What Is Maryland HB107 and Why Was It Passed?

Maryland House Bill 107 is a state law that requires condominium associations, housing cooperatives, and homeowners associations to complete a professional reserve study and fund their reserves based on that study's recommendations. The law applies statewide and was signed into law in 2022.

Why did Maryland pass this law? HB107 was a direct response to the Champlain Towers South condominium collapse in Surfside, Florida in June 2021. That tragedy exposed a reality that many in the condo industry already knew: too many associations were operating with dangerously underfunded reserves. Deferred maintenance and a lack of financial planning contributed to a situation where critical structural repairs were postponed for years.

Maryland lawmakers recognized that the same risks existed here, particularly in coastal markets like Ocean City, where aging condo buildings face constant exposure to salt air, wind, and moisture. The result was HB107, which expanded reserve study requirements that previously only applied to Montgomery County and Prince George's County to every community association in the state.

What Is a Reserve Study?

A reserve study is a financial planning tool that evaluates the major common-area components of a condo building and estimates when they'll need to be repaired or replaced and how much those repairs will cost. It essentially answers the question: does this association have enough money set aside to handle the big expenses coming down the road?

The study looks at items like roofs, elevators, pools, exterior walls, stairwells, balconies, parking lots, and other shared infrastructure. These are not small expenses. Refacing the exterior of a high-rise building, replacing a roof, or overhauling an elevator system can cost a ton of money depending on the size of your building.

Watch Grant Fritschle break down HB107 and what it means for Ocean City condo buyers and owners.

Under HB107, every condo association must have their reserve study completed by a qualified professional and update it every five years. The study must include an itemized list of components, their estimated remaining useful life, and the projected cost of repair or replacement. Associations then have three fiscal years to reach the annual funding level recommended by the study.

For a deeper look at how condo fees are structured in Ocean City, check out our comprehensive guide to Ocean City MD condo fees.

How HB107 Is Affecting Condo Fees in Ocean City MD

If you've been watching condo fees in Ocean City rise over the past few years, HB107 is one of the major reasons why. Along with rising insurance costs, reserve study requirements have forced many associations to take a harder look at their finances, and some cases, what they found wasn't pretty.

Here's the reality: some Ocean City condo buildings took pride in having extremely low fees. On the surface, that sounded great. But in many cases, those low fees meant the association wasn't setting aside enough money for the major maintenance items that every building eventually needs. When the reserve study revealed the gap between what was in the bank and what was going to be needed, the only options were to raise fees, issue a special assessment, or both.

"We've seen firsthand how HB107 has changed the conversation in Ocean City. Buildings that planned ahead are in great shape. Buildings that kept fees artificially low by ignoring reserves are now playing catch-up, and their owners are feeling it."

- Grant Fritschle, The Fritschle Barker Group

That said, not every building was caught off guard. Associations like the Gateway Grand and Thunder Island are examples of buildings that have been impeccably managed, with proactive boards that were already conducting reserve studies and planning ahead long before HB107 required it. For buyers, the difference between a well-managed association and one that deferred its planning is often the difference between stable, predictable fees and a surprise special assessment.

Explore Ocean City's High-Rise Row condos for sale to browse some of the most well-known buildings on the oceanfront.

The 2025 Amendments: What Changed

In May 2025, Governor Wes Moore signed SB 63/HB 292 into law, effective October 1, 2025. These amendments clarified and refined several aspects of the original HB107 that had caused confusion among associations and property managers.

Here are the key changes:

• Reserve studies must be prepared by a qualified professional. The 2025 amendments formalized what "qualified" means, adding specificity around who can conduct the study.
• Associations must develop a formal funding plan in consultation with the reserve study preparer, using prescribed accounting methods.
• A financial hardship provision was added. Associations can now temporarily deviate from full reserve funding requirements with a two-thirds majority vote, provided they make good faith efforts to resolve the shortfall and maintain documentation.
• Reserves can be used for purposes outside the original funding plan if the funds are repaid to the reserve account within five years.
• The reserve funding plan must be reviewed at each annual meeting, preventing boards from keeping the study or plan hidden from unit owners.

