Bulletin: MD2011005

September 19, 2011
All Maryland Issuing Offices
2011 Legislation Affecting Real Property Transactions in Maryland

Dear Associates:    

This Bulletin provides an update on legislation passed by the Maryland General Assembly in the 2010/2011 legislative session related to real property. Particular attention should be noted as to legislation with an asterisk (*).

*HB 72 - Budget Reconciliation and Financing Act of 2011 - Recording Fees

STATUS: PASSED - Effective July 1, 2011 - July 1, 2015

Increases the real estate recording surcharge fee from $20 to $40 for each recordable document. The fee for recording a land record is increased for fiscal 2012 through 2014 to $40, with the proceeds supporting the Real Property Records Improvement Fund.

NOTE: Please be sure to accurately calculate your recording fees for documents that fall within this category. The surcharge is assessed against every instrument recorded in the land records and financing statement records, other than: Powers of Attorney; Requests for Notice of (Foreclosure) Sale; Plats; Homeowners' Association Disclosures. 

*HB 247 - Maryland General and Limited Power of Attorney Act - Modifications

Establishing that provisions of law relating to durable powers of attorney apply to all powers of attorney; altering the authority of an agent under specified statutory form powers of attorney; providing that specified powers shall be deemed to be included in specified forms; defining "property" and "stocks and bonds"; altering the definition of "statutory form power of attorney"; etc.

Note: This bill takes effect June 1, 2011, and applies retroactively as to some aspects. You should continue to use the statutory power of attorney form approved with the 2010 Legislative Bulletin.  

HB 521/SB 328 - Estates and Trusts - Transfers - Recordation and Transfer Taxes

STATUS: PASSED - Effective July 1, 2011

Clarifies that transfer and recordation taxes may not be imposed on a mortgage or deed of trust that is transferred as part of an estate or trust to a beneficiary or a trust as long as there was no consideration. This legislation seeks to provide a more uniform treatment of estate and trust property because some counties imposed transfer and recordation taxes on the mortgage or deed of trust when property was transferred as part of the management of the estate or trust.   

HB 1245 - Recordation Tax and State Transfer Tax - Exemptions

STATUS: PASSED - Effective July 1, 2011

Expands the class of intra-family real property transfers that are exempt from recordation and transfer taxes to grandparents or step-grandparents. 

NOTE: There is certain preferred language that should be utilized on deeds in this category: A deed for transfers between relatives when property is transferred to the  transferor's son, daughter, parent, son-in-law, daughter-in-law, parent-in-law, grandchild, or grandparent (also the 'step' variety of all of the preceding) should include the wording: " This deed transfers an interest in real property between relatives (please state relationship) subject to an existing mortgage or deed of trust for which the unpaid principal balance is being assumed and is not taxable.  There is no other consideration and there is no refinance transaction at or near the time of this transfer." 

HB 102 - Financial Institutions - Mortgage Loan Originators - Prohibited Acts

STATUS: PASSED - Effective October 1, 2011

Prohibits a mortgage loan originator from making a payment, threat, or promise in order to improperly influence the independent judgment of a real estate appraiser.  However, HB 102 would still permit a mortgage loan originator to request the appraiser to: consider additional information; provide further substantiation of the appraiser's conclusions; and correct errors. Payment may also be withheld if the appraisal is subject to a legal or administrative action. 

HB 128 - Consumer Law - Maryland Consumer Protection Act - Scope

STATUS: PASSED - Effective October 1, 2011

Expands the scope of the Maryland Consumer Protection Act by altering the definition of consumer to include an individual who sells or offers for sale to a merchant certain consumer goods or consumer realty and expands the definition of a merchant to include a person who directly or indirectly purchases any consumer goods or consumer realty and whose business includes paying off consumer debt in connection with the purchase. 

HB 358 - Office of the Commissioner of Financial Regulation - The Banking Board:

Extinguishes the DLLR's Banking Board and merges its functions into the Office of the Commissioner of Financial Regulation. 

SB645/HB867 - Baltimore City - Sale Of Property To Enforce Lien For Water and Sewer Service:  The bill takes effect July 1, 2011.

City cannot sell property solely to enforce unpaid water/sewer charges unless the lien is more than $350 and the charges are at least three quarters in arrears.

