Legal News You Can Use: 2025 - 2026 Community Association Legislative Update

NEW STATUTORY AMENDMENTS

— continued from previous page Structural Integrity Reserve Studies

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of reserve contributions in order to determine the association’s reserve funding needs and to recommend a reserve funding plan. ▪ Note – This new provision appears intended to provide some relief, even if only temporary, for associations which have fulfilled their milestone inspection requirements. ▪ Note – This permitted “pause” does not apply to an association controlled by a developer, an association in which the non-developer unit owners have been in control for less than 1 year, or an association controlled by one or more bulk assignees or bulk buyers. » If the local building official determines that the entire condominium building is uninhabitable due to a natural emergency, the board may pause the contribution to its reserves or reduce reserve funding until the local building official determines that the condominium building is habitable. ▪ Note – Previous law only permitted the board to do this if a majority of the unit owners approved it. » If an association votes to terminate the condominium, the members may vote to waive the maintenance of reserves recommended by the association’s most recent SIRS. » An association’s reserve accounts may be pooled for two or more required components. Reserve funding for SIRS components may only be pooled with other SIRS components. The reserve funding indicated in the proposed annual budget must be sufficient to ensure that available funds meet or exceed projected expenses for all components in the reserve pool based on the reserve funding plan or schedule of the most recent SIRS. A vote of the members is not required for the board to change the accounting method for reserves to a pooling accounting method or a straight-line accounting method. ▪ Note – This is a significant change from previous law, which historically required unit owner approval to change the accounting method for reserves in certain situations. It also addresses a gap in the prior law regarding the pooling of SIRS reserves. ▪ Note – It is unclear whether this would permit associations to pool reserve funds that were previously collected, or only to pool reserve funds that are collected after the accounting method is changed. This uncertainty stems in part from another statutory provision which prohibits the use of reserve funds for other purposes without a unit owner vote. ■

lines of credit, or loans. If the SIRS is performed before the association has approved a special assessment or secured a line of credit or a loan, the SIRS must be updated to reflect the funding method selected by the association and its effect on the reserve funding schedule, including any anticipated change in the amount of regular assessments. ▪ Note – This places an additional responsibility on the association to obtain an updated SIRS whenever it approves a special assessment or secures a line of credit or loan to fund its maintenance and reserve funding obligations. » The association must obtain an updated SIRS before adopting any budget in which the reserve funding from regular assessments, special assessments, lines of credit, or loans do not align with the funding plan from the most recent version of the SIRS. ▪ Note – This is likely to present challenges, as obtaining an updated SIRS within such a short timeframe will often be impractical or even impossible. » An officer or a director of an association must sign an affidavit acknowledging receipt of the completed SIRS. The new laws also introduce certain disclosure requirements regarding potential conflicts of interest involving professionals and contractors. In particular: » Any design professional or licensed contractor who bids to perform a SIRS must disclose in writing to the association their intent to bid on any services related to any maintenance, repair, or replacement that may be recommended by the SIRS. » Any design professional or licensed contractor who submits a bid for performing any services recommended by the SIRS may not have an interest, directly or indirectly, in the firm or entity providing the SIRS or be a relative of any person having a direct or indirect interest in such firm, unless such relationship is disclosed to the association in writing. ▪ Note – As used in this provision, the term “relative” means a relative within the third degree of consanguinity by blood or marriage. » If a design professional or licensed contractor fails to provide the written disclosure of the interests or relationships required above: (i) the vendor’s contract is voidable and terminates upon the association filing a written notice terminating the contract; and (ii) the vendor may be subject to professional discipline by the State. ■

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