Maryland Laws Update for Financial Services

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Maryland Laws Update 2017

We are pleased to provide our clients and friends this review of 2017 Maryland laws affecting financial services providers.  The new laws present challenges and opportunities for financial institutions.  Some new laws are already effective, and others are effective later.  As always, Gordon Feinblatt's Financial Services Team is able to assist you with any of your questions.  Please email or call using the contact information found below.

If you are interested in legislation affecting the real estate industry, please see Relating to Real Estate Special Edition: 2017 Maryland Real Property Legislation, published by Gordon Feinblatt's Real Estate Team.

    Table of Topics

    Contacts

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

    Andrew D. Bulgin
    410-576-4280
    Lawrence D. Coppel
    410-576-4238
    Marjorie A. Corwin
    410-576-4041
    D. Robert Enten
    410-576-4114
    Robert A. Gaumont
    410-576-4007
    Bryan M. Mull
    410-576-4227
    David S. Musgrave
    410-576-4194
    Christia A. Pritts
    410-576-4157
    Christopher R. Rahl
    410-576-4222
    Peter B. Rosenwald, II
    410-576-4193
    Chastity E.C. Threadcraft
    410-576-4029
     

    Maryland Laws Update

    BANKING

    Maryland Chartered Banks – Residency Qualifications of Directors
    SB206 / HB718 (Chapters 265
     and 266)
    (effective October 1, 2017)

    Under current Maryland law, at least 50% of a Maryland commercial bank’s directors must be residents of Maryland.  Chapters 265 and 266 reduce this percentage to 30%.

    Practice Point:  This will provide Maryland banks with more flexibility in finding and electing qualified director candidates.  This was a Maryland Bankers Association initiative.           

    CONSUMER LENDING            

    Unsecured Open End Consumer Credit Plans – Fees and Charges
    SB527 / HB1270 (Chapters 723
     and 724)
    (effective July 1, 2017)

    These Acts limit certain fees and charges permitted for unsecured open end credit plans extended to consumer borrowers.  Under existing law, creditors that extend credit under Maryland’s Credit Grantor Revolving Credit Provisions (Subtitle 9) may impose an annual charge (in any amount) for the privilege of accessing the plan, a transaction charge for each advance under the plan, and a minimum charge for each billing period where there is an outstanding unpaid balance.  Under existing law, these charges are not treated as interest and, thus, are not subject to the maximum 24% annual simple interest rate permitted under Subtitle 9.  The Acts provide that these charges, when combined with any interest charged under the plan, may not exceed an effective rate of simple interest of 33% per year.

    Practice Point:  Lenders extending open end credit under Subtitle 9 should examine charges to ensure that if they are imposing charges identified in these Acts, such charges, when combined with interest under the plan, do not cause the rate to exceed the new 33% simple interest rate cap.  Lenders whose existing Maryland loan programs include the identified charges need to re-evaluate their lending programs in Maryland.  The Commissioner of Financial Regulation intends to enforce this new rate limit beginning July 1, 2017 for new revolving credit plans.

    CONSUMER PROTECTION

    Maryland Financial Consumer Protection Commission
    SB884 / HB1134 (Chapters 18
     and 781)
    (effective June 1, 2017)

    In response to a concern that the new federal administration will repeal or amend the Dodd-Frank Wall Street Reform and Consumer Protection Act and related laws, the General Assembly established the Maryland Financial Consumer Protection Commission.  The Commission is charged with the duty of assessing the impact of potential changes to federal financing industry laws and regulations and providing recommendations to protect Maryland residents in financial transactions and when receiving financial services.  The Commission is required to submit a report of its findings and recommendations for any legislation on or before December 31, 2017 and December 31, 2018.  The members of the Commission must include, among others, the Commissioner of Financial Regulation, a representative of a financial institution operating in Maryland, and persons with knowledge of federal laws and regulations that impact the financial and lending industry.

