The 71 day session of the Maryland General Assembly was for the first time since the Civil War cut short from the prescribed 90 days (.. of note, the legislature has met for 90 days since the predecessor, appointed not elected, General Assembly of Maryland was first called together in 1635 in St. Mary’s).
Despite the Coronavirus pandemic concern shortened session, the legislature acted on 1,664 House bills and 12 resolutions and 1,081 Senate bills and 6 resolutions with 667 bills passing both chambers before they adjourned sine die on March 18, 2020.
I have previously posted on this blog, Maryland Enacts New Environmental Laws in 2020 and posted on our sister blog, Maryland Enacts New Alcoholic Beverage Laws in 2020 and each of those describe more robust (.. and possibly more fun) legislative activity than is found below.
This is a compilation of the real estate legislation enacted this session and signed into law by the Governor.
Much can be gleaned about consumer weighted priorities from the ranks of Democrat lawmakers that control both houses of the legislature by those bills acted on. And real estate professionals might point to those things the legislature chose not to do, many necessary to modernize the real estate sector of the economy keeping Maryland competitive.
Given that real estate accounted for more than 25% of the gross state product (the state Gross Domestic Product) in Maryland last year and that more than 650,000 rent cases were filed in the Maryland courts in 2019, more than anything else the courts adjudicated, some have suggested the legislature might focus more of its efforts on real estate.
And arguably the new laws that were enacted were dwarfed, at least in the short and mid term by the impact on real estate of the federal Coronavirus Aid, Relief, and Economic Security Act, the Maryland Governor’s Executive Orders related to COVID-19, and the COVID-19 Administrative Orders of the Maryland Court of Appeals.
While unenforceable, covenants that restrict the ownership of real property based on race, religious belief, or national origin persist in the land records. House Bill 1077 (Ch. 421) permanently exempts from specified fees and surcharges the recordation of a covenant modification or an amendment to the common area deeds or other declarations of an HOA if the recordation is to modify or delete, in accordance with statutory provisions, a covenant or restriction that limits ownership based on these identifying characteristics. The Act also repeals a reference to an expired statutory deadline by which the governing body of an HOA was required to delete related recorded covenants or restrictions.
The General Assembly passed several bills relating to ground leases during the 2020 legislative session. Senate Bill 170/House Bill 241 (Chs. 124 and 125) prohibit a ground lease holder from bringing any suit, action, or proceeding against a current or former leasehold tenant to recover past due ground rent owed before the date that the current leasehold tenant acquired the interest in the residential property if the ground lease was not registered with SDAT prior to the current leasehold tenant acquiring title to the leasehold interest.
The redemption or extinguishment of the ground rent is effective to conclusively vest a fee simple title in the ground lease tenant when the ground lease tenant records the certificate in the county land records. The title is free and clear of any and all right, title, or interest of the ground lease holder, any lien of a creditor of the ground lease holder, and any person making claims in relation to the ground lease holder. Senate Bill 806/House Bill 1182 (Chs. 441 and 442) alter these provisions by establishing that the redemption or extinguishment of the ground rent is effective to conclusively divest the ground lease holder of the reversion, vest the reversion in the leasehold tenant, and eliminate all rights, titles, or interests to the property, as specified, when the leasehold tenant records the certificate of redemption or extinguishment in the land records of the county in which the property is located.
House Bill 149 (Ch. 82) repeals a requirement for a ground lease holder to promptly notify SDAT of a change in the name or address of a leasehold tenant and authorizes a leasehold tenant or an interested party to submit documentation of the redemption of a ground lease to SDAT if the ground lease was redeemed in a private transaction between the ground lease holder and the leasehold tenant and the ground lease holder failed to notify SDAT of the redemption, as required under current law. The documentation submitted to SDAT must include a certified copy of the ground lease redemption deed that has been filed in the land records of the appropriate county.
The current registration fee per ground lease holder is $10 for the first ground lease and $5 for each additional ground lease. House Bill 172 (Ch. 94) repeals the fee for the registration of a ground lease with SDAT, effective October 1, 2020.
Recordation of Instruments
A deed other than a mortgage, deed of trust, or an assignment or release of a mortgage or deed of trust may not be recorded unless it bears the certification of an attorney admitted to the Maryland Bar or a party named in the instrument, which states that the instrument was prepared by the attorney, under the supervision of the attorney, or by the party. Senate Bill 154/House Bill 1084 (Chs. 423 and 424) authorize the recordation of an assignment of rents or an assignment of leases for security purposes without this certification.
