26

(ii) Be deposited in the reserve account on or before the last day of 27
each fiscal year. 28

HOUSE BILL 1269 9

(2) Subject to paragraph (3) of this subsection, if the most recent reserve 1
study was an initial reserve study, the governing body shall, within 5 fiscal years following 2
the fiscal year in which the initial reserve study was completed, attain the annual reserve 3
funding level recommended in the initial reserve study in accordance with the funding plan 4
under § 11–109.4(f) of this title]. 5

[(3)] (2) (i) The [governing body of a residential condominium ] 6
COUNCIL OF UNIT OWNE RS may determine by a two –thirds majority vote that the 7
condominium and the unit owners are experiencing a financial hardship that limits the 8
ability to fund reserves that are required under paragraph (1) [or (2)] of this subsection. 9

(ii) Subject to [subparagraphs (iii) through (v) ] SUBPARAGRAPH 10
(III) of this paragraph, if a governing body makes a financial hardship determination 11
[based on the reserve funding requirements of paragraph (1) or (2) of this subsection: 12

1. The] IN ACCORDANCE WITH S UBPARAGRAPH (I) OF 13
THIS PARAGRAPH, THE condominium may reasonably deviate from that reserve funding 14
requirement[; and 15

2. The funding level under that requirement shall be at least 16
the funding amount necessary for the purposes specified under § 11–109.4(f)(3) of this title]. 17

(iii) 1. Except as provided in subsubparagraph 2 of this 18
subparagraph, a residential condominium may not deviate from the reserve funding 19
[requirements] REQUIREMENT of paragraph (1) [or (2)] of this subsection for a period of 20
more than 1 fiscal year following the financial hardship determination. 21

2. The [governing body ] UNIT OWNERS may renew a 22
financial hardship determination under subparagraph (i) of this paragraph by a two–thirds 23
majority vote to extend the period that a residential condominium may deviate from the 24
reserve funding requirement by 1 fiscal year following the renewal. 25

(iv) IF A CONDOMINIUM DEVI ATES FROM A RESERVE FUNDING 26
REQUIREMENT WITH RES PECT TO A CAPITAL CO MPONENT IDENTIFIED I N A 27
RESERVE STUDY , THE NEW ESTIMATED AN NUAL AMOUNT THE COND OMINIUM IS 28
REQUIRED TO ADD TO THE RESERVE ACCOUNT IN ACCORDANCE WITH THE RESERVE 29
STUDY SHALL BE RECAL CULATED SO THAT THE RESERVE ACCO UNT WILL HAVE 30
SUFFICIENT MONEY TO REPAIR OR REPLACE AN IDENTIFIED COMPONENT WHEN THE 31
COMPONENT REACHES THE END OF ITS USEFUL LIFE. 32

(V) The governing body shall: 33

1. Make good faith efforts to resolve the financial hardship 34
and resume funding reserves as required under paragraph (1) [or (2)] of this subsection; 35

10 HOUSE BILL 1269

2. Maintain detailed documentation of the good faith efforts 1
made under item 1 of this subparagraph; and 2

3. Treat the documents under item 2 of this subparagraph as 3
records available for examination and copying under § 11–116 of this title. 4

[(v)] (VI) 1. All unit owners shall be given reasonable notice in 5
advance of a vote on an initial or a renewal of a financial hardship determination under 6
this paragraph. 7

2. A vote on an i nitial or a renewal of a financial hardship 8
determination under this paragraph may be taken only at a regular or special meeting of 9
the condominium. 10

[(4)] (3) (i) The governing body of a residential condominium shall 11
annually review the reserves and the most recent reserve study or updated reserve study 12
to determine whether there is adequate funding in accordance with the funding plan 13
required under § 11–109.4(f) of this title. 14

(ii) The annual review under this paragraph does not require a 15
reserve study or updated reserve study in addition to the reserve study requirements under 16
§ 11–109.4 of this title. 17

(d) (1) The budget shall be adopted at an open meeting of the council of unit 18
owners or any other body to which the council of unit owners delegate s responsibilities for 19
preparing and adopting the budget. 20

