Maryland Laws Update for Financial Services

Hero Image for page

Maryland Laws Update 2016

We are pleased to provide our clients and friends this review of 2016 Maryland laws affecting financial services providers.

Please call or email us if you would like more information about these new laws and their impact on your business.

Charles R. Bacharach

410-576-4169

John C. Morton

410-576-4176

Andrew D. Bulgin

410-576-4280

Bryan M. Mull

410-576-4227

Douglas T. Coats

410-576-4002

David S. Musgrave

410-576-4194

Lawrence D. Coppel

410-576-4238

Christia A. Pritts

410-576-4157

Marjorie A. Corwin

410-576-4041

Christopher R. Rahl

410-576-4222

D. Robert Enten

410-576-4114

Peter B. Rosenwald, II

410-576-4193

Robert A. Gaumont

410-576-4007

Lynn B. Sassin

410-576-4151

Susan J. Klein

410-576-4137

William D. Shaughnessy, Jr.

410-576-4092

Edward J. Levin

410-576-1900

   

Table of Contents

COMMERCIAL AND CONSUMER LENDING
Consumer Protection in Door-to-Door Sales of Home Improvements
HB 439 (Chapter 485)
(effective June 1, 2016)

Chapter 485 extends the time period in which a buyer in a door-to-door sales transaction for home improvements may cancel the transaction – from 3 to 5 days generally and from 3 to 7 days if the buyer is age 65 or older. The right to cancel time period for door-to-door sales other than for home improvements is unchanged and remains 3 days. The law also specifies the manner in which the door-to-door seller of home improvements must notify the buyer of the right to cancel a transaction and requires the seller to obtain the buyer's signed acknowledgment of the buyer's right to cancel a transaction within the applicable time period. The Department of Labor, Licensing, and Regulation, in collaboration with the Maryland Office of the Attorney General, is required to convene a stakeholder workgroup to study issues relating to door-to-door sales of home improvements and report its findings to the Senate Finance Committee and the House Economic Matters Committee on or before December 1, 2016.

Practice Point: This Act became effective on June 1, 2016. Persons involved with door-to-door sales of home improvements must be sure their forms and procedures comply with this new law. Failure to comply with Maryland's Door-to-Door Sales Act is an unfair or deceptive trade practice within the meaning of Maryland's Consumer Protection Act.

Clean Energy Loan Programs for Commercial Property Renewable Energy Projects
SB 173/HB 105 (Chapters 534 and 535)
(effective October 1, 2016)

In 2009, the General Assembly authorized counties and municipalities to establish clean energy loan programs to provide loans to residential property owners and commercial property owners under certain circumstances. Chapters 534 and 535 expand the types of commercial loans that may be covered by a clean energy loan program by removing the limit on electric generating capacity on renewable energy projects financed by commercial property owners. Because a clean energy loan program must require a property owner to repay a loan through a surcharge on the owner's property tax bill, lien priority issues can arise under Maryland law. However, the existing law makes it clear that for commercial property clean energy loans, the holder of a mortgage or deed of trust (i.e., secured party) on the affected commercial property must expressly consent before clean energy loan payments may be collected through a surcharge on the owner's tax bill. This new law does not change the requirement for prior express consent from the existing secured party.

Clean Energy Loan Program – Residential Property – Study
SB 912/HB 387 (Chapter 592 and 593)
(effective June 1, 2016)

As originally introduced, these bills would have expanded the authorization for a county or municipality to establish residential property clean energy loan programs. Of particular concern to the financial services industry, the bills would have required the property owner to repay a loan through a surcharge on the owner's property tax bill, which would give any clean energy loan payments in default an immediate superior (super-priority) lien on the residential property. However, as enacted, Chapters 592 and 593 require the Maryland Clean Energy Center (MCEC) to conduct a study to determine strategies for a residential clean energy loan program. The study must include consideration of whether the strategies will work advantageously with loans made by private lenders for residential energy efficiency and renewable energy projects. MCEC must report its findings and any recommended policy actions to implement a residential clean energy loan program to the General Assembly by October 1, 2016.

Criminal Procedure – Seizure and Forfeiture
SB 161/HB 336 (Chapters 658 and 619)
(effective October 1, 2016)

These Acts make changes to the seizure and forfeiture of property occurring with violations of certain controlled dangerous substances laws. The Acts mandate that the seizing authority, at the time of seizure, provide a receipt containing specified information and notices to the person from whom the property was seized. If the person who received the receipt is not the owner, the law requires that the seizing authority send information related to the property to the owner, if known, within 15 days after seizure. The owner then has the right to obtain the seized property, under certain circumstances, through written request. Under the Acts, seized property cannot be legally forfeited without the filing of a timely complaint. Absent filing of a complaint, seized property must be returned to an owner, if the owner has been identified. Further, limitations are placed on the transfer of seized property by federal law enforcement when acting without a federal seizure warrant. The Acts also place reporting requirements on seizing authorities to report specified seizures and forfeitures to the Governor's Office of Crime Control and Prevention, which is required to submit an annual report related to the information.

Practice Point: Lenders who make loans secured by collateral that is subject to seizure should be familiar with the revised seizure provisions to protect their interests in seized collateral.

Vehicle Laws – Trade-In Allowance – Leased Vehicles
HB 986 (Chapter 728)
(effective October 1, 2016)
This law allows a person to deduct the trade-in allowance for a long-term leased vehicle for purposes of calculating the vehicle excise tax if the person is purchasing a vehicle or is leasing another vehicle long-term from a different leasing company.

Practice Point: This law codifies existing practice. Lenders who finance vehicle sales or leases should be familiar with this tax allowance.