    Maryland Securities Act – Vulnerable Adults
    HB1149 / SB951 (Chapters 837
     and 838)
    (effective October 1, 2017)

    This new law makes several changes to the Maryland Securities Act.  Most notably, the law will require a broker-dealer, an investment adviser, an agent of a broker dealer, an investment adviser representative, and any person who serves in a supervisory, compliance, or legal capacity for a broker-dealer or an investment adviser, who reasonably believes that an “eligible adult” has been, is currently, or will be the subject of “financial exploitation” or attempted financial exploitation to file a report of the exploitation or attempted exploitation with the Maryland Securities Commissioner and local law enforcement officials.  Subject to certain notice and other requirements, the law also permits one of these regulated persons who suspects financial exploitation to delay a disbursement from an account of an eligible adult or of which an eligible adult is a beneficiary.  A reporting person also may notify a third party who has been designated by the eligible adult to receive notices, as well as any other third party that is permitted to receive notices by federal or state laws or the rules of any self-regulatory organization.  The term “eligible adult” is defined to include a Maryland resident who is at least 65 years of age and any other adult who lacks the physical or mental capacity to provide for his or her daily needs.

    Practice Point:  Similar Maryland reporting obligations regarding elder adults already apply to depository institutions in Maryland.  However, many depository institutions have networking arrangements with broker-dealers, investment advisers, and insurance professionals under which securities are offered and sold at branch locations through “dual employees” deemed to be agents of these regulated persons.  Depository institutions will need to review their compliance policies and procedures in light of this law and ensure that their employees who act on behalf of networking broker-dealers, investment advisers, and insurance professionals are aware of the new reporting obligations. 

    Commercial Law – Consumer Protection – Door-to-Door Sales
    SB929 / HB959 (Chapters 93
     and 94)
    (effective June 1, 2017)

    These Acts move existing exemptions found in the Maryland Door-to-Door Sales Act out of the definitions section and into their own section.  In addition, these Acts clarify and change a few exemptions.  Specifically, the Acts clarify that the existing exemption for a bona fide immediate personal emergency applies to the renovation or construction of residential property to improve accessibility of the property for individuals who are mobility impaired or disabled.  The Acts expand the existing exemption for transactions conducted entirely by mail or telephone to include transactions conducted entirely through electronic communications.  The Acts eliminate the exemption for buyer-initiated transactions where the buyer requests the seller to visit the buyer’s home and repair or perform maintenance on personal property.  The Acts add a new exemption for transactions resulting from written change orders when the change order is agreed to, and is part of a transaction under a contract previously signed, by the buyer and seller, but only if a certain written personal statement is provided by the buyer to the seller.

    Practice Point:  These new exemptions are intended to alleviate some concerns raised by last year’s legislation (Chapter 485 of the 2016 Laws of Maryland) which added longer “cooling off” periods for home improvement contracts.

    Credit Report Security Freezes – Prohibition of Fees
    HB212 / SB270 (Chapters 827
     and 828)
    (effective October 1, 2017)

    Under existing Maryland law, an individual may request that a consumer reporting agency place a restriction (security freeze) on the individual’s consumer report that prohibits the consumer reporting agency from releasing the consumer report (or any information derived from the consumer report) without the consumer’s authorization.  A consumer reporting agency may charge a reasonable fee for imposing a security freeze (up to $5 for each request) but, under existing law, may not charge a fee for a security freeze where an individual has obtained a report of alleged identity fraud.  In addition to the existing limitation on charging a fee, these Acts prohibit a consumer reporting agency from charging a fee for the first placement of a security freeze (where the individual has not previously requested a security freeze from the consumer reporting agency).

    Practice Point:  It is possible this new law will increase the number of consumer reports subject to a security freeze because there will be no fee for the first placement of a security freeze by any individual.

