Relating to Real Estate

Below are summaries of laws affecting real property that were passed by the Maryland General Assembly in 2018.  These have been arranged by Article of the Maryland Code in the following order:  Real Property, Commercial Law, Corporations and Associations, Estates and Trusts, Tax - General, and Tax-Property, and then local legislation.

 

The full text of each of the bills referred to below as well as the other bills signed into law (totaling 855), and of the 3,101 bills that were introduced this year, can be found on the Maryland General Assembly’s website at: http://mgaleg.maryland.gov. 

 

Some of these bill summaries are based on the Fiscal and Policy Notes for individual bills and from the “90 Day Report,” provided courtesy of the Maryland Department of Legislative Services. The full text of the “90 Day Report” can be found on the Maryland General Assembly’s website at: http://mgaleg.maryland.gov/Pubs/LegisLegal/2018rs-90-day-report.pdf.

 

If you would like to discuss these new laws or to find out how they will affect you, please contact any of the lawyers in Gordon Feinblatt’s Real Estate Practice Group:

 

Timothy D. A. Chriss (410) 576-4237
Edward J. Levin, Chair (410) 576-1900
Christopher T. Magette (410) 576-4191
Searle E. Mitnick (410) 576-4107
Peter B. Rosenwald, II (410) 576-4193
Danielle S. Zoller (410) 576-4036

If you are interested in legislation affecting financial service providers, please see 2018 Maryland Laws Update published by Gordon Feinblatt’s Financial Services Group.

 

This act requires that the owner of a mobile home park, within five days after entering into a contract of sale, do the following: (a) provide notice of the sale to each resident in the mobile home park (by hand delivery or certified mail, return receipt requested) and to the Department of Housing and Community Development and (b) post notice of the sale in a public area of the mobile home park.  The act also requires an owner of a mobile home park to provide notice of any proposed rent increase to a tenant under a rental agreement that has a term of at least one year that is offered for renewal for a term of at least one year, no later than 60 days before the expiration of the existing lease agreement.  The act applies only to leases signed after the effective date.
Effective July 1, 2018.
 

2. Chapter 332 (HB 669)

Real Property - Homeowners Associations - Number of Declarant Votes
 
Real Property Article adding Section 11B–111.7.

This act provides that notwithstanding any other law or the provisions of a homeowners association’s governing documents, the person who subjects property to a declaration (the declarant) has the number of votes equal to the number of lots that have been subdivided and recorded but not yet sold when voting homeowners association matters, until the time all lots in a homeowners association have been subdivided and recorded.

Effective July 1, 2018.
 

3. Chapter 345 (HB 575)

Condominiums - Suspension of Use of Common Elements
 
Real Property Articleadding Section 11–103(d) and repealing and reenacting, with amendments, Section 11–103(c)(1).

 

In Elvaton Towne Condominium Regime II, Inc. v. Rose, 453 Md. 684 (2017), the Court of Appeals held that a condominium association may restrict a unit owner from access to a condominium property for failure to be current on assessments, but only if the condominium declaration permits that remedy.  This act permits a condominium declaration to provide for the suspension of use of parking or recreational facility common elements by a unit owner who is more than 60 days delinquent in payment of an assessment.  This act also provides certain procedures that must be followed to effectuate a suspension of rights, including the affirmative vote of at least 60% of the total eligible voters of the condominium.
Effective October 1, 2018.
 

This act specifies that any provision of a condominium document, such as a declaration or bylaw, or a contract for the initial sale of a residential condominium unit, created by a developer or vendor in accordance with the Maryland Condominium Act, is unenforceable if it contains certain limitations on pursuing the developer for building defects and other claims.

This act applies only from and after its effective date and is not to be interpreted to have any effect on any provision of a declaration or bylaws of a condominium recorded in the land records before the effective date or any other instrument executed before the effective date.
Effective October 1, 2018.