Vehicle Laws - Application - Park Model Recreational Vehicles - Definition
SB 579/HB 922 (Chapters 407 and 408)
(effective June 1, 2016)

This new law defines certain recreational vehicles to clarify they are travel trailers and taxed as motor vehicles rather than manufactured homes. Among other attributes, a "park model recreation vehicle" is designed as temporary living quarters for recreational, camping, travel, or seasonal use and is not permanently affixed to real property for use as a permanent dwelling. Because they are treated as motor vehicles, park model recreation vehicles need to have certificates of titles.

Practice Point: Lenders that finance the purchase of recreational vehicles will need to understand this new definition to ensure they obtain an appropriate lien on the property.

Vehicle Laws – Mechanical Repair Contracts
HB 675 (Chapter 494)
(effective October 1, 2016)

This Act alters the definition of "mechanical repair contract" to encompass any agreement or contract sold by an "agent." An agent is defined as a business entity that is authorized by an obligor or a licensed vehicle dealer to sell a mechanical repair contract. Agents – as well as an employee of a licensed vehicle dealer, agent, or registered obligor – are also permitted to offer, sell, or negotiate a mechanical repair contract. An obligor or a licensed vehicle dealer is liable for the actions of its agent when the agent is offering or selling a mechanical repair contract on its behalf. An obligor or a licensed vehicle dealer that uses an agent to sell mechanical repair contracts must maintain a list of its agents and make the list available to the Maryland Insurance Commissioner (MIC) on request. Likewise, an agent must maintain a list of the names of each employee authorized to sell mechanical repair contracts and, on request, provide this list to its obligor or licensed vehicle dealer within 10 business days from receipt of the request. The maximum misdemeanor fine that may be imposed for unauthorized sales of mechanical repair contracts has been increased from $1,000 to $5,000. The MIC also is authorized to impose a civil penalty of at least $100 but no more than $5,000 for each violation of provisions relating to mechanical repair contracts committed by an agent or the agent's employee while offering or selling a repair contract on behalf of a registered obligor.

Practice Point: This law clarifies issues that arose out of legislation enacted in 2015 (Chapter 444 of the 2015 Laws of Maryland). Persons who finance the sale of motor vehicles should take this opportunity to ensure that mechanical repair services sold in connection with motor vehicle sales comply with applicable law. If not, the financing (e.g., retail installment contract) may violate applicable credit law.

CORPORATE ISSUES
Corporations and Real Estate Investment Trusts – Duties and Liability of Directors
SB 148/HB 354 (Chapters 170 and 171)
(effective October 1, 2016)

Chapters 170 and 171 amend section 2-405.1 of the Corporations and Associations Article governing the duties of directors of Maryland corporations. These Acts are intended to partially overrule the Maryland Court of Appeals decision in Shenker v. Laureate Education Inc. The Shenker decision held that the statutory duty of care owed by directors when they undertake managerial decisions on behalf of a corporation does not provide the sole source of directorial duties in connection with a cash-out merger transaction in which shareholders will receive cash for their shares, and that other common law duties will apply. These Acts clarify the statutory duties of directors and their immunity from liability, and provide that the statutory duties are the sole source of duties of a director to the corporation or the stockholders of the corporation, whether or not a decision has been made to enter into an acquisition or potential acquisition of control of the corporation, or enter into any other transaction involving the corporation. These Acts also provide that the statutory duties expressly apply to any act of a director, including an act as a member of a committee of the board of directors. Chapters 170 and 171 also extend a director's duties and immunity from liability to a trustee of a real estate investment trust (REIT), except as otherwise specified in the declaration of trust of a REIT. While these Acts strengthen a director's immunity from liability, they also repeal section 2-405.1(g) of the Corporations and Associations Article regarding the necessity of bringing actions against directors in the name of the corporation or derivatively. As a result, these Acts adopt that portion of the Shenker decision that authorized shareholders to bring direct claims for a breach of fiduciary duties.

Practice Point: Banks and credit unions that are chartered under Maryland law will be subject to this new law. In addition, national banks and federal savings associations that are located in Maryland and have identified Maryland corporate law as governing their activities will also be subject to this new law.

State Department of Assessments and Taxation – Recordation of Governing and Charter Documents – Prohibitions
HB 1446 (Chapter 653)
(effective October 1, 2016)

This law prohibits a person from causing to be recorded with the State Department of Assessments and Taxation (SDAT) a governing document or charter document of an entity that the person knows (1) is not authorized by at least one individual whose name is included in the entity name or (2) does not otherwise conform to Maryland law. The law establishes a process by which a person who believes that a governing document or charter document was recorded in violation of this prohibition may submit an affidavit to the SDAT stating the factual basis for the person's belief and, under specified circumstances, have the SDAT void the governing document or charter document. If a person disagrees with a decision by the SDAT to void the document, then that person may file a petition for review in the Circuit Court for the county in which the person resides or in which the entity's resident agent is located. The court may award damages and reasonable attorneys' fees and costs to the prevailing party in any such action.

Practice Point: The process to be followed by the SDAT and a person who believes a document was recorded in violation of this new law is very similar to the process established in 2015 for the filing of false UCC financing statements (Chapter 8 of the 2015 Laws of Maryland). As with last year's law, SDAT will adopt and make available the form of affidavit to be used by persons who believe the law was violated.