SB 513 - (passed) Maryland Estate Tax - Payment Deferral for Qualified Agricultural Property - Extension of Payment Deferral:

Authorizes the Comptroller to grant an extension of the deferred estate tax payment period allowed for qualified agricultural property. To qualify for an extension, the recipient must have a pending application to place the land on which the deferred estate tax is due under a permanent land conservation easement with the Maryland Agricultural Land Preservation Foundation, the Rural Legacy Board, or a similar easement purchase program.

HB 1022 - Commercial Law - Debt Settlement Services

Among other things - exempts "a title insurer, title insurance agency or abstract company" (when engaged in regular course of business) from the Maryland Debt Settlement Services Act.

The bill takes effect October 1, 2011, and terminates June 30, 2015. 


HB 379/SB 334 - Real Property - Deposits on New Homes - Escrow Accounts

STATUS: PASSED - Effective July 1, 2011

Clarifies that a builder must open an escrow account prior to construction of a new residential unit, and must maintain the money in the account until the home is completed.  Clarifies that money deposited in an escrow account to pay a construction draw schedule may be released in accordance with the draw schedule. The bill addresses ambiguities in current law due to a recent court case. [See Maryland Court of Special Appeals case Coleman v. State of Maryland (No. 1559, filed December 28, 2010)] 

HB 509 - Real Property - Mortgages - Enforcement

STATUS: PASSED - Effective April 12, 2011

Authorizes the Commissioner of Financial Regulation to enforce the foreclosure and mortgage fraud laws in Maryland. Clarifies that the Commission may use certain investigative authority as well as compel violators of the law to make restitution to victims and allows a homeowner to sue for damages without having exhausted administrative remedies. Specifically addressing violations of the Protection of Homeowners in Foreclosure Act and Maryland Mortgage Fraud Protection Act. 

HB 944 - Financial Institutions - Mortgage Lenders and Mortgage Loan Originators

STATUS: PASSED - Effective October 1, 2011

Requires a person who is exempt from State Mortgage Licensing requirements to register with the Nationwide Mortgage Licensing System and Registry (NMLS) if the person employs a licensed mortgage loan originator. This change conforms state law to new requirements in the federal Secure and Fair Enforcement for Mortgage Licensing Act (SAFE ACT). 

HB 1038 - Commercial Law - Residential Mortgage Loans - Escrow Amounts

STATUS: PASSED - Effective October 1, 2011

Prohibits a lender from charging interest for up to one year on the amount of additional escrow money a lender requires a borrower to pay after establishment of the original escrow. 

HB 1041/SB 256 - Business Regulation - Definition of Homebuilder

STATUS: PASSED - Effective October 1, 2011

Requires developers to register as a homebuilder if the developer enters into contracts with consumers to provide or construct homes. 

HB 630 - Building Standards - High Performance Homes:

Requires the Department of Housing and Community Development (DHCD) to encourage the construction of new residential structures that are high-performance homes. A high-performance home is a new residential structure that meets or exceeds the current Silver rating of the International Code Council's 700 national Green Building Standards or the Silver rating of the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design) for Homes Rating System.  Effective March 1, 2012, House Bill 972 (passed)  authorizes DHCD to adopt by regulation the International Green Construction Code. 

HB 1049 - Real Estate Brokers - Intracompany Agents

STATUS: PASSED - Effective October 1, 2011

Authorizes a broker to appoint another licensee in the office to designate the intracompany agents working for the same real estate team. The designee appointed by the broker may not be a member of that real estate team. Prior to this change, the broker of record was the only licensee authorized to designate the intracompany agents for real estate teams. 

HB 1109 - Real Property - Rescission of Sales Contracts - Return of Deposits

STATUS: PASSED - Effective October 1, 2011

Clarifies that brokers must follow the current rules under §17-505 of the Business Occupations and Professions Article for returning deposit money when state law permits a buyer to rescind a contract of sale.  In order to return deposit money, §17-505 requires: an agreement of the parties; an interpleader action; or a determination by the broker of who should receive the money and notification to the parties of the decision. This process must be followed even if the property is subject to a condo, HOA or Coop regime.  

HB 1181/SB 658 - State Commission of Real Estate Appraisers and Home Inspectors - Special Fund and Registration and Regulation of Real Estate Appraisal Management Companies

STATUS: PASSED - Effective July 1, 2011

Requires Appraisal Management Companies (AMCs) to register with the State Commission of Real Estate Appraisers and Home Inspectors.  Institutes standards that the AMCs must meet when working with appraisers. Vendor management companies operating in Maryland must now apply for and hold a registration with the State.  