5. Chapters 348 and 349 (SB 222 – HB 78)

Foreclosed Property Registry - Updated Information - Notice to Local Governments
 
Real Property Articlerepealing and reenacting, with amendments Section 14–126.1.
 
Under Real Property Article §14-126.1 the Department of Labor, Licensing, and Regulation (DLLR) has established the Foreclosed Property Registry (FPR), and foreclosure property purchasers are required to submit information to the FPR within 30 days after a foreclosure sale of residential property.  This act specified changes to the initial registration filing that must be made within 21 business days after the purchaser becomes aware of an applicable change.  The purchaser’s additional reporting obligation under this act is only triggered by changes to any of the following:  the name and address of a person authorized to accept service for the purchaser, whether the property is vacant, and whether the purchaser has possession of the property.
Effective January 1, 2019.
 

6. Chapters 423 and 424 (SB 578 - HB 633)

Secretary of State – Address Confidentiality Programs – Shielding of Real Property Records
 

 

This act enables victims of domestic abuse who are participants in an address confidentiality program to request the shielding of their addresses in the public land records.  The act also requires any person to accept a substitute address of a participant in one these programs as the participant’s address.  Further, the act prohibits anyone from knowingly and intentionally seeking and obtaining the actual address or telephone number of a participant in an address confidentiality program.
 
With respect to title examination, on receiving a request containing certain information, the Secretary of State may authorize the disclosure of shielded real property records for the purpose of performing a bona fide title examination.

All state and local agencies and clerks in conjunction with the Administrative Office of the Courts are required to establish uniform procedures in connection with maintaining records and for recording deeds and other instruments to comply with this act.

The Secretary of State is to adopt regulations to implement this act.
Effective January 1, 2019.
 

 

Under current law interested persons may request access to a private burial site over another person’s private property.  These acts provide a request form for such a request and provide that the owner of private property must grant the interested person access to a burial site if the form is used.

These acts also provide that an owner of a burial site or the land encompassing a burial site that has been in existence for more than 50 years and in which the majority of persons interred in the burial site have been interred for more than 50 years must consult with the Maryland Historical Trust about the proper treatment of markers, human remains, and the environment surrounding the burial site. 

In addition, these acts authorize the granting of a local property tax credit for improvement to real property that substantiates, demarcates, commemorates, or celebrates a burial ground.

Effective June 1, 2018. The tax credit provisions are applicable to all taxable years beginning after June 30, 2018.

This act requires a landlord of a building that contains one or two residential dwelling units, who requires a tenant to make payments for water or sewer utility services directly to the landlord as opposed to the utility service provider, to (a) use a written lease that provides notice that the tenant is responsible for making payments for water or sewer utility services to the landlord, and (b) provide a copy of the water or sewer bill to the tenant.  However, this act does not apply if a tenant is required under the lease to pay water or sewer bills directly to the utility service provider.
Effective October 1, 2018.
 

 

This act establishes uniform procedures for the electronic recording of real property records in the State of Maryland.  It defines terms, establishes requirements for electronic documents and signatures, and authorizes the Maryland State Department of Assessments and Taxation (the “SDAT”) or a county to accept specified electronic payments.  This act also authorizes the Administrative Office of the Courts to establish standards for processing and recording documents.  This act provides that e-recorded documents are treated on an equal basis with paper documents that are recorded.  Of particular interest, this act authorizes the use of electronic signatures, including for notary and acknowledgment purposes, on instruments that are electronically recorded in the land records. This act will apply retroactively when it goes into effect on October 1, 2018.

Although authorized in 2007, the first land records e-recording pilot program in Maryland (which was in Baltimore County) was not officially established until October 2014.  And it was not until the beginning of 2016 that the Court of Appeals of Maryland authorized Land Record E-Recording Programs to expand to every circuit court in the State of Maryland.  At the beginning of 2018, 13 counties were participating in e-recording, with the remaining counties and Baltimore City expected to join by the end of this year. 
Effective October 1, 2018.

