Condominiums - Unit Owner Responsibility for Damage or Destruction and Mandatory Insurance Coverage

EXPLANATION: CAPITALS INDICATE MATTER ADDED TO EXISTING LAW.
[Brackets] indicate matter deleted from existing law.
Underlining indicates amendments to bill.
Strike out indicates matter stricken from the bill by amendment or deleted from the law by
amendment.
Italics indicate opposite chamber/conference committee amendments.
*sb0747*

SENATE BILL 747
N1 (6lr3534)
ENROLLED BILL
— Judicial Proceedings/Economic Matters —
Introduced by Senator McKay

Read and Examined by Proofreaders:

_______________________________________________
Proofreader.
_______________________________________________
Proofreader.

Sealed with the Great Seal and presented to the Governor, for his approval this

_______ day of _______________ at _________________ _______ o’clock, ________M.

______________________________________________
President.

CHAPTER ______

AN ACT concerning 1

Condominiums – Unit Owner Responsibility for Damage or Destruction and 2
Mandatory Insurance Coverage 3

FOR the purpose of providing that a certain unit owner is responsible for a certain cost of 4
repair or replacement for certain portions of a condominium under certain 5
circumstances; requiring a council of unit owners to inform unit owners annually of 6
certain responsibilities; requiring a certain condominium unit owner to obtain a 7
certain insurance policy for the unit; requiring a certain insurance policy to include 8
certain provisions; authorizing a council of unit owners to acquire a certain insurance 9
policy and charge a certa in assessment under certain circumstances; and generally 10
relating to unit owner responsibility for damage or destruction and mandatory 11
insurance coverage for condominiums. 12

BY repealing and reenacting, with amendments, 13
Article – Real Property 14
2 SENATE BILL 747

Section 11–114 1
Annotated Code of Maryland 2
(2023 Replacement Volume and 2025 Supplement) 3

BY adding to 4
Article – Real Property 5
Section 11–114.3 6
Annotated Code of Maryland 7
(2023 Replacement Volume and 2025 Supplement) 8

SECTION 1. BE IT ENACTED BY THE GENERAL ASSEMBLY OF MARYLAND, 9
That the Laws of Maryland read as follows: 10

Article – Real Property 11

11–114. 12

(a) Commencing not later than the time of the first conveyance of a unit to a 13
person other than the developer, the council of unit owners shall maintain, t o the extent 14
reasonably available: 15

(1) Property insurance against risks of direct physical loss commonly 16
insured against in amounts determined by the council of unit owners, but not less than any 17
amounts specified in the declaration or bylaws: 18

(i) For attached units, multifamily dwelling units, or detached units 19
located within a condominium not composed entirely of similar detached units, on the 20
common elements and units, exclusive of improvements and betterments installed in units 21
by unit owners other than the developer; and 22

(ii) For detached units located within a condominium composed 23
entirely of similar detached units, on the common elements; and 24

(2) Comprehensive general liability insurance, including medical 25
payments insurance, in an amou nt determined by the council of unit owners, but not less 26
than any amount specified in the declaration or bylaws, covering occurrences commonly 27
insured against for death, bodily injury, and property damage arising out of or in connection 28
with the use, ownership, or maintenance of the common elements. 29

(b) (1) (i) The council of unit owners shall give notice to all unit owners of 30
the termination of any insurance policy within 10 days of termination. 31

(ii) The declaration or bylaws may require the council of unit owners 32
to carry any other insurance, and the council of unit owners in any event may carry any 33
other insurance it deems appropriate to protect the council of unit owners or the unit 34
owners. 35

SENATE BILL 747 3

(2) (i) The council of unit owners shall give an annual notice, in writing, 1
of any obligation of an owner of a residential, detached unit to obtain property insurance 2
coverage on the unit. 3

(ii) If there is a change in any obligation under subparagraph (i) of 4
this paragraph, the council of unit owners shal l promptly provide the unit owner with an 5
updated notice. 6

(c) Insurance policies carried pursuant to subsection (a) of this section shall 7
provide that: 8