HB 679 - Real Property - Condominiums - Amendment to Bylaws to Require Unit

Insurance Coverage

STATUS: PASSED - Effective October 1, 2011

Authorizes condominiums to amend their bylaws by a simple majority (51%) of the council of unit owners in order to require unit owners to maintain individual homeowner insurance policies. 

*HB 1246/SB 946 - Condominiums and Homeowner Associations -Priority of Liens

STATUS: PASSED - Effective October 1, 2011

In a foreclosure, allows condo/HOA to create a priority lien over a claim of the holder of a first mortgage/deed of trust (exempts loans held by governmental agencies) recorded after 10/1/11. The lien shall consist solely of not more that 4 months of unpaid regular assessments and may not exceed $1200. Act also includes a statutory form for use in filing notice of lien in the land records. The priority lien cannot include special assessments, attorney fees, late charges, interest and other charges beyond the normal assessment. If a lender requests specific information regarding the priority lien, the condo or HOA association must provide that information within 30 days of filing the lien statement in the land records. *The bill applies prospectively to any first mortgage or first deed of trust on a condominium unit or a lot in an HOA that is recorded on or after October 1, 2011. 


HB 57/SB 539 - Environment - Bay Restoration Fund - Authorized Uses

STATUS: PASSED - Effective October 1, 2011

Authorizes money from the Bay Restoration Fund grants to be used to pay some of the cost of connecting properties to sewer. Currently, the grant money may only be used to pay for septic system upgrades, but this bill allows grants for a sewer connection in instances when a septic upgrade would be more expensive or not feasible.


HB 653/SB 457 - Lawyers - Bar Admission Requirement - Exception for Rent Escrow Proceedings

STATUS: PASSED - Effective October 1, 2011

Allows non-attorneys to represent landlords or tenants in rent escrow cases. Occasionally, property managers representing owners in court on a summary ejectment proceeding find themselves also engaged in a rent escrow action. 

HB 670/SB 620 - Real Property - Retaliatory Actions - Landlords and Mobile Home Park Owners

STATUS: PASSED - Effective October 1, 2011

Establishes a different standard for a tenant to prove a retaliatory action by a landlord. Under the current law, a tenant can only prove a retaliatory action if the "sole" reason for the action was to target the tenant. 

HB 842/SB 516 - Foreclosed Residential Property - Tenants - Collection of rent Payments - Prior Notice

STATUS: PASSED - Effective July 1, 2011

Prohibits a foreclosure purchaser from collecting rent from bona fide tenant in possession of residential property until purchaser conducts a reasonable inquiry and serves notice on each bona fide tenant. 

HB 1033/SB 840 - Environment - Reducing Lead Risk in Housing - Risk Reduction Standards

STATUS: PASSED - Effective January 1, 2012

Requires that landlords subject to the Maryland Lead Poisoning Prevention Program (LPPP) use a dust test when verifying whether a property is in compliance with the program. The current law allows a landlord to conduct either a lead dust test or perform certain risk reduction acts. 


HB 463 - Property Tax - Semiannual Payment Schedule - Business Property

STATUS: PASSED - Effective to tax years starting after June 30, 2012

Expands the number of businesses that may pay property taxes under a semi-annual schedule. Defines "Business Property" as real property that has been assigned a commercial use code by DAT and total state/county/municipal/special district property taxes do not exceed $100,000. Such property shall qualify for semi-annual property tax payments. This shall apply to all tax years beginning after 6/30/12. 

HB 601 - Sustainable Communities Tax Credit Program - Eligibility

STATUS: PASSED - Effective July 1, 2011

Clarifies that the Sustainable Communities Tax Credit may be used for commercial properties that have already begun rehabilitation work if the rehabilitation work had already been approved under the Federal Historic Tax Credit. 

SB 169 - Bankruptcy - Homestead Exemption - Debtor's Residence

Altering a homestead exemption that an individual may claim in a specified bankruptcy proceeding; clarifying that the exemption for an individual debtor's aggregate interest in owner-occupied real property includes a condominium unit; and authorizing an individual debtor to exempt the debtor's aggregate interest in a cooperative housing corporation that owns property that the owner occupies as a residence.


SB 191 - Real Property - Obliterating, Damaging, or Removing Property Markers - Penalty Increase

Increasing from $500 to $2,500 the penalty for willfully obliterating, damaging, or removing any stake, marker, monument, or other landmark set in the property of another person by any civil engineer, surveyor, or real estate appraiser or any of their assistants except under specified circumstances.