10. Chapter 550 (SB 226)

Real Property - Wrongful Detainer and Distress Actions - Trial by Jury
 
Real Property Articlerepealing and reenacting, with amendments Sections 8–302, 8–601, and 14–132.
 
An action of distress for rent is a District Court (small claims) suit to collect unpaid rent. A wrongful detainer action, which also must be filed in the District Court, is a suit against a party holding possession of real property without the right to do so. This act clarifies that any party to a wrongful detainer suit or distress for rent action is authorized to demand a jury trial, provided that the amount in controversy exceeds $15,000.00 and other relevant requirements are met.
Effective October 1, 2018

 

A number of documents recorded in the land records contain provisions that restrict ownership of property based on race, religious belief, or national origin.  This act defines these provisions as “unlawfully restrictive covenants.”  Even though the United States Supreme Court has held that unlawfully restrictive covenants are unenforceable as violative of the Fourteenth Amendment to the United States Constitution, some people, including the Rodgers Forge Community Association, have wanted to take action to have unlawfully restrictive covenants “removed” from the land records.  (Of course, the land records are permanent records, so nothing can really be removed from them.)

This act adds a new §3-112 to the Real Property Article (“RP”), which provides that a person who owns property subject to an unlawfully restrictive covenant, or a non-profit that is required to enforce neighborhood covenants, if the covenants include an unlawfully restrictive covenant, may record a “restrictive covenant modification.”  A “restrictive covenant modification” is a complete copy of the document that contains unlawfully restrictive covenants with the language of the unlawfully restrictive covenant stricken.  When presented for recording it must be accompanied by a signed land instrument intake sheet that refers to the original document.  After the restrictive covenant modification and intake sheet are presented to the clerk of court, the clerk must submit them to the county attorney for review and approval.  This act provides that once a restrictive covenant modification is recorded and indexed, the only restrictions that apply to the property based on the original document are those in the restrictive covenant modification and those recorded after the recording of the original instrument.

This act also amends RP §11B-113.3 to provide that by September 30, 2019, the governing body of a homeowners association shall delete any unlawfully restrictive covenant that is part of a uniform general scheme or plan of development from the common area deeds or other declarations of property in the development.  This may be done without the otherwise requisite approval of lot owners by recording with the clerk of the court an amendment to the common area deeds or other declarations.  The amendment must include the recorded covenant or restriction and must provide for the deletion of the offensive recorded covenant.  Further, beginning on October 1, 2019, any lot owner may request the governing body of a homeowners association to delete an unlawfully restrictive covenant from common area deeds or other declarations affecting property in the development, and the governing body of a homeowners association shall, within 180 days, record an amendment in accordance with other provisions of this act. 

A restrictive covenant modification may be recorded in the land records without charge by the clerk until September 30, 2019.
Effective October 1, 2018.

12. Chapters 645 and 646 (SB 1102 – HB 1329)

Landlord and Tenant - Action for Repossession of Nonresidential Property - Service of Process
 
Real Property Articlerepealing and reenacting, with amendments Section 8–401(b)(5).
 
Currently, repossession of leased premises can be accomplished by posting the property, but a money judgment for unpaid rent requires personal service.  These acts authorize the use of private process service, rather than only service by a sheriff, for repossession of the premises and recovery of unpaid rent in commercial lease cases.  Needless to say, use of private process service can speed the process and increase the chances that both proceedings can be completed on a single court date.  This makes statewide a procedure that is now applicable only in Wicomico County.
Effective October 1, 2018.
 

Business Regulation Articlerepealing and reenacting, with amendments Section 4.5–603.
 
These acts require that prior to executing a contract for an initial sale of a new home, home builders that construct 11 or more new homes in a development must provide written information to purchasers about energy-efficient options available for installation before construction is completed.  The written information must also include a statement that tax credits may be available in connection with the energy-efficient options.  These acts also require that applicable contracts contain an acknowledgment regarding delivery to the purchaser of the written information about energy-efficient options and tax credits. 
Effective October 1, 2018.
 

