Proposed Amendments to the Maine Condominium Act

Bruce McGlauflin, a partner with Petruccelli, Martin & Haddow, is the chairperson of the Maine Legislative Action Committee for the Community Associations Institute, which has developed and submitted legislation to amend the Maine Condominium Act. The Community Associations Institute represents condominium homeowners and condominium associations throughout Maine. The Bill has been printed as LD 1332 and is sponsored by Rep. Brad Moulton of York, Rep. Chase of Wells, Rep. Dill of Cape Elizabeth, and Sen. Collins of York. The purpose of the legislation is to provide better guidance to condominium associations on good governance and member rights, and to improve the financial stability of condominium associations. Condominium associations are creatures of statute. They are formed, live, breath and die by the terms of the Maine Condominium Act. The Act was written in 1981 and has not been substantially revised in the last 30 years. Much has occurred and changed in the interim, and it is high time for an update of the Maine Condominium Act. LD 1332 is not a wholesale abstract rewrite of the Act, but a targeted update of only those provisions that we know, based on real world experience, are no longer adequately serving their purposes. The provisions of the Bill can be grouped into two categories: 1) those that are designed to improve or more adequately address association governance and member rights, and 2) those that are designed to improve or more adequately address the financial health and stability of associations. The provisions addressing association governance and member rights can be summarized as implementing best practices for association governance and member rights; clarifying a member’s right to receive notice of and to participate in Board meetings; authorizing Board’s to establish reasonable rules to regulate meetings and to hold executive sessions; clarifying the Association’s obligations to maintain records and a member’s right to obtain records subject to exceptions for confidentiality.The provisions addressing financial stability can be summarized as simplifying the process for obtaining loans secured by assessments; extending an association’s lien from 3 to 5 years; allowing suspension of privileges for delinquent members, except access and services required for safety and health; allowing assessments on units sold at foreclosure auction to accrue from date of sale; and creating priority lien status for associations for up to six months of assessments when a condominium unit has been foreclosed upon.The vast majority of the provisions in LD 1332 are non-controversial and should receive broad support. The six month priority lien is likely to receive some opposition from lenders who are resistant to any legislation that would alter the first priority of a first mortgage. However, similar legislation has succeeded in the five other New England States. The reason is that the priority lien is necessary to maintain the financial health of condominium associations, an outcome that benefits all stakeholders, including first mortgage holders. The six month lien priority can benefit lenders by improving the financial stability of associations, which allows the associations to adequately maintain the condominium, thereby protecting the banks’ collateral and attracting more buyers and borrowers.The six month lien priority is also fair. When a condominium unit is in foreclosure, the condominium association usually receives no payments on the delinquent unit. Nevertheless, it must continue to provide insurance on the unit, perform maintenance and improvements on roofs, siding and other common elements, plow snow, and sometimes even pay for heat and utilities if the unit is abandoned. In some cases this can go on for years during the foreclosure process with the association incurring substantial costs that protect the bank’s collateral with no reimbursement to the association. The Maine Legislature’s Joint Committee on Judiciary is likely to hold a hearing on LD 1332 in early May.