DEBT COLLECTIONS
Courts and Judicial Proceedings – Consumer Debt Collection Actions – Restrictions
SB 771 (Chapter 579)
(effective October 1, 2016)

Chapter 579 prohibits a creditor or a debt collector from initiating a consumer debt collection action after the expiration of the statute of limitations applicable to the action and clarifies that any subsequent payment toward, written or oral affirmation of, or any other activity on the debt may not revive or extend the expired limitations period. Chapter 579 also identifies a myriad of documents that a debt buyer or a debt collector acting on behalf of a debt buyer must both possess in order to initiate a consumer debt action and introduce into evidence in order to obtain judgment. These required documents pertain to proof of the existence of the debt or account, proof of terms and conditions of the debt, proof of the plaintiff's ownership of the consumer debt, identification and nature of the debt or account, evidence of entitlement to damages under a future services contract, account charge-off information, information relating to debts and accounts not charged off, and collection agency licensing information for the plaintiff. The documents specified in the Act are the same as those required under Maryland Rule 3-306 for judgments on affidavits.

Practice Point: A "debt buyer" is broadly defined as "a person that purchases or otherwise acquires consumer debt from an original creditor or from a subsequent owner of the debt." However, there are several very specific exemptions from the definition of "debt buyer," including several situations involving banks, credit unions, mortgage servicers, sales finance companies, and those collecting consumer debt in connection with residential rental property. Anyone collecting consumer debt should carefully evaluate the definition of "debt buyer" and the related exemptions to properly determine coverage under this new law.

DEPOSIT ACCOUNT ISSUES
Maryland Achieving a Better Life Experience (ABLE) Program – Establishment
HB 431 (Chapter 39)
(effective July 1, 2016)

Federal law enacted in 2014 allows states to establish a savings program under which contributions may be made to a tax-advantaged Achieving a Better Life Experience (ABLE) account that can be used to pay qualified disability expenses of a designated beneficiary. Funds in the ABLE account, up to a specified threshold, do not count toward asset tests for eligibility for Supplementary Security Income, Medicaid, and other federal means-tested benefits. Chapter 39 renames the College Savings Plans of Maryland Board as the "Maryland 529 Board" and directs the Board, in consultation with the Maryland Department of Disabilities, to establish, administer, manage, and promote a new Maryland ABLE program. This new law also establishes an income tax subtraction modification for contributions to an ABLE account that is similar to the subtraction modification for contributions to existing 529 college savings plans. Funds in ABLE accounts may not be considered for the purpose of determining eligibility to receive, or the amount of, any assistance or benefits from local or State means-tested programs. The General Assembly set a goal of October 1, 2017 for the Maryland ABLE program to be fully operational.

Practice Point: While ABLE accounts are for savings purposes, they are not normal savings accounts. The Maryland 529 Board is charged with administering the program and, like the existing 529 college savings plans, is expected to identify a third-party to assist in the administration. It is unlikely local depository institutions will have authority to open Maryland ABLE accounts, and it is recommended that branch personnel be trained appropriately to respond to customer inquiries.

Health Insurance Provider Claims Paid by Credit Card or Electronic Funds Transfer
HB 639 (Chapter 109)
(effective October 1, 2016)

Chapter 109 authorizes health insurers, as well as managed care organizations, to pay certain reimbursement claims, which are submitted by providers, using a credit card or an electronic funds transfer payment method that imposes a fee or similar charge to process the payment. The Act allows a claim to be paid in this manner only if the provider is notified in advance that a fee or similar charge will apply, the provider is offered an alternative payment method that does not impose a fee or charge, and the provider elects to accept payment using the credit card or electronic funds transfer payment method. The provider also must be told to consult its own merchant processor or financial institution for the specific amount of fees or charges. If a provider participates on the carrier's provider panel, the acceptance by the provider of payment by credit card or an electronic funds transfer payment method must apply to all covered reimbursement claims paid by the carrier unless otherwise notified by the provider.

ESTATES AND TRUSTS
Maryland Fiduciary Access to Digital Assets Acts
SB 239/HB 507 (Chapters 364 and 365)
(effective October 1, 2016)

These Acts are based on the Revised Uniform Fiduciary Access to Digital Assets Act. The Acts ensure that, if a person grants to his or her fiduciaries (such as a personal representative, trustee, or attorney-in-fact) authorization to access his or her digital assets, the authorization will be respected by the custodian of the digital assets. Under the Acts, digital assets include electronic records in which a person has an interest (e.g., social media accounts). A person may grant authorization to a fiduciary either by using an online tool established by the custodian of the digital asset or by a specific provision in the person's Will, trust agreement, or financial power of attorney, as applicable. If a designation made using an online tool conflicts with the person's Will, trust agreement, or financial power of attorney, the online designation will control.

Practice Point: The Maryland statutory forms for financial powers of attorney are changed by these Acts to include a digital assets provision. If a financial institution has developed a form of power of attorney for its customers that mirrors the Maryland statutory forms, the financial institution's form should be updated to reflect these changes.

Maryland Trust Act – Representation
SB 570/HB 887 (Chapters 562 and 563)
(effective October 1, 2016)

The Maryland Trust Act currently allows for limited "virtual representation" in certain trust matters. Virtual representation generally involves a current known individual representing the interests of certain unknown persons (e.g., future trust beneficiaries). These Acts expand the virtual representation provisions in the Maryland Trust Act to allow for representation of individuals who are minors, incapacitated, unborn, or unknown, whose location is unknown, or who are more than one generation below the lineal ancestor serving as virtual representative. Previously, Maryland law only allowed a parent to virtually represent his or her children. In addition, these Acts provide that an individual who is not a lineal ancestor may serve as virtual representative if he or she has an interest in the matter that is substantially identical to that of the individual represented. In any case, a person may not serve as virtual representative if his or her interests in the matter conflict with those of the individual being represented.