    CORPORATE

    Corporations and Real Estate Investment Trusts – Internal Corporate Claim, Service of Process on Directors, and other Miscellaneous Amendments
    HB744 (Chapter 674
    )
    (effective October 1, 2017)

    Chapter 674 makes a number of substantive and technical amendments to the Corporations and Associations (CA) and Courts and Judicial Proceedings (CJ) Articles.  Among the substantive amendments, a new definition of “internal corporate claim” has been added to the CA Article.  An “internal corporate claim” is defined as a claim brought by or in the right of a corporation that is based on an alleged breach of a duty owed to the corporation or the corporation’s stockholders by a director, officer, or stockholder.  The amendments prohibit the charter or bylaws of a corporation with capital stock from requiring a stockholder who is a party to an internal corporate claim to pay the corporation’s legal fees or the legal fees of any other party, and permit the corporation’s bylaws to require, consistent with applicable jurisdictional requirements, that any internal corporate claim be filed only in courts sitting in one or more specified jurisdictions, provided that the charter or bylaws may not prohibit the filing of an internal corporate claim in a Maryland state or federal court.   Under an amendment to the CJ Article, directors of a corporation (or trustee of a REIT), on or after October 1, 2017, will be deemed to have consented to service of process on a corporation’s (or REIT’s) resident agent, or SDAT if no resident agent is appointed, as to any proceeding filed in Maryland by or on behalf of a corporation or REIT as to which the director or trustee is a necessary or proper party, and as to an action against the director or trustee on an internal corporate claim.  Most notably, the amendment provides that “deemed consent to service” applies regardless of whether the individual is a director or trustee when suit is filed.

    Practice Point:  This law applies to Maryland chartered financial institutions.  As a result of the “deemed consent to service of process” provision, it will be important for Maryland financial institutions and other corporations to maintain contact information for their present and former directors and update that information on a regular basis.

    Formation of a Holding Company by Merger
    HB759 / SB398 (Chapters 358
     and 359)
    (effective October 1, 2017)

    These Acts establish a simplified process for the formation of a holding company through the merger of a Maryland parent corporation with or into a direct or indirect wholly-owned subsidiary corporation.  Currently, parent holding corporations are typically formed through a process known as a share exchange, which (unless the charter provides otherwise) requires the affirmative vote of stockholders who hold at least two-thirds of all outstanding capital stock.  Under Chapters 358 and 359, a stockholder vote will not be required if, among other conditions, the charter and bylaws of the new holding company will be identical in all material respects to the charter and bylaws of the merging corporation immediately prior to the merger.  Finally, the Acts specify that a merger of a parent real estate investment trust with or into a single subsidiary real estate investment trust may be approved in the manner specified for corporations, provided that the merger otherwise conforms to statutory requirements.

    Maryland Securities Act – Regulatory Relief
    HB1149 / SB951 (Chapters 837
     and 838)
    (effective October 1, 2017)

    This new law makes several changes to the Maryland Securities Act.  One item of regulatory relief provided by this law is the elimination of the filing requirement applicable to some of the most common types of employer-adopted plans that permit the grant or sale of the employer’s securities (e.g., equity compensation plans, employee’s stock purchase plans, etc.).  Under current law, an employer’s grant of awards and/or issuance of securities under these plans does not need to be registered under the Maryland Securities Act, provided the employer files a notice of its intent to grant awards and/or issue securities with the Maryland Securities Commissioner at least 30 days prior to the first grant or issuance and pays a $400 filing fee.  This new law creates a self-executing exemption for these plans, meaning that no filing will be required, as long as no commission or other compensation will be paid to anyone in connection with securities issued under the plan and certain other conditions are satisfied.

    Exemption from Recordation and Transfer Taxes for Property Conveyed from Sole Proprietorship to Limited Liability Company
    SB111 / HB363 (Chapters 63
     and 64)
    (effective July 1, 2017)

    These Acts fill in a gap in the Maryland tax code with respect to transfers of real property when a single individual wishes to convert a sole proprietorship business to a limited liability company. Specifically, the Acts exempt from recordation and transfer taxes the transfer of real property from a sole proprietorship to a limited liability company if the sole member of the limited liability company is identical to the converting sole proprietor. Previously, only transfers from predecessor partnerships or joint ventures to the successor limited liability company were exempt from recordation and transfer taxes. However, the Acts also provide that the transfer of a controlling interest in a limited liability company that is the product of an untaxed conversion from a sole proprietorship is subject to the recordation and transfer tax.