(1) Subject to the applicable coverage specified under subsection (a)(1) of 9
this section, each unit owner is an insured person under the policy with respect to liability 10
arising out of the unit owner’s ownership of an undivided interest in the common elements 11
or membership in the council of unit owners for property and casualty losses to the common 12
elements and the units, exclusive of improvements and betterments installed in the units 13
by unit owners other than the developer; 14

(2) The insurer waives its right to subrogation under the policy against any 15
unit owner of the condominium or members of his household; 16

(3) An act or omission by any unit owner, unless acting within the scope of 17
his authority on behalf of the council of unit owners, does not void the policy and is not a 18
condition to recovery under the policy; and 19

(4) [If] SUBJECT TO THE RESP ONSIBILITY OF A UNIT OWNER UNDER 20
SUBSECTION (G)(2)(III) OF THIS SECTION, IF, at the time of a loss under the policy, there 21
is other insurance in the name of a unit owner covering the same property covered by the 22
policy, the policy is primary insurance not contributing with the other insurance. 23

(d) (1) Subject to the applicable coverage specified under subsection (a)(1) of 24
this section, any loss covered by the property policy shall be adjusted with the council of 25
unit owners, but the insurance proceeds for that loss shall be payable to any insurance 26
trustee designated for that purpose, or otherwise to the council of unit owners, and not to 27
any mortgagee. 28

(2) The insurance trustee or the council of unit owners shall hold any 29
insurance proceeds in trust for unit owners and lien holders as their interests may appear. 30

(3) (i) Subject to the provisions of subsection (g) of this section, the 31
proceeds shall be disbursed first for the repair or restoration of the damaged common 32
elements and, for condominiums with attached units, multifamily units, or detached units 33
located within a condominium not composed entirely of similar detached units that must 34
maintain a property insurance policy on the units, the damaged units. 35

(ii) Unit owners and lien holders are not entitled to receive payment 36
of any portion of the proceeds unless: 37
4 SENATE BILL 747

1. There is a surplus of proceeds after the common elements 1
and, for condominiums with attached units, multifamily units, or detached units located 2
within a condominium not composed entirely of similar detached units that must maintain 3
a property insurance policy on the units, the units have been completely repaired or 4
restored; or 5

2. The condominium is terminated. 6

(e) (1) [An] IN ADDITION TO THE RE QUIREMENT IMPOSED ON A UNIT 7
OWNER UNDER § 11–114.3 OF THIS TITLE, AN insurance policy issued to the council of 8
unit owners does not prevent a unit owner from obtaining ADDITIONAL insurance for his 9
own benefit. 10

(2) Unless a council of unit owners exercises the authority under 11
paragraph (3) of this subsection, an owner of a residential, detached unit located within a 12
condominium composed entirely of similar detached units, shall carry homeowners 13
insurance coverage on the entirety of the unit. 14

(3) A council of unit owners may carr y homeowners insurance on the 15
entirety of all detached units located within a condominium composed entirely of similar 16
detached units. 17

(f) (1) An insurer that has issued an insurance policy under this section shall 18
issue certificates or memoranda of insurance to the council of unit owners and, upon 19
request, to any unit owner, mortgagee, or beneficiary under a deed of trust. 20

(2) An insurer may cancel an insurance policy issued under this section in 21
accordance with § 27–603 of the Insurance Article. 22

(g) (1) Subject to the applicable coverage specified under subsection (a)(1) of 23
this section, any portion of the common elements and the units, exclusive of improvements 24
and betterments installed in the units by unit owners other than the developer, dama ged 25
or destroyed shall be repaired or replaced promptly by the council of unit owners unless: 26

(i) The condominium is terminated; 27

(ii) Repair or replacement would be illegal under any State or local 28
health or safety statute or ordinance; or 29

(iii) 80 percent of the unit owners, including every owner of a unit or 30
assigned limited common element which will not be rebuilt, vote not to rebuild. 31

(2) (i) 1. The cost of repair or replacement in excess of insurance 32
proceeds and reserves is a common expense. 33