Maryland Trust Act – Nonjudicial Settlement Agreements
SB 571/HB 888 (Chapters 221 and 222)
(effective October 1, 2016)

These Acts add a long-awaited provision to the Maryland Trust Act permitting the trustees and beneficiaries of a trust to enter into a binding settlement agreement with respect to certain trust matters without court involvement. These matters include the interpretation of trust terms, the approval of trust accountings, granting or prohibiting a trustee power, the resignation or appointment of a trustee, the determination of a trustee's compensation, a change of trust situs, and a trustee's liability for actions relating to the trust.

Guardians of Property and Custodians – Authority to Fund Certain Trusts and Accounts
SB 853/HB 960 (Chapters 438 and 439)
(effective October 1, 2016)

These Acts provide that a guardian or custodian may establish a special needs trust, pooled assets special needs trust account, or an Achieving a Better Life Experience (ABLE) account for a disabled person (including disabled minors). Prior to these Acts, a guardian or custodian could not take such actions without first obtaining a court order.

Estates and Trusts – Registers of Wills – Retention of Estate Files
HB 472 (Chapter 486)
(effective October 1, 2016, but applies retroactively to all estates opened on or after October 1, 2014)

Prior to the passage of this Act, each Register of Wills was required to return all original documents filed in an estate administration proceeding (other than the original Will) to the personal representative, once the estate was closed. This new law allows each Register of Wills to destroy such original documents (other than the original Will) after an estate has been closed for 180 days, provided that either hard or electronic copies are retained.

Maryland Trust Act – Revocable Trust – Partial Revocation by Divorce or Annulment
HB 541 (Chapter 270)
(effective October 1, 2016)

Before the enactment of this Act, Maryland law was clear that, if a person failed to update his or her Will after a divorce or an annulment, any provisions referring to the former spouse would fail because the former spouse would be deemed to have predeceased the decedent. However, Maryland law did not address whether this interpretation extended to revocable trust agreements. This Act clarifies that, in the event of a divorce or annulment after the creation of a revocable trust, subject to certain exceptions, the dispositive provisions relating to the former spouse are deemed to be revoked, and the former spouse may not serve as a trustee of the trust or as an advisor to the trustee and may not exercise any powers under the trust agreement. There are exceptions to this general rule if the trust agreement provides otherwise, if a court order specifies a contrary result, or if the settlor of the trust and the settlor's spouse or former spouse enter into an agreement that provides otherwise prior to the settlor's death.

GENERAL
Debt Settlement Services – Fund and Sunset Repeal
SB 471/HB 1450 (Chapters 392 and 393)
(effective June 1, 2016)

The existing Maryland Debt Settlement Services Act (DSSA) was enacted in 2011. The DSSA contained a sunset provision that would have automatically repealed the DSSA on June 30, 2016. These Acts remove the repeal provision, so that the DSSA remains in effect on and after June 30, 2016.
 

College Affordability Act of 2016
SB 676/HB 1014 (Chapters 689 and 690)
(effective July 1, 2016, with certain provisions effective in tax years beginning after December 31, 2016 and in the 2018 - 2019 academic year)

These Acts implement a number of changes designed to address the ever-rising costs of college. The Acts aim to assist individuals with high student loan debt, make Maryland financial aid programs more effective and accessible, and encourage students to complete college on schedule. The Acts make changes to Maryland's "529" college savings plans (529 plans) by providing for low and middle income families to obtain a $250 Maryland-funded contribution to a Maryland 529 plan. Individuals who set up a Maryland 529 plan after December 31, 2016 have the option to obtain the existing Maryland income tax subtraction (up to $2,500 per 529 plan), or receive a Maryland contribution of $250 to a 529 plan. The contribution is by application and applicants must be Maryland residents with Maryland taxable income no greater than $112,500 (individual) or $175,000 (married filing joint return) during the previous tax year.

The Acts also provide for Maryland income tax credits of up to $5,000 per individual for Maryland students who graduate from college with more than $27,000 in student loan debt (at least $5,000 of which must be outstanding undergraduate student loan debt). The tax credits are by application.

The Acts further permit Maryland college students who owe Maryland colleges specified amounts to enroll for continued classes, subject to certain limits: if the amount owed is $250 or less, Maryland colleges must allow the student to register for classes; and if the amount owed is more than $250, the student must enter into a payment plan (students who comply with the payment plans may not be referred to the Maryland Central Collection Unit).

The Acts additionally include provisions to address the effectiveness and accessibility of state financial aid programs and require the Maryland Higher Education Commission, in consultation with the Maryland Department of Legislative Services, to retain an independent consultant to evaluate the effectiveness of and make recommendations concerning the operation of the Maryland Office of Student Financial Assistance and financial aid programs that it implements. Under the Acts, recommendations concerning this study are due on or before October 1, 2017.

Maryland Clean Energy Center Task Force
SB 726 (Chapter 577)
(effective June 1, 2016)

The Maryland Clean Energy Center (MCEC) was established in 2008 to promote and assist in development of the clean energy industry in Maryland, promote the deployment of clean energy technology in Maryland, and collect, analyze, and disseminate industry data. The bill as introduced would have allowed MCEC to operate as a "green bank" (i.e., as a public or quasi-public institution that finances deployment of renewable energy, energy efficiency, and other clean energy projects in partnership with private lenders) and would have allowed MCEC to leverage private capital investments with public funds to finance the costs of acquiring or improving projects. The bill, as introduced, also would have required the Maryland Energy Administration to provide grants to MCEC for annual operating support and assistance. As enacted, Chapter 577 establishes a task force to study coordination and cost-effective opportunities between MCEC and other State and quasi-public entities in performing the functions of MCEC, including the possible establishment of a green bank. Ultimately, the task force is to determine how best to make MCEC self-sustaining. The task force must report its findings and recommendations to the Governor and the General Assembly by December 1, 2016.