(2) (i) The council of unit owners or other governing body of unit owners 21
shall submit the adopted annual budget to the unit owners not more than 30 days after the 22
meeting at which the budget was adopted. 23

(ii) The adopted annual budget may be submitted to each unit owner 24
by electronic transmission, by posting on the condominium association’s home page, or by 25
inclusion in the homeowners association’s newsletter. 26

(e) Any expenditure made other than those made because of conditions which, if 27
not corrected, could reasonably result in a threat to the health or safety of the unit owners 28
or a significant risk of damage to the condominium, that would result in an increase in an 29
amount of assessments for the current fiscal year of the condominium in excess of 15 30
percent of the budgeted amount previously adopted, shall be approved by an amendment 31
to the budget adopted at a special meeting, upon not less than 10 days written notice to the 32
council of unit owners. 33

(f) The adoption of a budget shall not impair the authority of the council of unit 34
owners to obligate the council of unit owners for expenditures for any purpose consistent 35
with any provision of this title. 36

HOUSE BILL 1269 11

(g) The provisions of this section do not apply to a condominium that is occupied 1
and used solely for nonresidential purposes. 2

11–109.4. 3

(a) (1) In this section the following words have the meanings indicated. 4

(2) “Reserve study” means a study of the reserves required for future major 5
repairs and replacement of the common elements of a condominium that: 6

(i) Using an itemized list, identifies each structural, mechanical, 7
electrical, and plumbing component of the common elements and any other components 8
that: 9

1. Are the responsib ility of the council of unit owners to 10
repair and replace; and 11

2. If applicable, meet a minimum cost of repair or 12
replacement, as determined by the governing body, that is: 13

A. Reasonably based on the expenses of the condominium; 14
and 15

B. Not a minor expense that is otherwise addressed by the 16
budget of the condominium; 17

(ii) States the normal useful life and the estimated remaining useful 18
life of each identified component; 19

(iii) States the estimated cost of repair or replacement of each 20
identified component; 21

(iv) States the estimated annual reserve amount necessary to BE 22
ADDED TO THE RESERVE ACCOUNT TO accomplish any identified future repair or 23
replacement OF AN IDENTIFIED COMPONENT WHEN THE COMPONENT REACHES THE 24
END OF THE COMPONENT’S USEFUL LIFE; and 25

(v) States the quantity or size of each identified component using the 26
appropriate measurement, such as unit amount, square footage, or cubic feet. 27

(3) “Updated reserve study” means, for the common elements since the 28
prior reserve study was completed within the previous 5 years, a study that: 29

(i) Revises replacement cost, remaining life, and useful life 30
estimates; 31

(ii) Analyzes work performed and amounts spent; and 32
12 HOUSE BILL 1269

(iii) Identifies whether any maintenance contracts are in place. 1

(b) This section applies only to a residential condominium. 2

(c) (1) This subsection applies only to a condominium established in: 3

(i) Prince George’s County on or after October 1, 2020; 4

(ii) Montgomery County on or after October 1, 2021; or 5

(iii) Any county other than Prince George’s County or Montgomery 6
County on or after October 1, 2022. 7

(2) The governing body of the condominium shall have an independent 8
reserve study completed not less than 30 calendar days before the meeting of the council of 9
unit owners required under § 11–109(c)(16) of this title. 10

(3) The governing body shall have an updated reserve study completed 11
within 5 years after the date of the initial reserve study conducted under paragraph (2) of 12
this subsection and at least every 5 years thereafter. 13

(d) (1) (i) This paragraph applies only to a condominium established in 14
Prince George’s County before October 1, 2020. 15

(ii) If the governing body of a condominium has had a reserve study 16
conducted on or after October 1, 2016, the governing body shall have an updated reserve 17
study conducted within 5 years after the date of that reserve study and at least every 5 18
years thereafter. 19

(iii) If the governing body of a condominium has not had a reserve 20
study conducted on or after October 1, 2016, the governing body shall have a reserve study 21
conducted on or before October 1, 2021, and an updated reserve study at least every 5 years 22
thereafter. 23

(2) (i) This paragraph applies only to a condominium established in 24
Montgomery County before October 1, 2021. 25