*SB 205 - Real Property - Residential Property Foreclosure Procedures - Accuracy of Notice of Intent to Foreclose

Requires Order to Docket/Complaint to Foreclose on residential property to contain (if applicable) the license number of the mortgage originator and lender; an affidavit stating date on which default occurred; nature of default and that a notice was sent to mortgagor and that the contents of the notice were accurate at time it was sent. The act states that it is only to be construed prospectively and may not be applied to any docket/complaint to foreclose filed before 7/1/11. 

HB 62 - Financial Institutions - Mortgage Loan Originators - Prohibited Acts

Prohibiting a person subject to regulation as a mortgage loan originator from making a payment, threat, or promise for the purpose of influencing another person to violate specified federal or State law or professional standards in connection with a mortgage loan or loan application; prohibiting a specified person from making a payment, threat, or promise to an appraiser of residential real estate in order to influence the independent judgment of the appraiser, and from engaging in specified other acts and practices etc.


HB 437 - Real Property - Sales of New Homes - Minimum Visitability Features

Requires a home builder at time of offering new homes in a subdivision for sale to offer minimum "visitability" features as an option - accompanied by drawing/photograph. 

NOTE: Applies to any subdivision that receives preliminary approval on or after 10/1/12.


HB 728 - Residential Property - Foreclosure - Required Documents - Timing Of Mediation

This bill became effective on June 1st and makes certain changes in the documentation required for notification of the intent to foreclose owner-occupied residential property as well as adjustments to the foreclosure mediation process. The law provides that the order to docket and the complaint to foreclose forms that are currently being used may continue to be used until the Commissioner of Financial Regulation replaces them through the adoption of new forms in regulation.

The changes in the time periods in the foreclosure mediation process became effective on June 1st. The homeowner now has 25 days, instead of 15 days, after delivery or mailing of the final loss mitigation affidavit to file with the court a completed request for foreclosure mediation. The time for filing with the court the report of the Office of Administrative Hearings regarding the outcome of the mediation has been extended from 5 days to 7 days after the mediation is held.

SB 450 - Real Property - Residential Property Foreclosure Procedures - Lost Note Affidavit

Prohibits a court from accepting a "lost note affidavit" in lieu of a copy of the debt instrument unless the affidavit: 

1. Identifies the owner of the debt instrument and states from whom and the date on which the owner acquired ownership;

2. States why a copy of the debt cannot be procured and 

3. Describes the good faith efforts made to produce a copy of the debt instrument 

NOTE: this act shall only be construed prospectively and may not have any effect on an order to Docket/Notice of Complaint to foreclose on residential property filed before 7/1/11.

The bill takes effect July 1, 2011. 

SB595/HB1151 - Corporations and Associations - Name Requirements for Benefit Corporations and Limited Liability Companies - Election to Be a Benefit Limited Liability Company:

Mandates procedures for establishing a Benefit LLC or for converting a LLC to a Benefit LLC. Benefit corporations incorporate under states' current corporate statutes and are subject to private-sector tax laws. Unlike traditional C or S corporations, benefit corporations must include a public benefit or social commitment in their corporate charter and corporate governing documents. Reference to the fact that a corporation is a benefit corporation must appear prominently at the head of the benefit corporation's charter document, each subsequent charter document, and all outstanding stock certificates. A benefit corporation may also identify and include one or more specific public benefits in its charter. 

HB 637 - Maryland Limited Liability Company Revision Act of 2011

Effective June 1, 2011, an important revision to the Maryland Limited Liability Company Act (the "Act") took effect that may have major implications for the use of limited liability companies ("LLCs") in structured finance transactions by the business and legal community.


Establishing the policy of specified provisions of law relating to limited liability companies; providing that a provision of law that may be changed by an operating agreement may also be changed by the terms of the articles of organization; providing that a certificate representing the interest of a member may be issued in bearer form only under specified circumstances; establishing that rights and conditions with regard to a limited liability company will be enforceable to a specified extent etc. 

SB 431 - Baltimore County - Tax Sales - Notification

Eliminating a requirement that in Baltimore County the collector post a statement and notice on a property before the property is advertised for sale at a tax sale; eliminating a fee related to tax sales; including among the allowable expenses relating to specified tax sales in Baltimore County a fee that may be established by the County Executive and subject to review by the County Council of Baltimore County for legal services, administrative costs, and mailing expenses, to be paid into the general fund of Baltimore County etc.
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