Transfers of Structured Settlement Payment Rights and Registration of Transferees
SB 734/HB 535 (Chapters 722 and 721)
(effective October 1, 2016)

These Acts are intended to protect persons who have the right to receive payments under structured settlements (i.e., arrangements for periodic payment of damages for personal injury in resolution of a tort claim) by addressing the procedures for filing and approving applications for the transfer of structured settlement payment rights. The Acts redefine "structured settlement payment rights" as "the rights to receive periodic payments, including lump-sum payments under a structured settlement, whether from the settlement obligor or an annuity issuer" for a payee in Maryland and certain other payees whose structured settlements were pending or approved by a Maryland court. The Acts prohibit the direct or indirect transfer of structured settlement rights, unless the transfer is authorized in a Circuit Court order based on express findings that: (1) the transfer is in the best interest of the payee taking into account the welfare and support of the payee's dependents; (2) the financial terms of the agreement are fair taking into account the difference between the amount payable to the payee, the discounted present value of the payments to be transferred, and the discount rate applicable to the transfer; (3) the payee received independent professional advice concerning the proposed transfer; and (4) at least 10 days before the date on which the payee signs the transfer agreement, the transferee provided to the payee a separate disclosure statement, in at least 14-point boldface type, which includes very specific information about the transaction, including a comparison of the original structured settlement with the settlement transfer agreement both in dollar terms and present value calculations. The disclosure must advise the payee that the agreement may be cancelled without penalty prior to court approval. If the structured settlement was established in resolution of a tort claim seeking compensation for cognitive injuries, including any claim arising from childhood exposure to lead paint, there are additional disclosure requirements. A court, at the transferee's expense, may appoint a guardian ad litem for the payee or require the payee to be examined by an independent mental health specialist designated by the court. These Acts also prohibit a person from filing a petition for a transfer of structured settlement payment rights unless the person is registered with and approved by the Maryland Attorney General as a structured settlement transferee or has a pending application for registration, and the Attorney General has not acted on the application within specified timelines. There are registration fee and bonding requirements. The Attorney General is authorized to issue regulations to carry out the purposes of the Acts.

Practice Point: Persons that purchase structured settlement payment rights must be registered with the Maryland Attorney General. All transfers must be approved by a Circuit Court after detailed disclosures are given to the seller of the payment rights and after findings by the court that the transaction is fair and beneficial to the seller and any dependents.

Maryland Small Business Retirement Savings Program and Trust
SB 1007/HB 1378 (Chapters 323 and 324)
(effective July 1, 2016)

These Acts establish the Maryland Small Business Retirement Savings Program and Trust to provide an alternative source for employee-funded individual retirement accounts. The Acts provide a "stick and carrot" approach. The stick: after the program is operational (which is dependent upon obtaining a legal opinion that the plan, trust, and other aspects of the program qualify for favorable federal income tax treatment), each private-sector employer in Maryland must enroll its employees in this retirement savings program if the employer (1) does not otherwise offer its employees a savings arrangement, (2) uses a payroll system or service, and (3) has been in business for at least two years. Employees of covered employers are automatically enrolled in the program, but they may choose to opt out. Employer involvement is limited to ministerial activities, such as forwarding payroll deductions to the program. An employer's participation in the program does not create a fiduciary obligation, and employers are not liable for an employee's decision to participate or opt out of the program or for investment decisions. The carrot: after the program becomes operational, employers that participate in the program, as well as those that provide a comparable alternative retirement savings arrangement to their employees, are exempt from paying the State's annual filing fee to SDAT for corporations and other business entities. At present, for most business entities, this annual fee is $300.

Campaign Finance – Disclosure of Political Contributions – Attribution of Contributions
HB 112 (Chapter 252)
(effective October 1, 2016)

Existing Maryland law requires persons doing business with any governmental entity in Maryland (both State and local) to disclose to the Board of Elections all political contributions made not only by the business entity and every officer, director, or partner of the business entity but also, according to the Board of Elections, by the business entity's subsidiaries and each subsidiary's officers, directors, and partners. Chapter 252 establishes that certain bank holding companies (BHC) do not have to include each subsidiary's political contributions, or contributions by the subsidiary's officers, directors, and partners, in the BHC's disclosure of political contributions. The BHC's subsidiary-related political contributions do not have to be included as long as: (1) the subsidiary itself does not do business with any Maryland governmental entity; (2) the BHC's securities are traded on a national exchange; and (3) no one individual owns or controls more than 10% of the BHC.

Practice Point: Chapter 252 mistakenly cites to the Bank Holding Company Act by referring to 12 U.S.C. §184(a) rather than 12 U.S.C. §1841(a). In an April 25, 2016 letter to the Governor, the Maryland Attorney General identified this citation as an error and indicated that this citation should be changed in next year's corrective bill. The Attorney General advised that in the meantime, the State Board of Elections should treat the provision in Chapter 252 regarding attribution of political contributions as applying to bank holding companies using the definition in 12 U.S.C. §1841(a).