14. Chapter 720 (SB 659)

Corporations - Transfer of Assets and Exchange of Shares of Stock
 

 

Under current law, a transfer of all, or substantially all, of the assets of a Maryland corporation is regarded as so important that it is accomplished by approval of articles of transfer by the corporation’s stockholders and filing of the articles with the SDAT.  Even if real property is involved, a deed is not used to effect the transfer.  This is not the case for a corporation organized anywhere but Maryland or for a transfer by any type of entity other than a corporation.  This act changes this law so that transfers of real property by Maryland corporations, even if the transaction involves all or substantially all of the corporation’s assets, are evidenced by deeds.  In addition, the new law dispenses with the need for stockholder approval where the selling corporation will be dissolved in connection with the transaction. 

This act also limits Real Property Article §14-113 so that it only applies to deeds that are effective before October 1, 2018.  That section provides that if a Maryland corporation includes a certification in a deed that states that the sale does not constitute a transfer of all or substantially all of the grantor’s assets, the deed is valid and effective, even if the provisions of the law regarding transfer of assets were not followed.  Of course, with the enactment of this act, those provisions will not be applicable on or after October 1, 2018.
Effective October 1, 2018.

15. Chapter 778 (HB 239)

Prince George’s County - Sales of Residential Real Property - Community Amenities - Advertising PG 412-18
 
Real Property Articlerepealing and reenacting, with amendments Section 10–710.
 
This act requires a home builder in Prince George’s County to make available to prospective purchasers a copy of any recreational facilities agreement (RFA) recorded with the Prince George’s County Planning Department.  Prince George’s County home builders must display in the sales or management office of the community development (a) the amenities listed in any RFA, (b) a detailed site plan and the building permit number of each amenity listed in the RFA, and (c) the expected completion dates of each amenity as stated in the RFA.

This act applies only to amenities relating to RFAs that are recorded with the Prince George’s County Planning Department on or after the effective date.
Effective October 1, 2018. 

16. Chapter 787 (HB 1257)

Residential Leases - Lease Option Agreements - Required Statements
 
Real Property Article repealing and reenacting, with amendments Section 8–202. 
 
Current law requires that in a “lease option agreement,” which gives a tenant a right to purchase improved residential property, there must be a sentence that states in capital letters, “THIS IS NOT A CONTRACT TO BUY.”  This act further requires that a lease option agreement signed after its effective date must include, in capital letters and near the tenant’s signature line, a specified statement that the landlord-tenant provisions of the Real Property Article are applicable to it.
Effective July 1, 2018.

COMMERCIAL LAW ARTICLE
 

 

This act authorizes a lending institution that makes a loan secured by a first mortgage or first deed of trust on the borrower’s residential real property to create an escrow account in connection with that loan solely for the payment of water and sewer facilities assessments (including front foot assessments), if requested by the borrower.  A “water and sewer facilities assessment” is defined as a fee or charge assessed on an owner of residential real property that is: (a) served by public water or wastewater facilities for which deferred water or sewer charges have been established by a recorded covenant or declaration to cover or defray the cost of installing or maintaining during construction all or part of the public water or wastewater facilities constructed by the developer; and (b) paid to the lienholder of the lien recorded on the residential real property for public water and wastewater facilities. The term includes a front foot benefit fee or charge. In addition, loan servicers must make timely payment of water and sewer facilities assessments if the borrower has paid into escrow an amount sufficient to pay the assessment due and the servicer has the assessment bill.  Failure to make the required timely payment is an unfair or deceptive trade practice under the Maryland Consumer Protection Act (MCPA) and is subject to MCPA’s civil and criminal penalty provisions.
Effective October 1, 2018.