    DEPOSIT ACCOUNTS 

    Small Claim Action Appeals from District Court – Non-attorney Representation
    SB500 (Chapter 544
    )
    (effective October 1, 2017)

    Under current Maryland law, non-attorney representatives of business entities may appear on the entity’s behalf in small claims actions ($5,000 or less) in the District Court of Maryland and that activity is not deemed the unauthorized practice of law.  This Act expands the authority and allows a non-attorney representative to participate in an appeal of a small claim ($5,000 or less) from the District Court of Maryland.

    Practice Point:  Many financial institutions take advantage of the exemption from the unauthorized practice of law for small claims, particularly in connection with answering writs of garnishment for property other than wages.  This will allow a non-attorney representative of the financial institution to participate in an appeal even though that appeal will be in Circuit Court.

    Maryland Achieving a Better Life Experience (ABLE) Program – Account Clarifications
    HB448 / SB344 (Chapters 132
     and 133)
    (effective July 1, 2017)

    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.  These Acts specify that contributions made during each calendar year may not exceed the maximum amount determined by the Maryland 529 Board to be in accordance with applicable provisions of the Internal Revenue Code.

    Practice Point: While ABLE accounts are for savings purposes, they are not normal savings accounts.  It is recommended that branch personnel be trained appropriately to respond to customer inquiries about ABLE accounts.

    ESTATES AND TRUSTS 

    Conditions of Disability and Incapacity – Confinement
    HB81 (Chapter 666
    )
    (effective October 31, 2017)

    Under Maryland law, a court may appoint a guardian of the property of an individual if the individual is unable to manage his or her property or financial affairs for various reasons, such as physical or mental disability, illness, or imprisonment.  Prior to this Act, confinement was a condition included in the statutory definition of incapacity and required the appointment of a guardian.  As a result of this Act, an individual under confinement is no longer automatically deemed to be incapacitated and in need of a guardian.

    Share of Intestate Estate Inherited by Surviving Spouse
    HB735 / SB73 (Chapters 626
     and 627)
    (effective October 31, 2017)

    Prior to these Acts, if a married individual died without a will and was survived by adult descendants (or had no surviving descendants, but was survived by either or both of his or her parents), the surviving spouse was entitled to receive the first $15,000 of the estate, plus one-half of the residue.  The remaining one-half of the residue would then be distributed to the decedent’s surviving adult descendants or parents, as applicable.  These Acts increase the amount that the surviving spouse is entitled to take prior to the division of the residue from $15,000 to $40,000.

    Maryland Trust Act – Representatives of Beneficiaries
    HB753 / SB793 (Chapters 354
     and 355)
    (effective October 31, 2017)

    The Maryland Trust Act contains virtual representation provisions, which allow certain individuals to serve as representatives of trust beneficiaries, provided there is no conflict of interest between the representative and the beneficiary.  For example, a parent may serve as representative for his or her minor child, and a guardian may serve as representative for a disabled person.  The representative has the authority to receive notice from the trustee of the trust on behalf of the beneficiary and to bind the beneficiary with respect to trust matters that require the beneficiary’s consent.  These Acts expand the virtual representation statute to permit the settlor of a trust to designate an individual to serve as the representative of a beneficiary and designate one or more individuals to serve as successor representatives of a beneficiary, or to give another person the authority to designate representatives and/or successor representatives of a beneficiary.  The designated representative may not be someone who is serving as the trustee of the trust.

    Practice Point:  This provision will be especially helpful for administering trusts with qualified beneficiaries who are old enough to receive trustee reports and notices but who are not yet mature enough to know all of the details concerning the trust.  The settlor can name someone else to receive such reports and notices on behalf of the beneficiary.

    Maryland Trust Act – Notice and Reporting Requirements – Exemptions
    HB754 / SB792 (Chapters 356
     and 357)
    (effective October 31, 2017)

    Under the Maryland Trust Act, a trustee is required to provide notice to the qualified beneficiaries of the trust upon the occurrence of certain events, such as the creation of an irrevocable trust, a revocable trust becoming irrevocable, or the acceptance by a trustee of his or her appointment as trustee.  A trustee is also required to provide an annual report to a qualified beneficiary upon his or her request.  These Acts clarify that, if the trustee of a trust is also a qualified beneficiary of the trust, the trustee is not required to provide reports or notices of any such events to himself or herself.