(ii) If the governing body of a condominium has had a reserve study 26
conducted on or after October 1, 2017, the governing body shall have an updated reserve 27
study conducted within 5 years after the date of that re serve study and at least every 5 28
years thereafter. 29

(iii) If the governing body of a condominium has not had a reserve 30
study conducted on or after October 1, 2017, the governing body shall have a reserve study 31
conducted on or before October 1, 2022, and an updated reserve study at least every 5 years 32
thereafter. 33
HOUSE BILL 1269 13

(3) (i) This paragraph applies only to a condominium established in any 1
county other than Prince George’s County or Montgomery County before October 1, 2022. 2

(ii) If the governing body of a condominium has had a reserve study 3
conducted on or after October 1, 2018, the governing body shall have an updated reserve 4
study conducted within 5 years after the date of that reserve study and at least every 5 5
years thereafter. 6

(iii) If the govern ing body of a condominium has not had a reserve 7
study conducted on or after October 1, 2018, the governing body shall have a reserve study 8
conducted on or before October 1, 2023, and an updated reserve study at least every 5 years 9
thereafter. 10

(e) Each re serve study and updated reserve study required under this section 11
shall: 12

(1) Be prepared by a person who: 13

(i) Has prepared at least 30 reserve studies within the prior 3 14
calendar years; 15

(ii) Has participated in the preparation of at least 30 reserve studies 16
within the prior 3 calendar years while employed by a firm that prepares reserve studies; 17

(iii) Holds a current license from the State Board of Architects or the 18
State Board for Professional Engineers; or 19

(iv) Is currently designated as a reserve specialist by the Community 20
Association Institute or as a professional reserve analyst by the Association of Professional 21
Reserve Analysts; 22

(2) Be available for inspection and copying by any unit owner; 23

(3) Be reviewed by the governing b ody of the condominium in connection 24
with the preparation of the annual proposed budget; and 25

(4) Be summarized for submission with the annual proposed budget to the 26
unit owners. 27

(f) [(1) The governing body of a condominium shall, in consultation with a 28
person identified under subsection (e)(1) of this section, develop a funding plan to determine 29
how to fund the reserves necessary under this section. 30

(2) In developing the funding plan under this subsection, the governing 31
body shall select one of the following methods to achieve the reserve funding under this 32
section: 33
14 HOUSE BILL 1269

(i) The component method; 1

(ii) The cash flow method; 2

(iii) The baseline funding method; 3

(iv) The threshold cash flow method; or 4

(v) Any other funding method consistent with generally accepted 5
accounting principles. 6

(3) A funding plan developed under this subsection shall prioritize 7
adequate amounts for repair and replacement of common elements of the condominium 8
that are necessary for: 9

(i) The health, safety, and well–being of the occupants; 10

(ii) Ensuring structural integrity, such as roofing replacements and 11
maintaining structural systems; 12

(iii) Essential functioning, such as plumbing, sewer, heating, cooling, 13
and electrical infrastructure; and 14

(iv) Any other essential or critical purpose, as determined by the 15
governing body. 16

(4) Reserves may be used for purposes other than those specified in the 17
funding plan if the funds are repaid to the reserve fund within 5 years after their use. 18

(5) A gover ning body shall review progress toward compliance with the 19
funding plan developed under this subsection at each annual meeting of the governing 20
body] TO THE EXTENT THAT A RESERVE STUDY CONDUCTED IN ACCORDANCE WITH 21
THIS SECTION INDICAT ES A NEED TO BUDGET FOR RESERVES , THE GOVERNING 22
BODY OF THE CONDOMINIUM SHALL ADOPT AN ANNUAL BUDGET THAT INCLUDES: 23

(1) FOR THE CAPITAL COMPO NENTS IDENTIFIED IN THE RESERVE 24
STUDY, THE CURRENT ESTIMATED: 25

(I) REPLACEMENT COST CALCULATED IN THE RESERVE STUDY; 26
AND 27

(II) REMAINING USEFUL LIFE CALCULATED IN THE RE SERVE 28
STUDY; 29

(2) THE AMOUNT OF: 30
HOUSE BILL 1269 15

(I) ACCUMULATED CASH RESE RVES SET ASIDE FOR T HE 1
REPAIR OR REPLACEMENT OF CAPITAL COMPONENTS IDENTIFIED IN THE RESERVE 2
STUDY AS OF THE BEGINNING OF THE FISCAL YEAR IN WHICH THE RESERVE STUDY 3
IS CONDUCTED; AND 4

