Michael and Maud Ziegler might have thought twice about purchasing their condo in Ocean City if they’d known their fees would be projected to increase from $900 to $3,300 a quarter.

The projected increase stems from a Maryland law passed in 2022, requiring condos, homeowners associations and cooperative housing corporations to perform reserve studies identifying how much money is needed for future repairs and maintenance. But Michael Ziegler, president of his condo building, said several items noted on his property’s reserve study didn’t make sense — including a $53,000 quote to replace the building’s parking pad in six years, despite that it has only a few minor cracks.

Some changes to the reserve study law are in the works under a bill sponsored by Democrat Del. Marvin Holmes of Prince George’s County, following a wave of skyrocketing condo fees across the state. But some stakeholders object to portions of the bill, saying it either provides too much flexibility for owners or is still not flexible enough.

The reserve study bill was passed following the Champlain Towers South condo collapse in Surfside, Florida, in 2021, that killed 98 people. The bill was intended to ensure buildings kept up with needed repairs, which was not done in the years leading up to the Surfside tragedy.

Increased fees

Ziegler, who lives in Monkton, said that instead of replacing his parking pad for $53,000, he could replace it with gravel for around $19,000.

“We’re required to fund this amount of money, even though we know that in six years we’re not going to jackhammer our parking lot and re-do it,” Ziegler said. He added that the law “doesn’t give us the flexibility to reach out to contractors and look at other options and to get all their costs other than what’s in our study.”

The reserve study also said his roof could be replaced for $65,000, but Ziegler found another quote to re-coat the roof for $30,000, under the same 20-year warranty. Additionally, instead of re-coating the decks, the owners could simply carpet them for much less money, he said.

Holmes said his bill allows an opportunity for condo owners to revise their reserve study in coordination with the study specialist. “Some of the folks that are board members of condos are very smart people, PhDs and all kinds of stuff,” Holmes said, but, “They’re not engineers, and they don’t have the training.”

Ziegler has owned his condo for eight years and said his building never did a reserve study prior to the law’s passage in 2022. He said that while some condo building owners may not be aware of needed repairs, the six owners in his building always “get things done as we need to get them done.”

Ziegler said the engineer’s parking pad estimate was based on the item’s estimated 50-year “average life.” Peter Miller, president of Miller Dodson Associates, a reserve study firm based in Annapolis, said, “That’s a bad way to do reserve studies,” and that the cost should be based on the component’s condition.

Families and seniors

For many Maryland residents, it’s not just vacation properties affected by the higher fees.

One condo owner in Roland Park, who requested not to be named due to concerns about divulging his personal information, had to take out a loan to cover a $12,000 “special assessment” charge that his condo required him to pay within a month and a half. That was in addition to increased monthly fees rising from $830, when he bought the condo three years ago, to $1,350 now.

“How feasible is it for someone to be legally on the hook to contribute that?” the resident said. He said he plans to sell his condo after his daughter finishes high school. He and his wife both work full-time, and he also has a college-age son and mother-in-law in the household.

“We have to limit as much as we can to be able to afford what we have,” he said. “Thank god we’re both still employed and are able to do that.”

Holmes suggested that people may have to pay special assessments because they don’t have money in their reserve funds. “If you don’t have money in your reserve fund, then you have to pay for it some kind of way,” he said.

Increased fees are particularly difficult for senior residents on fixed incomes.

Marguerite Strobel, 77, lives in a two-bedroom, two-bathroom condo in Forest Hill. She said she can manage the increase of fees from $325 to $440 a month since she and her husband can combine their pension and Social Security funds. But the majority of her neighbors are “single, widowed or divorced ladies, some of which I know have their children helping them,” she said.

Strobel added that some reserve dollars won’t help the current residents since “they will not live long enough to even benefit” from them.

Strobel also noted that a separate bill sponsored by Republican Sen. J.B. Jennings, who represents Baltimore and Harford counties, allows condos to raise their reserve funds over 10 years instead of the five years proposed under Holmes’ bill. She said she’d prefer the 10-year option since it would mean owners have to pay for fewer reserve studies.

Financial hardship

One of the most “troubling” aspects of Holmes’ bill is a provision allowing for a delay in repairs if residents are experiencing financial hardship, said Miller, from the reserve study firm, who also served on a task force to develop national reserve study standards.

“That’s exactly what got Florida into trouble,” Miller said. “The Florida law allowed them to either partially fund or not fund the reserves based on a majority vote… We’re repeating the same stupid mistake by telling the board that, ‘Oh well, if you’re in too bad of shape, you don’t have to do it.’ Which means, in two years, you’re going to be in even worse shape.”

Miller said his company saw a “large upswing in reserve studies” after the 2022 law was enacted.

“The law is not something that’s being done to these communities. It’s being done for these communities,” he said. “The law is giving the Board of Directors teeth to insist that the budget include adequate funding for reserves.”

Holmes said he disagreed with the hardship clause but still decided to include it.

“In my opinion, it is not a good idea,” he said. “However, I’m a public servant, and I’ve been hearing concerns from the public, so I’m attempting to find how I can assist them in catching up.”

Confusion over deducting funds

Some condo owners have raised concerns about whether money spent from a reserve fund needs to be immediately replaced in the fund, essentially “doubling” repair costs.

Democrat Marc Korman, a Montgomery County delegate and attorney, said if a repair or replacement has been made, “there would be no need to fund that item going forward in the reserve.”

“That is fundamental to how this works so special language is not necessary,” he said in an email.

Holmes said there has been confusion about deducting funds based on misinterpreting the bill’s language.

“It doesn’t make any sense, for example, to pay for a $100,000 roof replacement, and then immediately have to put $100,000 back into the account.” Holmes said. “You do not have to put $100,000 back in that account.”

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