Nondisparagement Clauses in Consumer Contracts – Prohibition
HB 131 (Chapter 96)
(effective October 1, 2016)

Many businesses include provisions known as "nondisparagement clauses" in their terms of service or in other provisions of consumer contracts. These clauses are intended to prevent a customer from leaving a critical review of the company, its products or services, and/or its employees – especially in an online forum or on an online review site. Chapter 96 prohibits a seller or lessor of consumer goods or services from including any provision in a contract or a proposed contract that waives a consumer's right to make any statement concerning: (1) the seller or lessor; (2) employees or agents of the seller or lessor; or (3) the consumer goods or services themselves. The law also prohibits a person from threatening or seeking enforcement of a prohibited provision or penalizing a consumer for making a protected statement. A violation of the law constitutes an unfair or deceptive trade practice within the meaning of Maryland's Consumer Protection Act. Chapter 96 does not prohibit a seller or lessor from bringing an action alleging that a consumer's statement was defamatory, nor does it prohibit a contract provision that prohibits a consumer from disclosing proprietary information, techniques, or processes.

Commissioner of Financial Regulation – Disclosure and Sharing of Information
HB 188 (Chapter 478)
(effective July 1, 2016)

The Maryland Commissioner of Financial Regulation regulates State-chartered banks and credit unions and non-depository financial services licensees doing business in Maryland. Examinations are an important aspect of the Commissioner's regulatory duties. As part of the examination process, the examined businesses must make their books and records available for review, as well as engage in frank discussions with examiners about confidential business activities. Chapter 478 organizes existing law and clarifies the confidentiality of information obtained by the Commissioner from banks and credit unions during examinations and otherwise. In addition, Chapter 478 expands current law so that similar clarity regarding confidentiality of information applies to non-depository licensees regulated by the Commissioner. Chapter 478 also authorizes the Commissioner to share certain information with other relevant regulators under specified circumstances.

Practice Point: This law clarifies that there will be limited disclosure of information obtained or generated in the exercise of the Commissioner's authority to examine licensed persons, banks, and credit unions.

Consumer Protection – Asset Recovery for Exploited Seniors
HB 718 (Chapter 114)
(effective July 1, 2016)

This law authorizes the Division of Consumer Protection in the Office of the Maryland Attorney General to bring a civil action for damages against a person who violates Maryland prohibitions concerning the exploitation of vulnerable adults. Under existing Maryland law, it is a misdemeanor for a person to knowingly or willfully obtain, by deception, intimidation, or undue influence, the property of an individual that the person knows is at least age 68 or is otherwise an adult viewed as vulnerable based on diminished physical or mental capacity. Because many perpetrators are family members of the victims, many victims do not press charges. By creating this civil alternative, it is believed that more victims will recover damages if they have been exploited. A criminal conviction is not required for maintaining an action under this law, and this law does not preclude private civil actions by the victim.

Agreements to Defend or Pay the Cost of Defense – Void
HB 871 (Chapter 636)
(effective October 1, 2016)
This Act invalidates any contractual provisions requiring the promisor to indemnify the promisee from any loss caused solely by the promisee's negligence. The Act applies to contracts relating to architectural, engineering, inspecting, or surveying services or the construction, alteration, repair, or maintenance of property.

Practice Point: The Act only applies prospectively to a cause of action arising on or after October 1, 2016.

INSURANCE
Maryland Insurance Commissioner – Responsibility for Holding Hearings – Delegation
SB 240 (Chapter 56)
(effective July 1, 2016)

This Act expands the authority of the Maryland Insurance Commissioner (MIC) to delegate the responsibility for holding hearings under the Insurance Article, by allowing the MIC to designate one other Maryland Insurance Administration employee who is admitted to practice law in Maryland to hold the hearings, in addition to the Deputy Commissioner, associate deputy commissioners, and associate commissioners who are authorized by statute to hold hearings.

LABOR AND INDUSTRY
 

Hiring and Promotion Preferences – Veterans and Their Spouses
SB 245 (Chapter 318)
(effective October 1, 2016)

This new law authorizes employers to grant a preference in hiring and promotion to certain eligible veterans, spouses of eligible veterans, and surviving spouses of eligible veterans. Eligible veterans include a veteran of any branch of the U.S. armed forces, including the National Guard and the military reserves, who has received an honorable discharge or certificate of completion of military service. This new law further provides that granting a preference under the law does not violate any State or local equal employment opportunity laws.

Maryland Home Improvement Commission – Subcontractor Licensing Requirement – Repeal
SB 285 (Chapter 370)
(effective July 1, 2016)

Existing Maryland law requires a person who acts as a subcontractor in Maryland to obtain a subcontractor license from the Maryland Home Improvement Commission (MHIC). Under this law, subcontractors will no longer be required to obtain MHIC licensing (only contractor licensing will be required). This law also requires the MHIC to identify subcontractors in Maryland who may be eligible for contractor licensing and encourage them to apply for a contractor license.
 

Medical Cannabis – Written Certifications by Certifying Providers
HB 104 (Chapter 474)
(effective June 1, 2017)

It is anticipated that the Natalie M. LaPrade Medical Cannabis Commission will award the first license pre-approvals (Stage 1) for medical cannabis growers, processors, and dispensaries in 2016. On this timetable, it is expected that medical cannabis should become available for sale in Maryland beginning mid-2017. The Commission already registers physicians, who will discuss medical cannabis with a patient, complete an assessment of a patient's medical condition, and certify in writing that the patient qualifies for medical cannabis. Chapter 474 expands who may provide written certifications to include dentists, podiatrists, and certain registered nurses. These certifying providers are subject to the same processes for registration, restrictions, and protections that are required for certifying physicians under current law. To become a certifying provider, a dentist, podiatrist, or registered nurse must have an active, unrestricted license, be in good standing with their respective board, and have a State-controlled dangerous substances registration. In addition, a registered nurse must have an active, unrestricted State Board of Nursing-issued certification to practice as a nurse practitioner or a nurse midwife.