(II) THE AMOUNT OF THE EXP ECTED CONTRIBUTION T O THE 5
RESERVE FUND FOR THE FISCAL YEAR CALCULATED IN THE RESERVE STUDY; 6

(3) A STATEMENT DESCRIBING THE PROCEDURES USED FOR 7
ESTIMATION AND ACCUMULATION OF CASH RESERVES IN ACCORDANCE WITH THIS 8
SECTION; AND 9

(4) A STATEMENT OF THE AMOUNT OF RESERVES RECOMMENDED IN 10
THE RESERVE STUDY AN D THE AMOUNT OF CURR ENT CASH FOR REPLACE MENT 11
RESERVES. 12

11B–112.2. 13

(a) This section applies only to a homeowners association that has responsibility 14
under its declaration for maintaining and repairing common areas. 15

(b) (1) The board of directors or other governing body of a homeowners 16
association shall cause to be prepared and submitted to the lot owners an annual proposed 17
budget at least 30 days before its adoption. 18

(2) The annual proposed budget may be sent to each lot owner by electronic 19
transmission, by posting on the homeowners association’s home page, or by including the 20
annual proposed budget in the homeowners association’s newsletter. 21

(c) The annual budget shall provide for at least the following items: 22

(1) Income; 23

(2) Administration; 24

(3) Maintenance; 25

(4) Utilities; 26

(5) General expenses; 27

(6) Reserves; and 28

(7) Capital expenses. 29

16 HOUSE BILL 1269

(d) (1) [Subject to parag raphs (2) and (3) of this subsection and ] THE 1
GOVERNING BODY OF TH E HOMEOWNERS ASSOCIATION SHALL DEPOSIT F UNDS TO 2
THE RESERVE ACCOUNT in accordance with the funding plan under § 11B–112.3(f) of this 3
title[, reserves provided for in the annual budget under subsection (c) of this section shall: 4

(i) Be the funding amount recommended in the most recent reserve 5
study or updated reserve study completed under § 11B–112.3 of this title; and 6

(ii) Be deposited in the reserve account on or before the last day of 7
each fiscal year. 8

(2) Subject to paragraph (3) of this subsection, if the most recent reserve 9
study was an initial reserve study, the governing body shall, within 5 fiscal years following 10
the fiscal year in which the initial reserve study was completed, attain the annual reserve 11
funding level recommended in the initial reserve study in accordance with the funding plan 12
under § 11B–112.3(f) of this title]. 13

[(3)] (2) (i) The [governing body ] LOT OWNERS of a homeowners 14
association may determine by a two–thirds majority vote that the homeowners association 15
and the lot owners are experiencing a financial hardship that limits the ability to fund 16
reserves that are required under paragraph (1) [or (2)] of this subsection. 17

(ii) Subject to [subparagraphs ( iii) through (v) ] SUBPARAGRAPH 18
(III) of this paragraph, if [a governing body makes ] THE LOT OWNERS OF A 19
HOMEOWNERS ASSOCIATION MAKE a financial hardship determination [based on the 20
reserve funding requirements of paragraph (1) or (2) of this subsection: 21

1. The] IN ACCORDANCE WITH S UBPARAGRAPH (I) OF 22
THIS PARAGRAPH , THE homeowners association may reasonably deviate from that 23
reserve funding requirement[; and 24

2. The funding level under that requirement shall be at least 25
the funding amount necessary for the purposes specified under § 11B –112.3(f)(3) of this 26
title]. 27

(iii) 1. Except as provided in subsubparagraph 2 of this 28
subparagraph, a homeowners association may not deviate from the reserve funding 29
requirements of paragraph (1) [or (2)] of this subsection for a period of more than 1 fiscal 30
year following the financial hardship determination. 31

2. The [governing body] LOT OWNERS OF A HOMEOWNERS 32
ASSOCIATION may renew a financial hardship determination under subparagraph (i) of 33
this paragraph by a two–thirds majority vote to extend the period that a homeowners 34
association may deviate from the reserve funding requirement by 1 fiscal year following the 35
renewal. 36