SENATE BILL 747 5

2. A property insurance deductible is not a cost of repair or 1
replacement in excess of insurance proceeds. 2

(ii) If the cause of any damage to or destruction of any portion of the 3
condominium originates from the common elements or an event outside of the condominium 4
units and common elements, the council of unit owners’ property insurance deductible is a 5
common expense. 6

(iii) 1. If the cause of any damage to or destruction of any portion 7
of the condominium originates from a unit, the owner of the unit where the cause of the 8
damage or destruction originated is responsible for THE LEAST OF: 9

A. THE TOTAL COST OF THE REPAIR OR REPLACEMENT; 10

B. THE AMOUNT OF the council of unit owners’ property 11
insurance deductible [not to exceed $10,000] AS SPECIFIED IN THE COUNCIL OF UNIT 12
OWNERS’ PROPERTY INSURANCE POLICY; OR 13

C. $25,000. 14

2. The council of unit owners shall inform each unit owner 15
annually in writing of: 16

A. The unit owner’s responsibility [for the council of unit 17
owners’ property insurance deductible ] UNDER SUBSUBPARAGRAP H 1 OF THIS 18
SUBPARAGRAPH; and 19

B. The amount of the COUNCIL OF UNIT OWNE RS’ 20
deductible AS SPECIFIED IN THE COUNCIL OF UNIT OWNERS’ PROPERTY INSURANCE 21
POLICY. 22

3. The ACTUAL AMOUNT OF THE council of unit owners’ 23
property insurance deductible amount exceeding the [$10,000] responsibility of the unit 24
owner UNDER SUBSUBPARAGRAPH 1 OF THIS SUBPARAGRAPH is a common expense. 25

(iv) In the same manner as provided under § 11–110 of this title, the 26
council of unit owners may make an [annual] assessment against the unit owner 27
responsible under subparagraph (iii) of this paragraph. 28

(3) If the damaged or destroyed portion of the condominium is not repaired 29
or replaced: 30

(i) The insurance procee ds attributable to the damaged common 31
elements shall be used to restore the damaged area to a condition compatible with the 32
remainder of the condominium; 33
6 SENATE BILL 747

(ii) The insurance proceeds attributable to units and limited 1
common elements which are not rebuil t shall be distributed to the owners of those units 2
and the owners of the units to which those limited common elements were assigned; and 3

(iii) The remainder of the proceeds shall be distributed to all the unit 4
owners in proportion to their percentage interest in the common elements. 5

(4) (i) If the unit owners vote not to rebuild any unit, that unit’s entire 6
common element interest, votes in the council of unit owners, and common expense liability 7
are automatically reallocated upon the vote as if the unit had been condemned under § 8
11–112 of this title, and the council of unit owners promptly shall prepare, execute, and 9
record an amendment to the declaration reflecting the reallocations. 10

(ii) Notwithstanding the provisions of this subsection, § 1 1–123 of 11
this title governs the distribution of insurance proceeds if the condominium is terminated. 12

(h) The council of unit owners shall maintain and make available for inspection a 13
copy of all insurance policies maintained by the council of unit owners. 14

(i) The provisions of this section do not apply to a condominium all of whose units 15
are intended for nonresidential use. 16

11–114.3. 17

(A) (1) THIS SECTION APPLIES ONLY TO A CONDOMINIU M COMPOSED 18
ENTIRELY OF UNITS INTENDED FOR RESIDENTIAL USE. 19

(2) THIS SECTION DOES NOT APPLY TO DETACHED UN ITS OF A 20
CONDOMINIUM COMPOSED ENTIRELY OF SIMILAR DETACHED UNITS. 21

(B) (1) A UNIT OWNER SHALL MAI NTAIN A CONDOMINIUM UNIT OWNER 22
INSURANCE POLICY OR A SUBSTANTIALLY SIMILAR PROPERTY INSURANCE POLICY 23
ON THE UNIT. 24

(2) AN INSURANCE POLICY R EQUIRED UNDER PARAGR APH (1) OF 25
THIS SUBSECTION SHALL INCLUDE: 26

(I) COVERAGE FOR THE COUNCIL OF UNIT OWNERS’ PROPERTY 27
INSURANCE DEDUCTIBLE OR A PORTION OF THE DEDUCTIBLE REQUIRED UNDER § 28
11–114 OF THIS TITLE; 29

