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HB 1041

Homeowners Associations - Reserve Funding Requirements - Exemption

2025 Regular Session Introduced by Denise Roberts

Allows HOAs facing severe emergencies to temporarily deviate from reserve funding requirements with a structured plan and protections for lot owners.

Hearing 2/25 at 1:00 p.m.
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Bill Summary · HB 1041

HB 1041 — Homeowners Associations: Reserve Funding Requirements — Exemption

Status: Introduced (Maryland). First Reader Feb. 21, 2025. Bill text provides effective date: October 1, 2025.

Purpose / Intent

To allow a homeowners association (HOA) that experiences unanticipated, severe financial hardship (“exigent financial circumstances”) to temporarily deviate from statutorily required reserve funding levels by implementing a documented “reserve recovery plan,” while protecting lot owners through disclosure, record access, time limits, and enforcement remedies.

Key definitions

  • Exigent financial circumstances — significant unexpected financial hardship such as a major natural disaster (fire, flood), fraud/embezzlement/misappropriation, or a similar emergency/catastrophic event.
  • Reserve recovery plan — a detailed plan prepared by the HOA governing body that: (a) describes the exigent circumstances; (b) estimates damage and remedial costs; and (c) sets out the funding strategy, timeline, and actions to restore required reserve levels.

Major provisions

  • Applicability: only for HOAs that have responsibility under their declaration to maintain and repair common areas.
  • Temporary deviation authorized: an HOA experiencing exigent financial circumstances may reasonably deviate from reserve funding requirements (set forth in §11B–112.2(d)) if it satisfies procedural and substantive conditions.
  • Governing body requirements:
    • Within 90 days of discovering the exigent circumstances, adopt a reserve recovery plan by a two‑thirds vote of the governing body.
    • Make good‑faith efforts to implement the plan and restore reserve funding "within a reasonable period."
    • Maintain detailed documentation of efforts and plan implementation.
    • Provide quarterly progress updates to lot owners.
    • Notify lot owners at least 5 days before voting to approve a reserve recovery plan and provide each lot owner a copy of the adopted plan.
  • Record access: the reserve recovery plan and related documentation must be available for examination and copying by lot owners; governing body must provide these records to a unit of State government on request.
  • Time limit: deviation from reserve funding requirements may not exceed 3 calendar years for each exigent circumstance (in addition to any other applicable time limits).
  • Failure to comply: if the governing body fails to meet the bill’s requirements/prohibitions, it must comply with the reserve funding requirements indicated in the most recent reserve study.

Enforcement and remedies

  • A governing body’s violation affecting a lot owner is classified as an unfair, abusive, or deceptive trade practice under Maryland’s Commercial Law (MCPA).
  • Enforcement/penalties under Title 13 (MCPA) apply; lot owners may bring a court action seeking injunctive relief and damages for violations.
  • Fiscal note: imposition of existing MCPA penalty provisions is not expected to materially affect State or local government finances; Attorney General’s Consumer Protection Division can handle enforcement with existing resources.

Who is affected

  • Primary: HOAs responsible for common area maintenance/repair, and their governing boards.
  • Secondary: lot owners (who gain greater disclosure and legal remedies), State oversight units (may request records), and potentially vendors/contractors involved in remediation.

Procedural/timeline highlights

  • Governing body must adopt a reserve recovery plan within 90 days of discovery of exigent circumstances.
  • Quarterly progress reporting to lot owners while plan is in effect.
  • Deviation limited to 3 calendar years per exigent event.
  • Bill’s effective date stated as October 1, 2025 (per draft).

Practical effect

HB 1041 creates a structured, transparent process permitting temporary reserve‑funding relief for HOAs hit by sudden catastrophic or financial emergencies, while imposing notice, documentation, time limits, and legal enforcement options to protect lot owners and encourage timely restoration of reserves.

Compiled from official sources — confirm details with the bill’s official record.

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