HOUSE BILL 1269 17

(iv) IF A HOMEOWNERS ASSOC IATION DEVIATES FROM A 1
RESERVE FUNDING REQU IREMENT WITH RESP ECT TO A CAPITAL COM PONENT 2
IDENTIFIED IN A RESE RVE STUDY , THE NEW ESTIMATED AN NUAL AMOUNT THE 3
HOMEOWNERS ASSOCIATION IS REQUIRED TO AD D TO THE RESERVE ACC OUNT IN 4
ACCORDANCE WITH THE RESERVE STUDY SHALL BE RECALCULATED SO T HAT THE 5
RESERVE ACCOUNT WILL HAVE SUFFICIENT MONEY TO REPAIR OR REPLACE AN 6
IDENTIFIED COMPONENT WHEN THE COMPONENT REACHES THE END OF ITS USEFUL 7
LIFE. 8

(V) The governing body shall: 9

1. Make good faith efforts to resolve the financial hardship 10
and resume funding reserves as required under paragraph (1) [or (2)] of this subsection; 11

2. Maintain detailed documentation of the good faith efforts 12
made under item 1 of this subparagraph; and 13

3. Treat the documents under item 2 of this subparagraph as 14
records for examination and copying under § 11B–112 of this title. 15

[(v)] (VI) 1. All lot owners shall be given reasonable notice in 16
advance of a vote on an initial or a renewal of a financial hardship determination under 17
this paragraph. 18

2. A vote on an initial or a renewal of a financial hardship 19
determination under this paragraph may only be taken at a regular or special meeting of 20
the homeowners association. 21

[(4)] (3) (i) The governing body of a homeowners association shall 22
annually review the reserves and the most recent r eserve study or updated reserve study 23
to determine whether there is adequate funding in accordance with the funding plan 24
required under § 11B–112.3(f) of this title. 25

(ii) The annual review under this paragraph does not require a 26
reserve study or updated reserve study in addition to the reserve study requirements under 27
§ 11B–112.3 of this title. 28

(e) (1) The budget shall be adopted at an open meeting of the homeowners 29
association or any other body to which the homeowners association delegates 30
responsibilities for preparing and adopting the budget. 31

(2) (i) The board of directors or other governing body of a homeowners 32
association shall submit the adopted annual budget to the lot owners not more than 30 days 33
after the meeting at which the budget was adopted. 34

18 HOUSE BILL 1269

(ii) The adopted annual budget may be submitted to each lot owner 1
by electronic transmission, by posting on the homeowners association’s home page, or by 2
inclusion in the homeowners association’s newsletter. 3

(3) (i) Notice of the meeting at wh ich the proposed budget will be 4
considered shall be sent to each lot owner. 5

(ii) Notice under subparagraph (i) of this paragraph may be sent by 6
electronic transmission, by posting on the homeowners association’s home page, or by 7
including the notice in the homeowners association’s newsletter. 8

(f) Except for an expenditure made by the homeowners association because of a 9
condition that, if not corrected, could reasonably result in a threat to the health or safety 10
of the lot owners or a significant risk of damage to the development, any expenditure that 11
would result in an increase in an amount of assessments for the current fiscal year of the 12
homeowners association in excess of 15% of the budgeted amount previously adopted shall 13
be approved by an amendmen t to the budget adopted at a special meeting for which not 14
less than 10 days’ written notice or notice by electronic transmission shall be provided to 15
the lot owners. 16

(g) The adoption of a budget does not impair the authority of the homeowners 17
association to obligate the homeowners association for expenditures for any purpose 18
consistent with any provision of this title. 19

11B–112.3. 20

(a) (1) In this section the following words have the meanings indicated. 21

(2) “Reserve study” means a study of the reserves required for future major 22
repairs and replacement of the common areas of a homeowners association that: 23

(i) Using an itemized list, identifies each structural, mechanical, 24
electrical, and plumbing component of the common areas and any other components that: 25