LANDLORD - TENANT

Senior Apartment Facilities – Conversion
SB 241 (Chapter 543)
(effective October 1, 2016)

This Act requires a landlord to provide written notice to tenants of senior apartment facilities at least 180 days before converting a senior apartment facility into an apartment facility for the general population. After receipt of such a notice, a tenant has the right, before the conversion date, to terminate the tenant's lease after giving at least one month's written notice to the landlord. A landlord may not withhold any portion of a tenant's security deposit for rent that would have become due under any remaining portion of the lease.

Security Deposit – Contents of Lease
HB 1059 (Chapter 643)
(effective October 1, 2016)

Existing Maryland law requires a landlord in a residential lease to provide a receipt for any security deposit related to the tenancy. The required receipt must contain specified information describing the tenant's rights concerning the security deposit. Because existing Maryland law does not specify that a security deposit must be paid at the time a residential lease is signed, tenants may not receive the required security deposit receipt until after the lease has been signed. This law requires that the security deposit receipt be included in the residential lease, essentially prohibiting residential landlords from requesting a security deposit after a lease has been signed.

MORTGAGE LENDING AND RELATED ISSUES

Mortgage Loan Originators Criminal History Records Check
SB 87 (Chapter 340)
(effective July 1, 2016)

Chapter 340 eliminates the Maryland criminal history background check for mortgage loan originators. Currently, mortgage loan originators who are subject to licensing under Maryland law are required to obtain both a Maryland criminal history background check and a national criminal history check. Under the new law, one background check is deemed sufficient and, effective July 1, 2016, only the national criminal history check will be required.

Housing and Community Development – Community Development Administration – Student and Residential Mortgage Loans
SB 381 (Chapter 146)
(effective July 1, 2016)

This Act authorizes the Community Development Administration (CDA) to provide financial assistance under the Maryland Mortgage Program (Program) to a homeowner for (1) purchasing a primary residence and making payments on the homeowner's student loan debt, or (2) making payments on the homeowner's student loan debt in conjunction with the homeowner obtaining separate financial assistance from a source other than the CDA for purchasing the homeowner's primary residence. The Act is intended to help student loan borrowers overcome barriers to homeownership, which primarily include student loan repayment obligations that decrease the ability of otherwise creditworthy homebuyers to qualify for a mortgage loan. The Act requires the Secretary of Housing and Community Development to determine the terms and qualifications of the financial assistance that will be made available to homeowners and requires the Program to sell state-owned residential property.

Practice Point: Additional CDA loan programs should become available for residential lenders.

Anne Arundel County – Property Tax Deferrals – Payment Due Date
SB 8/HB 37 (Chapters 327 and 328)
(effective July 1, 2016)

These Acts permit Anne Arundel County to change the due date for payment of deferred Anne Arundel County property taxes if the owner no longer satisfies specified income eligibility requirements.

REAL ESTATE

Real Property – Actions to Quiet Title
SB 509/HB 920 (Chapters 395 and 396)
(effective October 1, 2016)

These Acts provide a procedure and rules that will be applicable throughout Maryland when a person seeks to quiet title on real property. Before these Acts, there was no comprehensive law that concerned quieting title, or judicially establishing the ownership of and rights to real property when those issues are in doubt or there is a cloud on title. These Acts provide for venue and the application of the Maryland Rules in a quiet title action and set forth requirements for a complaint, an answer to a complaint, naming of defendants, joinder of parties, and service of process in an action to quiet title. The Acts provide that mortgagees and trustees, beneficiaries, and assignees of record of deeds of trust are required to receive notice of a complaint filed to commence a quiet title action. In addition, the Acts require the recording of a judgment in an action to quiet title in the land records of the county in which any portion of the property is located.

Tax Sales – Condominium Assessments and Homeowners Association Fees
SB 591/HB 970 (Chapters 565 and 566)
(effective July 1, 2016)

These Acts enable condominium and homeowner associations to receive notice of tax sale proceedings affecting properties in the associations, and to enable such associations to collect assessments from the tax sale purchasers once a final judgment has been entered, regardless of whether a foreclosure deed has been recorded. In a tax sale action to foreclose the right of redemption on a property, the Acts require the plaintiff to send specified notices to a condominium association, as well as to a homeowners association, if the property at issue is part of the association. Notices must be sent to the last reasonably ascertainable address of the association. These Acts also require that, once a judgment in an action to foreclose the right of redemption is granted, the plaintiff in the tax sale action immediately becomes liable for (and may be sued for) the payment of assessments or fees charged by a condominium association or a homeowners association from the date of judgment, even if the foreclosure deed vesting title in the plaintiff has not yet been recorded.

Recordation and Transfer Taxes – Transfer of Controlling Interest – Exemptions
SB 597/HB 1226 (Chapters 223 and 224)
(effective July 1, 2016)

These Acts alter the exemption from recordation and transfer taxes to provide that a transfer of a controlling interest in a real property entity is not subject to recordation and transfer taxes if the ownership interests in the transferee entity are owned, directly or indirectly, by the same persons and in the same proportions as those persons own, directly or indirectly, the transferor entity or the real property entity the controlling interest of which was transferred. This will enable transfers of controlling interests "within the family" (that is, where there is a common ultimate parent) to be made without incurring recordation or transfer tax. The Acts also will permit transfers of controlling interests of entities other than corporations to be done without imposition of recordation or transfer taxes in certain situations.

Real Estate Licensees – Verification of Service Provider Licensing Status
SB 824/HB 1453 (Chapters 432 and 433)
(effective October 1, 2016)

These Acts provide, on the one hand, that a licensee of the State Real Estate Commission does not need to verify that a specified service provider (which term includes a mortgage lender, mortgage broker, real estate appraiser, home inspector, plumber, electrician, and HVAC contractor) is currently licensed by the State to perform the services if the licensee offers the name of the service provider to a client in the provision of real estate brokerage services. On the other hand, the Acts require that a licensee of the State Real Estate Commission verify annually that a home improvement contractor is licensed by the Maryland Home Improvement Commission.

