Condo Fidelity Bond Requirement in Maryland

Governing bodies of cooperative housing corporations, condominium associations and homeowners’ associations must secure fidelity insurance against fraud, dishonesty or criminal acts by its directors, officers, agents or employees.
An IA&B-sponsored amendment to the law was passed during the 2010 session to clarify that the use of a fidelity bond would meet the fidelity requirement.

Applicable to:

Governing bodies of cooperative housing corporations, condominium associations and homeowners’ associations.
The bill has been interpreted to apply to residential, mixed-use and commercial properties. We confirmed with the Attorney General’s Consumer Protection Division that a condominium that is 100% commercial would have to comply with the fidelity insurance requirement.
In addition, another bill exempting smaller associations (SB 800) also passed during the 2010 session, and is effective October 1, 2010. To claim the exemption, the following conditions must be met:
  • the condominium must have four or fewer units, and
  • three months’ worth of gross annual assessments must be less than $2,500.

Amount required:

For those corporations or associations that are not exempted by SB 800 as indicated above, the amount of coverage needed is the lesser of $3 million or:
  • for cooperative housing: three months’ worth of gross common charges and the total amount held in all investment accounts at the time the fidelity is issued;
  • for condo associations: three months’ worth of gross annual assessments and the total amount held in all investment accounts when the fidelity is issued; and
  • for homeowners’ associations: three months’ worth of gross annual association fees and the total amount held in all investment accounts when the fidelity is issued.

Effective dates:

For those corporations or associations that are not exempted by SB 800 as indicated above, the amount of coverage needed is the lesser of $3 million or:
  • The fidelity insurance requirement was effective Oct. 1, 2009 – Access HB 687
  • The clarification amendment takes effect on Oct. 1, 2010 through HB 702. The inclusion of bonds makes the process more streamlined, as the bonds are easier and quicker to issue, and allow for broader coverage of individuals – Access HB 702
  • The amendment exempting smaller associations from the bond requirement is also anticipated to go into effect Oct. 1, 2010 – Access SB 800
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