 

Under existing Maryland law, a residential mortgage broker normally is permitted to charge a fee (called a “finder’s fee”) of 8 percent of the amount of the loans.  However, the same broker arranging for a mortgage loan with respect to the same property more than once within a 24-month period may charge fees based only on the amount a subsequent loan is in excess of the initial loan amount.  These acts retain a 24-month restriction on broker fees, but determine the permissible fee based on combining the broker fees charged in the initial loan transaction plus any other broker fees collected on a loan secured by the same property during the 24-month period.  Based on this determination, the total permitted broker fee on all loans on the same property within 24-months may be 8% of the initial loan amount.
Effective October 1, 2018.

CORPORATIONS AND ASSOCIATIONS ARTICLE
 

 

This act changes the provision that a Maryland corporation have “at least” one resident agent to a requirement that a Maryland corporation have a single resident agent.  This act provides that if the resident agent resigns, the resignation will become effective when it is filed with the SDAT if the corporation has appointed a successor resident agent, or if no successor has been appointed, 10 days after the resignation is filed with SDAT.  The changes are also applicable to resident agents of foreign corporations, limited liability partnerships, limited partnerships, and statutory trusts.
Effective October 1, 2018.

ESTATES AND TRUSTS ARTICLE
 

 

These acts clarify that a “no consideration” transfer from a revocable trust to a beneficiary as a result of the death of the settlor of the trust is exempt from state and local recordation and transfer taxes.  For the purpose of the bill, the word “consideration” does not include the amount of any obligation under a mortgage or deed of trust encumbering the transferred property.  These acts are not applicable to statutory trusts or real estate investment trusts.
Effective July 1, 2018.

TAX-GENERAL
 

21. Chapter 303 (HB 43)

Income Tax – Subtraction – Perpetual Conservation Easements Modification
 

 

Under current Maryland law, for purposes of calculating Maryland adjusted gross income, an individual taxpayer may subtract from the taxpayer’s federal adjusted gross income the first $100,000 of compensation received by the taxpayer during the taxable year in exchange for the sale of a perpetual conservation easement on Maryland real property.  This act reduces the possible subtraction to $50,000.
Effective July 1, 2018 for tax years beginning after December 31, 2017.

TAX - PROPERTY ARTICLE
 

 

These acts provide that tax collectors outside of Baltimore City have the option to withhold from tax sale any residential property when the total unpaid taxes on the property, including interest and penalties, amount to less than $750. (In Baltimore City the collector must withhold from sale owner-occupied residential property when the total taxes on the property, including interest and penalties, amount to less than $750.)  These acts also require that the tax collectors provide information regarding housing counseling resources, in addition to the existing notices of tax sale sent by the collector to property owners. 
Effective October 1, 2018.

 

This act requires the SDAT to identify homeowners who may be eligible for the homestead property tax credit but have failed to apply for the tax credit. The SDAT must include a separate insert with each assessment notice that it sends to such homeowners informing them that they may be eligible for the homestead property tax credit and advising them how they may apply for the credit.
Effective October 1, 2018.

 

Under §6-102(e) of the Tax-Property Article (“TP”), the leasehold interest (or other interest that gives a person a right to use property) of a person in business property that is owned by the federal, state, or local government or agency is subject to property tax.  However, under current TP §10-403(a), the owner of that property is not liable for the property tax.  If the tax is not paid, no lien attaches to the property or the interest of the fee owner of the property, but the leasehold owner is personally liable.  These acts add an exception to this rule:  If property taxes are not paid, a lien does attach to the leasehold (or other) interest in property that is within (a) a specified development property, (b) a special taxing district, or (c) a community development authority in Frederick County.
Effective October 1, 2018.
 