Task Force to Study Recording Deeds for Victims of Domestic Violence
SB 1047 (Chapter 602)
(effective July 1, 2016)

This law establishes a task force to study and make recommendations regarding how to protect the identity and address of a participant in the Address Confidentiality Program ("ACP") for victims of domestic violence and human trafficking when transferring real property to or from a program participant. The task force must report its findings to the Governor and General Assembly by December 31, 2017. One member on the task force will be from the Maryland Bankers Association.

Baltimore City – Abandoned Property – Tax Sales – Ground Rent
HB 385 (Chapter 484)
(effective July 1, 2016)

This Act requires the tax collector in Baltimore City to sell the whole fee simple interest in an abandoned property to a purchaser at a tax sale when the property is subject to a ground rent, regardless of the amount of the minimum bid, thereby extinguishing the ground rent with the transfer. The Act modifies existing law which provided that the ground rent for an abandoned property would only be extinguished after a tax sale when the minimum bid was less than the lien amount. The Act also specifies that abandoned property consists of either a vacant lot or improved property that Baltimore City has cited on a housing or building violation notice as unfit for human habitation.

Real Estate Brokers – Licensure Requirement – Exemption for Lawyers
HB 747 (Chapter 276)
(effective October 1, 2016)

This Act alters an exemption that currently allows licensed Maryland attorneys to represent themselves in a real estate transaction related to the sale of their own homes (and share in the real estate brokerage commissions). Maryland law requires an individual to obtain and maintain a license as a real estate broker in order to provide real estate brokerage services in Maryland (and to obtain any fee related to real estate brokerage services). Existing Maryland law includes exemptions from this requirement for certain financial institutions, attorneys, home builders, agents of licensed real estate brokers, certain business sellers (where real estate is leased, not owned), and certain individuals who subdivide and sell unimproved property. This Act preserves the exemption for licensed Maryland attorneys to participate in real estate transactions if they are not regularly engaged in real estate brokerage activities and do not advertise that they are in the business of providing real estate brokerage services. The Act, however, eliminates the ability for attorneys to share in the real estate brokerage commissions from the sale of their own homes.

Residential Real Property – Sales Contracts – Notice of Water and Sewer Charges
HB 989 (Chapter 638)
(effective October 1, 2016)

This Act requires that a contract for the resale of residential real property that is served by public water or wastewater facilities, for which deferred water and sewer charges have been established by a recorded covenant or declaration, must contain a specified form of notice. The Act provides penalties for failure to comply; including that if the violation is discovered before settlement, the buyer is entitled to rescind the transaction and receive a return of the full deposit; and if the violation is discovered after settlement, the seller is required to pay the full amount of the fee or assessment that was not disclosed unless the seller was never charged a fee or assessment. The notice provisions of this Act are inapplicable in a county that has adopted a substantially similar notice requirement.

Condominiums and Homeowners Associations – Resales - Disclosures and Fees
HB 1192 (Chapter 735)
(effective October 1, 2016)

This law changes the required contents of the certificate that a unit owner must furnish to a purchaser on resale of a condominium unit or upon resale of a lot. The law specifies a maximum fee of $250 that a council of unit owners or a homeowners association may charge for furnishing a certificate to a unit owner or upon resale of a lot. The law also permits a fee of up to $100 for an inspection of a condominium unit and permits a council of unit owners or a homeowners association to charge $50 for the delivery of the certificate or information within 14 days and $100 for the delivery of the certificate or information within 7 days. The Act requires the Department of Housing and Community Development to adjust the maximum fee that a council of unit owners may charge for furnishing a certificate to a unit owner or a homeowners association may charge for furnishing information based on changes in the Consumer Price Index (CPI).

TAXES

Income Tax – Filing of Withholding Statements
SB 185/HB 1333 (Chapters 538 and 539)
(effective July 1, 2016)

Currently, employers and payors of payments that are subject to state withholding must submit a withholding statement to the Maryland Comptroller by February 28 of each year. These Acts accelerate the due date for the submission of such withholding statements from February 28 to January 31.

Income Tax – Corporation Returns – Filing Date
SB 288/HB 484 (Chapters 547 and 548)
(effective July 1, 2016)

These Acts extend the filing date by one month for a corporation that must file a state income tax return with the Maryland Comptroller. Instead of having to file by March 15, the Acts require that a corporation file its income tax return by April 15 of the year that follows the corporation's taxable year. If the corporation has a fiscal year, the filing due date is the 15th day of the 4th month (instead of the 3rd month) after the end of the corporation's fiscal year.

Income Tax – Interest Rate on Tax Deficiencies and Refunds
HB 422 (Chapter 322)
(effective July 1, 2016)

Under existing law, by October 1 of each year, the Maryland Comptroller sets the annual interest rate for tax refunds and monies owed to the State for the next calendar year at a rate equal to the greater of: 13%; or 3 percentage points above the average prime rate of interest in the previous year. This Act is intended to improve Maryland's competitiveness in attracting and retaining business by reducing the interest rate for tax deficiencies and refunds. Under the new law, the Maryland Comptroller will set the interest rate equal to the greater of: (i) a set amount for each year (13% for 2016; 12% for 2017; 11.5% for 2018; 11% for 2019; 10.5% for 2020; 10% for 2021; 9.5% for 2022; and 9% for 2023 and thereafter); or (ii) 3 percentage points above the average prime rate.