These amendments strike a balance. They hold associations accountable while acknowledging that getting to full funding overnight isn't always realistic, especially for older buildings with decades of deferred maintenance.

For more on how condo associations work in Ocean City, read our guide on understanding HOAs in Ocean City MD.

What Buyers Should Know Before Writing an Offer

This is where HB107 goes from a legal topic to a practical one. If you're buying a condo in Ocean City, reviewing the reserve study is now one of the most important pieces of your due diligence.

Before you write an offer: If the association's reserve study is available, your agent should be reviewing it with you before you submit your offer. The study will tell you whether the building is in strong financial shape or whether significant fee increases or special assessments could be on the horizon. Not every association will share the study before an offer is written, but if it's available, take the time to review it.

After your offer is accepted: Assuming the association has completed their reserve study, it will usually come as part of the resale package during your 7-day condo document review period. This is your window to review all association financials, rules, regulations, bylaws, budgets, proof of insurance, and the reserve study. If you don't understand what you're looking at, ask questions. That's exactly what your agent and your attorney are there for.

Here's what to look for in a reserve study:

• Current reserve balance vs. recommended balance at that date. A large gap is a red flag.
• Upcoming major expenses. Are there big-ticket items (roof replacement, elevator modernization, exterior refacing) due in the next 5 to 10 years?
• Funding plan trajectory. Is the association on track to meet its funding goals, or are they falling behind?
• History of special assessments. Has the building had to levy special assessments in the past? Frequent special assessments often signal poor financial planning.

Buildings that are professionally managed tend to have a higher likelihood of having completed their reserve studies and maintaining organized, transparent financials. That's one of many reasons why the quality of a building's management matters when you're making a purchase decision.

Have more questions about the buying process? Check out our top FAQs for buying a beach condo in Ocean City, our guide on 5 things to know before you buy an Ocean City MD condo, or learn how to buy a beach house that actually makes financial sense.

What Current Owners Should Know

If you already own a condo in Ocean City, HB107 affects you too.

If your association has not yet completed a reserve study, it is strongly recommended. We understand that the prospect of higher fees can be difficult, but a far more difficult scenario is a large special assessment that comes due immediately when a major maintenance item can't be delayed any longer. A reserve study provides the roadmap to avoid that outcome.

For owners who sit on their association's board, the 2025 amendments now require that the reserve funding plan be reviewed at each annual meeting. This is a positive change. Transparency around the association's financial health benefits every owner in the building.

If your condo fees have gone up recently because of reserve study requirements, try to view it through this lens: those dollars are going into a fund that protects your investment. The alternative, a building that defers maintenance and eventually faces a massive repair bill with no reserves to cover it, can be far more costly in the long run, both financially and in terms of your property's value and marketability.

Wondering what your Ocean City condo is worth today? Use our local Realtor's valuation guide. Thinking about selling? Read our guide on the top mistakes sellers make in Ocean City MD and our seller FAQ page.

What About Enforcement?

This is a question we hear often. Currently, HB107 does not outline specific penalties for associations that have not completed their reserve study, and there is no designated institution monitoring compliance. However, enforcement may evolve. As of late 2023, Maryland's Attorney General consumer protection division indicated it could take enforcement action against non-compliant associations, and some legal experts have noted that civil penalties are possible.

There's also a practical enforcement mechanism that many people overlook. Associations that neglect their opportunity to conduct a reserve study may face significant special assessments down the road when critical maintenance items come due without adequate reserves to cover them. In that sense, the law enforces itself through consequences.

It's also worth noting that as buyers become more educated about reserve studies (which is already happening), buildings without a completed study may become harder to sell. Savvy buyers and their agents are asking for this information upfront, and a missing or incomplete reserve study is increasingly viewed as a red flag.

For more on how market dynamics affect buying and selling decisions in Ocean City, read should you buy in Ocean City MD in 2026.

FAQs: Maryland HB107 and Reserve Studies in Ocean City MD