1. Are the responsibility of the homeowners association to 26
repair and replace; and 27

2. If applicable, meet a minimum cost of repair or 28
replacement, as determined by the governing body, that is: 29

A. Reasonably based on the expe nses of the homeowners 30
association; and 31

B. Not a minor expense that is otherwise addressed by the 32
budget of the homeowners association; 33

HOUSE BILL 1269 19

(ii) States the estimated remaining useful life of each identified 1
component; 2

(iii) States the estimated co st of repair or replacement of each 3
identified component; 4

(iv) States the estimated annual reserve amount necessary to BE 5
ADDED TO THE RESERVE ACCOUNT IN ORDER TO accomplish any identified future 6
repair or replacement OF AN IDENTIFIED COM PONENT WHEN TH E COMPONENT 7
REACHES THE END OF THE COMPONENT’S USEFUL LIFE; and 8

(v) States the quantity or size of each identified component using the 9
appropriate measurement, such as unit amount, square footage, or cubic feet. 10

(3) “Updated reserve study” means, fo r the common areas since the prior 11
reserve study was completed within the previous 5 years, a study that: 12

(i) Revises replacement cost, remaining life, and useful life 13
estimates; 14

(ii) Analyzes work performed and amounts spent; and 15

(iii) Identifies whether any maintenance contracts are in place. 16

(b) (1) This section applies only to a homeowners association: 17

(i) That has responsibility under its declaration for maintaining and 18
repairing common areas; and 19

(ii) For which the total repair or replacement costs for all 20
components identified in subsection (a) of this section is at least $10,000. 21

(2) This section does not apply to a homeowners association that issues 22
bonds for the purpose of meeting capital expenditures. 23

(c) (1) This subsection applies only to a homeowners association established 24
in: 25

(i) Prince George’s County on or after October 1, 2020; 26

(ii) Montgomery County on or after October 1, 2021; or 27

(iii) Any county other than Prince George’s County or Montgomery 28
County on or after October 1, 2022. 29

(2) The governing body of the homeowners association shall have an 30
independent reserve study completed not more than 90 calendar days and not less than 30 31
20 HOUSE BILL 1269

calendar days before the meeting of the homeowners association requ ired under § 1
11B–106.1(a) of this title. 2

(3) The governing body shall have an updated reserve study completed 3
within 5 years after the date of the initial reserve study conducted under paragraph (2) of 4
this subsection and at least every 5 years thereafter. 5

(d) (1) (i) This paragraph applies only to a homeowners association 6
established in Prince George’s County before October 1, 2020. 7

(ii) If the governing body of a homeowners association has had a 8
reserve study conducted on or after October 1, 201 6, the governing body shall have an 9
updated reserve study conducted within 5 years after the date of that reserve study and at 10
least every 5 years thereafter. 11

(iii) If the governing body of a homeowners association has not had a 12
reserve study conducted on or after October 1, 2016, the governing body shall have a reserve 13
study conducted on or before October 1, 2021, and an updated reserve study at least every 14
5 years thereafter. 15

(2) (i) This paragraph applies only to a homeowners association 16
established in Montgomery County before October 1, 2021. 17

(ii) If the governing body of a homeowners association has had a 18
reserve study conducted on or after October 1, 2017, the governing body shall have an 19
updated reserve study conducted within 5 years after the date of that reserve study and at 20
least every 5 years thereafter. 21

(iii) If the governing body of a homeowners association has not had a 22
reserve study conducted on or after October 1, 2017, the governing body shall have a reserve 23
study conducted on or before October 1, 2022, and an updated reserve study at least every 24
5 years thereafter. 25

(3) (i) This paragraph applies only to a homeowners association 26
established in any county other than Prince George’s County or Montgomery County before 27
October 1, 2022. 28

(ii) If the governing body of a homeowners association has had a 29
reserve study conducted on or after October 1, 2018, the governing body shall have an 30
updated reserve study conducted within 5 years after the date of that reserve study and at 31
least every 5 years thereafter. 32

(iii) If the governing body of a homeowners association has not had a 33
reserve study conducted on or after October 1, 2018, the governing body shall have a reserve 34
study conducted on or before October 1, 2023, and an updated reserve study at least every 35
5 years thereafter. 36

