Homeowners’ Associations in Maryland must be set up as corporations, most choose to be nonprofit, and must, therefore, follow State Nonprofit Law. There is also the Homeowners Association Act that provides more specific regulations regarding the management of HOAs.
Homeowner Association’s Rights and Responsibilities
The community association’s main purpose is to protect home values and provide maintenance for the common elements of the development. To raise funding, the HOA can impose regular assessments on homeowners to cover the cost of maintaining the neighborhood. Joining the association is not optional. By purchasing a property within an HOA controlled community, you automatically join the HOA and are subject to the rules and bylaws outlined in the governing documents.
The association must provide HOA documents including the Articles of Incorporation, the declaration, any recorded covenants and restrictions, bylaws, current association budget, and any mandatory fees in addition to other official documents upon the sale of a property. If the association fails to provide all the documents required, the buyer may back out of the contract and receive a refund for all deposits made.
Members of the board of directors will be elected at the annual members’ meeting. If there is a vacancy, it is up to the board to fill the open position. In the event, the quorum is not met and no new members are elected to fill the vacancy, association members may petition the circuit court to appoint a receiver to oversee and handle HOA affairs in the meantime. The receiver will have all the power that is given to the board of directors. To ensure fairness, the receiver cannot be a homeowner or resident of the community. All costs related to the receiver’s salary, court costs, and attorney fees become a common expense.
HOAs in Maryland are required to carry fidelity insurance to protect homeowners’ association against loss resulting from acts of omissions arising from fraud, dishonesty, or criminal acts by any officer, director, managing agent, or other employees of the association. HOAs are required to carry at least three months of gross annual HOA fees plus the total amount held in all investment accounts, or $3,000,000; whichever is less.
Homeowners have the power to elect and remove members of the board of directors at association meetings. It is required that there be an association meeting at least annually to discuss budgetary changes, elect board members, and make any changes to the community regulations or bylaws.
All meetings are open to association members. It is required that any member in good standing with the association be allowed to attend and reasonable opportunity to speak. Good standing is defined as having an account that is no more than 90 days overdue. The board may have closed meetings only when discussing sensitive matters, such as specific member accounts, or meeting with legal representation. Association documents including financial reports and budgets must be made reasonably available to homeowners. Copies must be made if requested by the homeowner.
No-impact Home-based Businesses
Unless otherwise specified in association documents, the HOA cannot prohibit no-impact home-based businesses such as childcare facilities. No-impact is described as a business that does not disturb the neighborhood with additional power or water needs, increased sound or light pollution, or any other activity that could disrupt daily routines or lower home values. Even if the association Covenants, Conditions, and Restrictions (CC&R) prohibit the creation of no-impact businesses, if a majority of association members vote in favor of the business, one may be created.
MD Homeowners Association Act
To ensure that your community association is being run following all state and local laws, it helps to have a professional on your side. CSM has a team of experienced professionals that have worked with communities in almost every state in the US. Specializing in HOA financial management, we can help your board of directors manage association finances, write and submit documents, and prepare for audits. If you have any questions regarding state HOA laws and regulations, give us a call at (865) 315-7505, contact us online or email us at firstname.lastname@example.org.