2001 Legislation Affecting Real Property

In the 2001 session of the General Assembly of Maryland, several bills affecting real property and the real estate industry were enacted.  The effective date for each bill was October 1, 2001.

Releases of Mortgages and Deeds of Trust.  House Bill 632 imposes detailed requirements on lenders in connection with consumer or commercial loans of $75,000 or less secured by the borrower’s principal residence for delivery of releases upon repayment of the loan. Maryland Code, Real Property Article, §3-105.1.

Eviction of Tenant for Dangerous Behavior. House Bill 864 revises §8-402.1, Real Property Article, Maryland Code, by giving landlords the right to terminate a lease on 14 days notice of a breach if tenant fails to comply and the breach involves behavior by the tenant or a person allowed to be on the premises by the tenant that demonstrates a clear and imminent danger of serious harm to themselves, other tenants, the landlord or landlord’s property.  For other substantial breaches of a lease, a 30 day notice is required.

Brokers Disbursement of Earnest Money Deposits.  House Bill  83 provides a mechanism by which real estate brokers may distribute deposit monies for a failed transaction.  Under prior law, a real estate broker holding deposit money in connection with a contract of sale was required to hold the money in an escrow account until the transaction was completed or terminated or a release is signed by all parties.  If there was a dispute between the seller and buyer with respect to the distribution of deposit money where the transaction did not go through, the real estate broker was required to hold the money indefinitely until receiving written instructions signed by both seller and buyer directing the disbursement of the deposit money, or until receiveing a court order directing the disbursement of the deposit money.  In many cases, one or the other party refuses to sign written instructions and the deposit money must remain in escrow.  House Bill 83 provides a mechanism for alleviating this problem.  Where the seller and buyer do not complete a transaction, the real estate broker is permitted to notify both seller and buyer in writing that the broker intends to disburse the deposit monies to the person who, in the good faith judgment of the broker, is entitled to receive the deposit pursuant to the contract of sale.  The notice must advise the parties that either of them has the right to protest the proposed disbursement by sending a written protest to the broker within thirty (30) days from the date the notice was given.  If neither party protests the proposed disbursement, then the broker may disburse the deposit money in the manner set forth in the notice.  However, if either party protests the proposed disbursement, then the deposit money must remain in escrow until the broker receives written instructions signed by seller and buyer, or receives a court order.  The Bill also provides that the buyer and seller must authorize the broker to disburse the funds pursuant to the new procedure by a prior written agreement.  The agreement under which the broker is entrusted with the deposit funds (generally, the contract of sale) must contain a statement that the broker may distribute the trust money in accordance with the provisions of the Bill if the transaction is not completed.  Maryland Code, Business Occupations and Professions Article, §17-505.

Deposit of Earnest Money Deposits.   House Bill 460 requires brokers to deposit trust money in an escrow account “promptly, but not more than 7 business days” after acceptance of the contract of sale by seller and buyer.  Under prior law, the broker was required to deposit funds “promptly”, but the term “promptly” was not defined.  Maryland Code, Business Occupations and Professions Article, §17-502. 

Smoke Detectors.  House Bill 66 requires residential leases for properties which have alternating current (AC) electric service to include a disclosure in 10 point bold type which is set forth in Maryland Code, Article 38A, §12A (r) as follows:

“This residential dwelling unit contains alternating current (AC) electric service.  In the event of a power outage, an alternating current (AC) powered smoke detector will not provide an alarm.  Therefore, the occupants should obtain a dual powered smoke detector or a battery powered smoke detector.”

Under §10-702, Real Property Article, Maryland Code, a seller of residential property is required to give the buyer either a property condition Disclosure Statement, or a Disclaimer Statement, in the form prescribed by the Real Estate Commission of Maryland.  House Bill 66 amends §10-702 to require the Disclosure Statement to advise the buyer whether smoke detectors on the premises will provide an alarm in the event of a power outage. As a result, the Real Estate Commission prepared a revised Disclosure and Disclaimer Statement which must be used after September 30, 2001.   Since the buyer has rescission rights for 5 days after receipt of a completed Disclosure Statement containing all of the disclosures required by the new law, it is important to use the new Disclosure Statement.  If the old form is used, the buyer’s rescission rights will continue until settlement.

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