HOUSE BILL 1269 21

(e) Each reserve study and updated reserve study required under this section 1
shall: 2

(1) Be prepared by a person who: 3

(i) Has prepared at least 30 reserve studies within the prior 3 4
calendar years; 5

(ii) Has participated in the preparation of at least 30 reserve studies 6
within the prior 3 calendar years while employed by a firm that prepares reserve studies; 7

(iii) Holds a current license from the State Board of Architects or the 8
State Board for Professional Engineers; or 9

(iv) Is currently designated as a reserve specialist by the Community 10
Association Institute or as a professional reserve analyst by the Association of Professional 11
Reserve Analysts; 12

(2) Be available for inspection and copying by any lot owner; 13

(3) Be reviewed by the governing body of the homeowners association in 14
connection with the preparation of the annual proposed budget; and 15

(4) Be summarized for submission with the annual proposed budget to the 16
lot owners. 17

(f) [(1) The governing body of a homeowners association shall, in consultation 18
with a person identified under subsection (e)(1) of this section, develop a funding plan to 19
determine how to fund the reserves necessary under this section. 20

(2) In developing the funding plan under this subsection, the governing 21
body shall select one of the following methods to achieve the reserve funding under this 22
section: 23

(i) The component method; 24

(ii) The cash flow method; 25

(iii) The baseline funding method; 26

(iv) The threshold cash flow method; or 27

(v) Any other funding method consistent with generally accepted 28
accounting principles. 29

22 HOUSE BILL 1269

(3) A funding plan developed under this subsection shall prioritize 1
adequate amounts for repair and replacement of common areas of the homeowners 2
association that are necessary for: 3

(i) The health, safety, and well–being of the occupants; 4

(ii) Ensuring structural integrity, such as roofing replacements and 5
maintaining structural systems; 6

(iii) Essential functioning, such as plumbing, sewer, heating, cooling, 7
and electrical infrastructure; and 8

(iv) Any other essential or critical purpose, as determined by the 9
governing body. 10

(4) Reserves may be used for purposes other than those specified in the 11
funding plan if the funds are repaid to the reserve fund within 5 years after their use. 12

(5) A governing body of a homeowners association shall review progress 13
toward compliance with the funding plan developed under this subsection at each annual 14
meeting of the homeowners association ] TO THE EXTENT THAT A RESERVE STUDY 15
CONDUCTED IN ACCORDA NCE WITH THIS SECTIO N INDICATES A NEED T O BUDGET 16
FOR RESERVES , THE GOVERNING BODY O F A HOMEOWNERS ASSOC IATION SHALL 17
ADOPT AN ANNUAL BUDGET THAT INCLUDES: 18

(1) FOR THE CAPITAL COMPONENTS IDENTIFIE D IN THE RESERVE 19
STUDY, THE CURRENT ESTIMATED: 20

(I) REPLACEMENT COST CALCULATED IN THE RESERVE STUDY; 21
AND 22

(II) REMAINING USEFUL LIFE CALCULATED IN THE RE SERVE 23
STUDY; 24

(2) THE AMOUNT OF: 25

(I) ACCUMULATED CASH RESE RVES SET ASI DE FOR THE 26
REPAIR OR REPLACEMENT OF CAPITAL COMPONENTS IDENTIFIED IN THE RESERVE 27
STUDY AS OF THE BEGINNING OF THE FISCAL YEAR IN WHICH THE RESERVE STUDY 28
IS CONDUCTED; AND 29

(II) THE AMOUNT OF THE EXP ECTED CONTRIBUTION T O THE 30
RESERVE FUND FOR THE FISCAL YEAR CALCULATED IN THE RESERVE STUDY; 31

HOUSE BILL 1269 23

(3) A STATEMENT DESCRIBING THE PROCEDURES USED FOR 1
ESTIMATION AND ACCUMULATION OF CASH RESERVES IN ACCORDANCE W ITH THIS 2
SECTION; AND 3

(4) A STATEMENT OF THE AMOUNT OF RESERVES RECOMMENDED IN 4
THE RESERVE STUDY AN D THE AMOUNT OF CURREN T CASH FOR REPLACEME NT 5
RESERVES. 6

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 7
October 1, 2026. 8