    Inheritance Tax – Exemption – Evidence of Domestic Partnership
    HB1104 (Chapter 503
    )
    (effective July 1, 2017)

    This Act clarifies the evidence that is required for purposes of claiming the inheritance tax exemption for real property held in joint tenancy passing from a decedent to his or her domestic partner.  Under prior law, the surviving domestic partner was required to provide a signed affidavit stating that there was a domestic partnership and proof of two additional documents, such as joint liability on a mortgage, lease, or loan, a designation of one partner as primary beneficiary under a will, life insurance policy, or retirement plan of the other partner, or joint ownership of a bank account or motor vehicle.  This Act removes the requirement to provide a signed affidavit of domestic partnership so that any two non-affidavit proofs of the domestic partnership will be sufficient in order to claim the inheritance tax exemption.

    GROUND RENT 

    Ground Lease Registration Form – Revisions
    HB44 (Chapter 542
    )
    (effective October 1, 2017)

    As a result of this law, the ground lease holder registration forms made available by the Maryland Department of Assessments and Taxation will be revised to allow ground lease holders, at their option, to include their telephone number and email address.

    Residential Ground Leases in Baltimore City – Abandoned Property
    SB487 (Chapter 595
    )
    (effective October 1, 2017)

    Under current law, recovery of delinquent ground rent on property in Baltimore City is limited to 3 years’ past-due ground rent if the property is owned or acquired by Baltimore City and is abandoned or distressed property as defined in the law.  Chapter 595 leaves unchanged the limitation for distressed property but further narrows recovery of ground rent relating to abandoned property in Baltimore City.  It prohibits any proceeding against the current leasehold tenant to recover ground rent that was due from a former leasehold tenant before the date that the current tenant acquired title if the property is owned or acquired by the current tenant and is abandoned property as defined by law.

    LICENSING 

    Maryland Licensing Using the Nationwide Mortgage Licensing System and Registry
    HB182 (Chapter 253)
    (effective July 1, 2017)

    Maryland law already requires mortgage lenders, mortgage originators, and money transmitters to obtain their annual licenses through a multistate, electronic uniform licensing system called the Nationwide Mortgage Licensing System and Registry (NMLS).  This Act requires 7 additional categories of Maryland licensees to obtain their licenses annually and through NMLS.  Beginning July 1, 2017, new or renewal licensing must be accomplished through NMLS for: check cashers; collection agencies; consumer loan lenders; credit services businesses; debt management companies; installment lenders; and sales finance companies.  The Maryland Commissioner of Financial Regulation will establish a time period within which each existing licensee must transfer its licensing information to NMLS and obtain a valid unique identifier issued by NMLS.  Among other changes, this Act also conforms the statutes applicable to these 7 categories of licensees to last year’s enactment (Chapter 478 of the 2016 Laws of Maryland) which both authorized and limited the Commissioner’s ability to share information about Maryland licensees with certain State and federal regulatory officials.

    Practice Point:  Existing Maryland check casher, collection agency, consumer loan lender, credit services business, debt management company, installment lender, and sales finance company licensees need to review the new licensing process.  Experience suggests that the first time using NMLS may be confusing and lead to frustration.  All existing exemptions from licensing remain unaffected by this new law.

    Licensing Surety Bond Requirements
    SB924 (Chapter 479)
    (effective June 1, 2017)

    Chapter 479 standardizes surety bond requirements for certain businesses required to be licensed or registered by the Commissioner of Financial Regulation or the Collection Agency Licensing Board.  The new standardized surety bond requirements apply to: collection agencies; consumer loan lenders; debt management companies; debt settlement companies; installment lenders; mortgage lenders; and money transmitters.  The law establishes, among other requirements, that surety bonds are now obtained only once at the time of initial application (and not with renewal applications).  The bonds must be continuous and must not end until 3 years after the later of cancellation of the bond or cessation of the license/registration.  In addition to claims filed by a claimant (or by the regulator on behalf of a claimant), bond proceeds may be used to pay regulatory penalties imposed against a licensee.  The new law does not affect the amount of  the surety bond required.