Senate Bill 291/House Bill 676 (Chs. 299 and 300) add all units of State government to the list of governmental entities that are exempt from paying a fee to record land records under § 3-603 of the Real Property Article unless the entity first gives its consent. Under current law, any entity that is exempt from paying recordation fees under § 3-603 is also exempt from paying to the clerk of a circuit court a surcharge on each recordable instrument that is recorded in the jurisdiction’s land records. Thus, the Acts also exempt any unit of State government from being required to pay these surcharges, which are deposited into the Circuit Court Real Property Records Improvement Fund.
Senate Bill 570 (Ch. 566) authorizes, but does not require, the recordation of a notice of a recorded easement, covenant, restriction, or condition that affects an interest in real property in the land records of the county in which the property interest is located. The recorded notice must contain specified information and must be indexed in a specified manner. Failure to record a notice in accordance with the Act does not impair the rights or interests of the holder of the easement, covenant, restriction, or condition or waive, release, or otherwise affect the obligations of any person holding a real property interest burdened by the easement, covenant, restriction, or condition. The bill might appear unnecessary on its face, but a similar provision already exists in law for environmental easements, but given that many easements exist in perpetuity, this allows an updating of the current contact information for beneficial and burdened interests.
Condominiums and HOAs
Senate Bill 175/House Bill 108 (Chs. 56 and 57) specify that the council of unit owners’ property insurance deductible is a common expense if the cause of damage to or destruction of the condominium originates from an event outside of the condominium units and common elements and increase, from $5,000 to $10,000, the maximum amount of the council of unit owners’ property insurance deductible for which a unit owner is responsible when the cause of any damage to or destruction of the common elements or units of a condominium originates from an event inside the owner’s unit. The Acts apply prospectively to all policies of property and casualty insurance issued, delivered, or renewed in the State to a condominium council of unit owners on or after October 1, 2020.
Senate Bill 472 (Ch. 559) requires a condominium association or an HOA to submit its annual adopted budget to the unit or lot owners within 30 days after the meeting at which the budget was adopted. The adopted annual budget may be submitted to the unit or lot owners by electronic transmission, posting on the entity’s homepage, or inclusion in the entity’s newsletter.
The bylaws of a condominium may be amended without the explicit agreement of the holder of a mortgage or deed of trust under certain circumstances. Senate Bill 293/House Bill 25 (Chs. 32 and 33) establish similar authority for amendments to the declaration of a condominium and the governing documents of an HOA. Under the Acts, if a declaration or a governing document contains a provision requiring any action on the part of a holder of a mortgage or deed of trust for a unit in a condominium or a lot in an HOA in order to amend the declaration or governing document, the council of unit owners of a condominium or the HOA must deliver a copy of the proposed amendment to each holder of a mortgage or deed of trust entitled to notice. If the holder of the mortgage or deed of trust fails to object, in writing, within 60 days after the date of actual receipt of the proposed amendment, the holder is deemed to have consented to the adoption of the amendment.
Real Estate Commission
Generally, an individual must be licensed by the State Real Estate Commission as a real estate broker, associate broker, or salesperson before the individual may provide real estate brokerage services in the State, subject to specified requirements for licensure and ongoing licensee behavior. The commission also administers a guaranty fund for the purpose of reimbursing persons for actual losses due to acts or omissions that occur in the provision of real estate brokerage services by licensees or unlicensed employees of licensed real estate brokers. Senate Bill 6 (Ch. 493) extends the termination date of the commission by 10 years – from July 1, 2022, until July 1, 2032.
Senate Bill 618 (Ch. 569) delays the requirement that certain annual tests on an elevator in a privately owned building be performed in the physical presence of a licensed third-party qualified elevator inspector. The Act delays the requirement from October 1, 2020, to October 1, 2021, for all elevators in privately owned buildings, except for direct-acting hydraulic elevators, which must comply beginning October 1, 2022. The Secretary of Labor must report to the Senate Finance Committee and the House Economic Matters Committee by January 1, 2021, and January 1, 2022, on the status of how elevator inspections are being conducted in accordance with the Act.
The Home Builder Guaranty Fund, administered by the Consumer Protection Division (CPD) of the Office of the Attorney General, allows consumers to seek compensation for actual losses resulting from an act or omission by a registered home builder who constructs a new home for a consumer. The fund is supported by fees collected by local governments from home builders upon application for a construction permit. Senate Bill 164/House Bill 116 (Chs. 58 and 59) increase, from $300,000 to $500,000, the maximum amount CPD may award from the Home Builder Guaranty Fund to all claimants for acts or omissions of one registered home builder before the registered home builder reimburses the fund.
The Maryland General Assembly will convene in regular session on Wednesday, January 13, 2021 at 12:00 p.m.
Thank you to the Maryland Department of Legislative Services for the information provided above.
And be assured I would like to be your lawyer in real estate matters. We are ready to help you.