A tough new Maryland law that regulates homeowners associations for the first time goes into effect July 1, extending new rights to buyers of houses in developments with associations and imposing strict requirements governing the way such groups operate.

The Maryland Homeowners Association Act, passed by the legislature this spring and signed by Gov. William Donald Schaefer on May 14, requires that sellers provide buyers with extensive information about a homeowners association before or at the time a buyer signs a contract. Otherwise, a buyer can rescind the contract without losing a deposit up until settlement.

In addition, a buyer could change his mind for up to three days after settlement, if he gets additional information "that substantially or materially changes what he's been given and adversely affects" him, said Roger D. Winston, a Silver Spring real estate attorney who chaired a Governors Commission on Condominiums, Cooperatives and Homeowners Associations subcommittee that helped draft a prototype of the law.

A buyer also could sue a seller for lying or omitting an important fact about the homeowners association after the sale closes for up to year afterward, Winston said.

"That's a fairly significant change in the law. Now, if the purchaser is given anything, it can be at any time, and he still has a binding contract," Winston said. "The new law presumes that a buyer, if he gets the homeowners association information after the contract and doesn't like what he got," should still have a way out.

While Maryland has a condominium law that allows buyers to cancel their contracts after receiving the condo documents and has strict operating requirements for those groups, the state has not previously regulated homeowners associations. The law will make Maryland the first jurisdiction in the Washington area and one of the few states in the country to have such a law on the books.

Although the Homeowners Association Act is primarily a disclosure law, it also mandates that open meetings be held by an association's board of directors and committees. The exception is when they meet to discuss pending legal action, personnel matters, business deals or individual homeowners in "matters not related to the homeowners association's business."

Furthermore, homeowners associations must allow any member or mortgage holder to inspect its books and records, but may charge a reasonable fee for doing so.

The act also requires developers to guarantee their improvements to common areas. The warranty would cover all defects except for those caused through abuse or an association's neglect. It would extend for one year from the time the developer transfers title of the common areas to the association or finishes the improvements, or from the time the facility becomes accessible to the homeowners, whichever is later.

The Maryland statute arose out of concerns that buyers weren't being told all they needed to know about homeowners associations, which have increased in number across the state rapidly over the past several years, Winston said. Some residents had testified before the governor's commission that they were surprised to find that they belonged to an association after they settled on their houses.

The homeowners association law came after two earlier attempts to pass similar legislation. In 1984, a homeowners association act cleared both chambers of the Maryland General Assembly only to be defeated in the final days of the legislature when Montgomery County officials objected to the House version, which prohibited local governments from enacting restrictions on associations that were stiffer than the state's.

A second association bill passed both chambers again in 1985 after the questions about state preemption were resolved. But two weeks after the legislative session ended, a clerk noticed that the Senate had concurred, but not voted on, a version containing two House amendments.

"So we had to go back and reintroduce the bill last session," said Sen. Howard Denis (R-Montgomery), who sponsored the legislation that finally passed and was signed this year.

While the law extends new protections for home buyers, it may prove somewhat burdensome for sellers. For a resale, an owner must notify buyers in writing if a house is covered by a homeowners association, specify monthly fees and list the total amount of dues and assessments imposed during the association's previous year.

The seller also must provide copies of all association bylaws and documents as well as the name, address and telephone number of either the management agent or association officer who can give information about the association. If there isn't any, a statement saying so will suffice, Winston said.

In addition, a seller must inform the buyer if he has actual knowledge of any unsatisfied judgments or pending lawsuits against the homeowners association, or any claims, covenant violations or other actions against his property.

Developers and builders have to provide even more information. The law requires that developers make available to buyers copies of an association's organizing documents, including rules and regulations, a description of the streets, pools, paths, sidewalks, streetlights or other common elements owned or expected to be owned by the homeowners association, as well as a copy of its proposed or actual budget.

Winston said the law also would require developers to reveal their plans for the development of adjacent properties. Montgomery County officials said that they had gotten quite a few complaints in recent years about residents not knowing about developers' plans.

Hamer Campbell, director of government and legislative affairs for the Suburban Maryland Building Industry Association, a trade group of builders, said that the "preparation fees and other costs {of complying with the new law} will eventually get passed on {to home buyers} like any other part of business." He said that he didn't know what the cost would be because that would depend on the size of the development.

Winston said the law is expected to cut down on lawsuits that stem from buyers claiming the developer broke promises they made as well as help homeowners association collect delinquent fees and enforce covenant restrictions against residents who claim they didn't know about them.