    Practice Point:  Licensees should contact their surety companies to determine if the requirements of this new law will impact existing surety bonds or the cost for those bonds.

    MORTGAGE LENDING AND FORECLOSURE

    Closed End Mortgage Lending – Elimination of Duplicative Disclosures
    SB392 (Chapter 484
    )
    (effective July 1, 2017)

    Since 1989, Maryland has required licensed mortgage lenders and brokers to provide certain unique disclosures, commonly referred to as the Maryland financing agreement and Maryland commitment.  Failure to provide these disclosures can lead to regulatory penalties and civil liability.  Chapter 484 recognizes that much, if not all, of the information required to be disclosed in the Maryland financing agreement and Maryland commitment is found in required federal Truth in Lending Act and Real Estate Settlement Procedures Act integrated disclosures (TRID) for closed end mortgage credit.  Chapter 484 establishes that disclosures provided by a licensee to a borrower in compliance with TRID will satisfy requirements under Maryland law to provide a Maryland financing agreement or Maryland commitment.  Chapter 484 directs the Commissioner of Financial Regulation to monitor TRID requirements implemented by the federal Consumer Financial Protection Bureau and notify the Governor and the General Assembly if the Commissioner determines that federal disclosure requirements are modified or proposed to be modified to be less stringent or less consumer friendly.

    Practice Point:  TRID does not apply to some mortgages, such as reverse mortgages or open end lines of credit (HELOCs), and Maryland disclosures for those loans are not changed.  Licensees may want to contact their forms providers and find out if changes will be implemented to reflect the elimination of certain unique Maryland disclosures for loans subject to TRID.

    Mortgages and Deeds of Trust – Prerequisites to Recording
    HB595 / SB376 (Chapters 520
     and 521) and HB404 (Chapter 425)
    (effective October 1, 2017)

    Under existing law, deeds, mortgages, and deeds of trust must contain a certification that the instrument was prepared by an attorney or a party to the instrument.  (St. Mary’s County has a local law to this same effect, and Chapter 425 rescinds that local law effective October 1, 2017.)  Chapters 520 and 521 amend this requirement, providing that a mortgage, deed of trust, assignment of a mortgage/deed of trust, or release of a mortgage/deed of trust does not need the preparation certification.  This revision may reduce the burden faced by lenders that document a significant volume of mortgages and deeds of trust. 

    Practice Point:  Language was included in these Acts to acknowledge that one of the parties to a mortgage, deed of trust, or assignment of mortgage/deed of trust may prepare that instrument.

    Recordation and Transfer Tax – Principal Residence Surrendered in Bankruptcy – Exemption
    HB469 (Chapter 538
    )
    (effective July 1, 2017)                   

    This Act exempts from recordation and transfer taxes the recordation of a deed transferring residential real property to the secured party under a purchase money deed of trust when the property was the grantor’s principal residence and the property was surrendered to the secured party in connection with a Chapter 7 bankruptcy.

    Notices of Foreclosure Sale and Postponement or Cancellation of Foreclosure Sale
    HB26 / SB247 (Chapters 346
     and 347)
    (effective October 1, 2017)

    These Acts expand upon the existing written notice requirements necessary for a residential foreclosure sale.  In addition to the existing duty to provide notice of the time, place, and terms of a foreclosure sale to the record owner of the subject property, the Acts require the person authorized to conduct a foreclosure sale to give written notice to a condominium or homeowners association that recorded a statement of lien under the Maryland Contract Lien Act at least 30 days before the proposed sale date.  Additionally, in the event the foreclosure sale is postponed or cancelled, the person authorized to conduct the foreclosure sale must give notice within 14 days of the postponement or cancellation to the record owner and, if applicable, the condominium or homeowners association.  Under current law, the person authorized to conduct the foreclosure is not required to provide notice of the cancellation or postponement of a sale.

    Practice Point:  These new notice requirements are relatively minor, so these Acts should not dramatically increase the burden on secured parties pursuing foreclosure. 