(II) A COVERAGE LIMIT THAT IS SUFF ICIENT TO REPAIR OR 30
REPLACE THE UNIT OWNER’S PERSONAL PROPERTY OR THE CONTENTS OF THE UNIT; 31

SENATE BILL 747 7

(III) LOSS OF USE COVERAGE IN AN AMOUNT SUFFICI ENT TO 1
PROVIDE ALTERNATE HO USING FOR AT LEAST 12 MONTHS IF THE UNIT O WNER 2
CANNOT LIVE IN THE UNIT; 3

(IV) PERSONAL LIABILITY COVERAGE OF AT LEAST $500,000; 4

(V) LOSS ASSESSMENT COVERAGE OF AT LEAST $25,000; AND 5

(VI) (III) DWELLING OR BUILDING PROPERTY COVERAGE OF AT 6
LEAST THE GREATER OF: 7

1. $25,000; OR 8

2. THE AMOUNT NECESSARY TO REPAIR AND REPLACE: 9

A. ALTERATIONS, ADDITIONS, IMPROVEMENTS AND 10
BETTERMENTS, AND INVESTMENTS MADE BY THE CURRENT OWNER OR ACQUIRED 11
BY THE CURRENT UNIT FROM ANY PREVIOUS OWNER OTHER THAN THE DEVELOPER; 12
AND 13

B. UPGRADES CONVEYED TO THE UNIT OWNER THAT 14
ARE THE RESPONSIBILITY OF THE UNIT OWNER TO INSURE UNDER THE BYLAWS OF 15
THE CONDOMINIUM. 16

(C) THE BYLAWS OF A CONDOMINIUM MAY NOT REQUIRE A UNIT OWNER TO 17
MAINTAIN AN INSURANCE POLICY THAT INCLUDES COVERAGE AMOUNTS IN EXCESS 18
OF THE REQUIREMENTS UNDER SUBSECTION (B) OF THIS SECTION. 19

(D) EACH UNIT OWNER SHALL PRO VIDE EVIDENCE OF THE INSURANCE 20
POLICY REQUIRED UNDER SUBSECTION (B) OF THIS SECTION TO THE C OUNCIL OF 21
UNIT OWNERS: 22

(1) ANNUALLY; AND 23

(2) ON REQUEST BY THE COUNCIL OF UNIT OWNERS. 24

(E) (1) IF A UNIT OWNER DOES NOT MAINTAIN AN INSURANCE POLICY AS 25
REQUIRED UNDER SUBSE CTION (B) OF THIS SECTION , THE COUNCIL OF UNIT 26
OWNERS MAY ACQUIRE AN INSURANCE POLICY ON BEHALF OF THE UNIT OWNER. 27

(2) A COUNCIL OF UNIT OWNE RS THAT ACQUIRES AN INSURANCE 28
POLICY ON BEHALF OF A UNIT OWNER UNDER PARAGRAPH (1) OF THIS SUBSECTION 29
MAY CHARGE THE INSURANCE PREMIUM AS AN ASSESSMENT TO THE UNIT OWNER. 30

8 SENATE BILL 747

(3) FOR AN INSURANCE POLI CY ACQUIRED ON BEHAL F OF A UNIT 1
OWNER UNDER THIS SUBSECTION, THE INSURANCE CARRIER SHALL PAY DIRECTLY 2
TO THE COUNCIL OF UN IT OWNERS THE PORTIO N OF THE COUNCIL ’S DEDUCTIBLE 3
THAT THE UNIT OWNER IS RESPONSIBLE FOR UNDER § 11–114 OF THIS TITLE THE 4
ABSENCE OF INSURANCE COVERAGE UNDER THIS SECTION DOES NOT LIMIT A UNIT 5
OWNER’S RESPONSIBILITY UNDER § 11–114(G)(2)(III) OF THIS TITLE. 6

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect 7
October 1, 2026 2027. 8

Approved:
________________________________________________________________________________
Governor.
________________________________________________________________________________
President of the Senate.
________________________________________________________________________________
Speaker of the House of Delegates.