Maryland House Bill 107 passed legislation, effective October 2022, and may affect your community.
What is the House Bill 107?
The Reserve Study requirement that was previously applicable to only Prince George's and Montgomery Counties, is now applicable statewide according to the newly passed Legislation, House Bill 107 (HB 107).
The House Bill 107 requires that community associations throughout Maryland conduct a Reserve Study (and an updated Reserve Study) every five years of the items needed for future repairs and replacement of common elements of a condominium, cooperative housing corporation, or Homeowners Association (HOA).
The property managers, accountants, and attorneys who work with community associations know this cry for help sounds familiar as the hundreds of communities constructed in the 1990’s and 2000’s are aging. Most times the answer to the question, “What do we do now?” includes special assessments, bank loans, or worse, using inferior reconstruction materials or methods to cut costs (often creating future maintenance or functional issues), or some combination of all three.
What happened? Simply put, the estimates of the construction costs listed in the reserve analysis are wrong and unrealistic or outdated.
Who gets the blame? Usually, and often unjustly, the current property management and/or professional team bear the burden of blame. The real culprit is typically no longer involved in the community.
The primary purpose of a Capital Reserve Funding Analysis is to offer recommendations as to the amount of monies an Association should fund on a yearly basis for the future replacement of commonly owned elements of a single or multifamily development. The analysis and recommendations are important in that they help to avoid possible future special assessments of the individual unit owners and should be in the best interest of the community. The analysis should consider the site-specific existing conditions, their useful lives, and the realistic replacement costs based upon actual material costs and the site-specific individual item’s method of reconstruction.
Requirements on who can prepare this Reserve Study for your Community:
- Has prepared at least 30 reserve studies for the applicable type of community within the prior three calendar years
- Is currently a designated Reserve Specialist by the Community Association Institute or a Professional Reserve Analyst by the Association of Professional Reserve Analysts
- Holds a Bachelor's degree in architecture, engineering, construction management, or has equivalent education/experience
- Holds a current license from the State Board of Architects or the State Board for Professional Engineers
The Falcon Group Capital Reserves team consists of 8 CAI Certified Reserve Specialist (RS) as well as a Professional Reserve Analyst (PRA) designation awarded by the Association of Professional Analysts. Reach out to us today for your Reserve Study!