    Residential Property – Vacant and Abandoned Property – Expedited Foreclosure
    SB1033 (Chapter 617
    )
    (effective October 1, 2017)

    This Act provides procedures for secured parties to petition the court to proceed with an expedited foreclosure of vacant and abandoned residential real property.  If the deed of trust has been in default for at least 120 days and the secured party can establish certain other indicia of abandonment (such as boarded up windows, disconnected utilities, the absence of furnishings, accumulated litter, destruction or vandalism of the property), the secured party may petition the court for an expedited foreclosure.  If the court grants the petition, then the secured party can proceed with an expedited foreclosure and avoid the usual requirements in a foreclosure of residential property, including possible mediation and certain notice requirements. Essentially, if the court grants the petition for immediate foreclosure, the foreclosure will proceed like a foreclosure of commercial real property rather than residential property.

    Practice Point:  This Act will allow secured parties to avoid the needless accrual of time and expenses typically associated with foreclosure of residential abandoned properties.  Importantly, taking the actions described in this Act is completely voluntary.  A secured party may always follow the normal requirements for residential property foreclosures even if the property is vacant and abandoned.

    Residential Property – Notice of Foreclosure
    SB875 / HB1048 (Chapters 348
     and 349)
    (effective October 1, 2018)

    These Acts provide that a person authorized to sell residential real property subject to a foreclosure must file with the Maryland Department of Labor, Licensing, and Regulation (DLLR) certain information concerning the property.  The information provided to DLLR includes basic information, such as the property’s address, tax identification number, whether the property is vacant, and if known, the owner’s contact information.  The new notice required under these Acts must be filed within 7 days of filing the foreclosure order to docket.  DLLR will provide the form of the notice. These Acts should not prove to be overly burdensome, but does increase the compliance burden for the party conducting the foreclosure.  These Acts have a delayed effective date of October 1, 2018.

    MOTOR VEHICLE

    Vehicle Laws – Certificate of Title – Transfer-on-Death Beneficiary Designation
    HB492 (Chapter 684
    )
    (effective October 1, 2017)

    This law authorizes the sole owner of a motor vehicle to designate a beneficiary (TOD beneficiary) to take ownership of the motor vehicle after the sole owner’s death.  The transfer is outside the estate administration process.  The owner of a motor vehicle may designate a TOD beneficiary by applying to the Maryland Motor Vehicle Administration (MVA) for an updated certificate of title that includes a TOD beneficiary designation.  The MVA is required to allow the designation, but may charge a fee for doing so, and the designation does not impact the ownership of the motor vehicle during the owner’s lifetime.  The owner may change or cancel a TOD beneficiary designation at any time prior to death of the owner.  Upon the death of the owner, ownership of the motor vehicle passes to the TOD beneficiary if the TOD beneficiary survives the owner.  After the original owner’s death, the TOD beneficiary must apply to the MVA for an updated certificate of title listing the TOD beneficiary as the current owner of the motor vehicle.  If the TOD beneficiary does not survive the owner, the motor vehicle becomes part of the deceased owner’s estate.  The Act does not impact a secured creditor’s rights concerning a motor vehicle that is collateral for a loan and the TOD beneficiary takes title upon the owner’s death subject to the creditor’s pre-existing security interest.

    Practice Point:  Questions remain for secured parties concerning how they will get notice of a TOD designation and resulting transfer after the death of an owner who is a borrower.  It is anticipated the MVA regulations will address these issues.

    Vehicle Transfers – Excise Tax and Fee Exemption
    SB449 (Chapter 663
    )
    (effective July 1, 2017)

    This Act permits a trust to claim the excise tax and titling fee exemption for transfers of vehicles to or from the trust for no consideration under certain circumstances.  The exemption may be claimed for transfers to the trust if the transfer would have qualified for the exemption had the settlor transferred the vehicle directly to one or more of the beneficiaries of the trust.  Similarly, the exemption may be claimed for transfers from the trust to one or more of the beneficiaries if the transfer would have qualified for the exemption had it been made by the settlor directly to those beneficiaries.