 

This act extends to the entire state several tax sale provisions that are now only applicable in Baltimore City. This act provides that a tax collector may release liens for unpaid taxes to facilitate the transfer of certain vacant property, provided that the purchaser can demonstrate an ability to return the property to productive use and that the purchaser is paying fair market value for the property. This act also authorizes tax collectors to sell abandoned property for less than the total taxes due on the property, and for tax sale purchasers of such abandoned property to pursue expedited foreclosure of the right of redemption.  Further, this act provides that tax collectors may hold back from tax sale properties that have been designated for redevelopment purposes.  Because under this act tax collectors may sell abandoned properties at a discount, there may be an opportunity for investment.
Effective October 1, 2018.

26. Chapter 594 (SB 999) 

Recordation Tax - Exemptions
 

 

This act expands some exemptions from recordation and transfer taxes.  It broadens the refinance exemption from recordation tax by expanding the definition of “original mortgagor” in “TP” §12-108(g) to include a person that has received property from the original mortgagor under a deed that was exempt from the recordation tax, under specified circumstances. The circumstances are the transfer of the property to a related business entity or to a new limited liability company that is a successor to the transferor and whose membership mirrors that of the transferor. The act alters the definition of “business entity” in TP §12-108(p) to include a limited partnership or statutory trust so that certain transfers between these entities and certain of their affiliates will be exempt from the recordation tax. This act also alters an exemption from recordation tax under TP §12-117 for specified transfers of a controlling interest in certain entities that own real property. 

Note that the Maryland statutory scheme includes corresponding exemptions from the transfer tax for these exemptions from the recordation tax.
Effective July 1, 2018.
 

 

This act repeals the requirement that the SDAT value all real property based on a physical inspection of the real property. Instead, the SDAT is only required to value real property based on a physical inspection of a property if: (a) the value of improvements to the property is being initially established; (b) the value of substantially completed improvements is being established; (c) the property is the subject of a recent sale and the inspection is deemed necessary by SDAT for purposes of market analysis; (d) the property owner requests a physical inspection as part of an active appeal; (e) the SDAT is notified by a county finance officer that a substantially completed improvement has been made that adds at least $1 million in value to the property; or (f) the SDAT determines that a physical inspection is appropriate.
Effective June 1, 2018.

 

Under existing law owner-occupied residential properties in Baltimore City may be sold at tax sale solely to enforce a lien for unpaid water and sewer charges if the charges are at least $750.  This act prohibits the sale of a residential property (not just owner-occupied residential property) in Baltimore City if the taxes consist only of a lien for unpaid water and sewer charges.  However, the residential property may be sold to enforce a lien for unpaid water and sewer charges if another lien is also being enforced by the sale of the property. 
Effective October 1, 2018 and terminates December 31, 2019.

 

This act requires the SDAT to mail to each individual who acquires residential real property and who indicates in the land records that the property will be that individual’s principal residence, a notice stating that the individual may be eligible for the homestead property tax credit. The notice must be sent within a reasonable amount of time after the acquisition of the property and must contain information on how to apply for the tax credit. The SDAT must ensure that the information that it provides is accurate and up to date.
Effective July 1, 2018.

LOCAL LEGISLATION
 

 

This act adds Howard County public school teachers to the list of county employees who are eligible for a county transfer tax exemption for a first time home purchase in Howard County and a reduced transfer tax rate for subsequent home purchases in Howard County.
Effective July 1, 2018.
 

 

These acts clarify and expand provisions of landlord-tenant law applicable in Baltimore City related to the offenses of false representation and unlawful eviction. These acts provide that a landlord may not intentionally interrupt, terminate, or diminish any utility service provided to the tenant (including, but not limited to water, heat, light, electricity, gas, elevator, or similar services) to which the tenant may be entitled under the tenancy. Also, a landlord may not (a) remove furnishings, cooking facilities, appliances, or similar items to which the tenant may be entitled; (b) prevent the tenant from gaining access to the property by changing the locks and failing to provide the tenant with new keys; (c) remove outside doors or windows; or (d) remove the tenant’s personal property, furnishings, or any other items.
Effective October 1, 2018.