    PRIVACY

    Maryland Personal Information Protection Act – Data Breach Requirements Revised
    HB974 (Chapter 518
    )
    (effective January 1, 2018)

    This law amends the Maryland Personal Information Protection Act, which is Maryland’s data breach law.  It imposes additional duties on businesses that have an individual’s personal information to protect that information and it changes the notification requirements that apply when a business experiences a security breach affecting computerized personal information of an individual residing in Maryland.  The definition of personal information is expanded to include, among other information, health information, health insurance information, and biometric data.  For the first time, Maryland’s law specifically addresses breaches involving only email account information.  While amendments were introduced during the legislative session that would have adversely impacted existing exemptions, they were defeated.  New exemptions have been added for a business that is subject to and in compliance with the federal HIPAA requirements and affiliates of such businesses.

    Practice Point:  There continues to be an exemption from the Maryland Personal Information Protection Act for businesses subject to and in compliance with Section 501(b) of the federal Gramm-Leach-Bliley Act and various identified federal guidelines and guidance (e.g., depository financial institutions) and their affiliates, as well as businesses in compliance with requirements established by a primary or functional federal or Maryland regulator.

    Financial Records Requested by the Department of Human Resources
    SB671 / HB752 (Chapters 202
     and 203)
    (effective October 1, 2017)

    This law requires the Department of Human Resources to request financial records from a fiduciary institution (e.g., banks, savings and loans, credit unions) doing business in Maryland if an applicant for long-term care Medicaid benefits has been unable to obtain those financial records and the records are necessary to establish the applicant’s eligibility for Medicaid benefits.  This change is intended to eliminate barriers to Medicaid eligibility determinations.

    Practice Point:  Maryland’s Confidential Financial Records Act already allows fiduciary institutions to disclose financial records to the Department of Human Resources in order to verify an individual’s eligibility for public assistance.

    TAX SALES

    Tax Sales – Study
    HB659 / SB823 (Chapters 615
     and 616)
    (effective June 1, 2017)

    This law establishes a task force to study tax sales in Maryland.  The task force is required to evaluate and assess the impact of tax sales, evaluate how tax sales are conducted in each county, and evaluate tax sales to collect delinquent water charges and alternative methods of collecting delinquent water charges.  The task force also will consider and make recommendations for reform of the tax sale process in Maryland.  The task force is required to report its findings and recommendations to the Governor and General Assembly by December 1, 2017. 

    Tax Sales – Foreclosure of Right of Redemption – Naming of Defendants
    HB861 (Chapter 243
    )
    (effective October 1, 2017)

    This Act sets forth procedures for a tax sale foreclosure plaintiff to name a defendant when the plaintiff has reason to believe that the defendant is deceased.  If the plaintiff knows of the deceased defendant’s personal representative, the plaintiff must join the personal representative as a defendant to the tax sale foreclosure action. If the plaintiff does not know the deceased defendant’s personal representative, the plaintiff must file an affidavit to that effect and join the deceased defendant’s successors as a defendant, as well as the deceased defendant.  This Act should bring greater certainty to tax sale purchasers pursuing foreclosure.  By clarifying the procedures for naming defendants who may be deceased, tax sale purchasers should have greater assurance that due process will be afforded to defendants who are deceased or believed to be deceased, thereby preventing future challenges to the tax sale foreclosure.

    Prince George’s County – Tax Sales – Limited Auction and Foreclosure for Abandoned Property PG 411-17
    HB1573 (Chapter 819
    )
    (effective July 1, 2017)

    This Act provides procedures for a limited auction for tax sales in Prince George’s County.  The limited auction will occur prior to any public auction and will only be open to residents of Prince George’s County and certain Prince George’s County public employees (e.g., police department employees, federal government employees, veterans, and public school employees). The person who obtains the tax sale certificate at the limited auction cannot assign the certificate to another party.  A participant in the limited auction can only bid in his or her individual capacity.  On the one hand, this law will impair the ability of non-residents of Prince George’s County to participate in Prince George’s County tax sale auctions. On the other hand, individuals who reside in Prince George’s County should recognize that they now have a distinct advantage in local tax sales.