The Renters’ Rights Stabilization Act of 2024 went into effect on October 1, 2024, with the goal of protecting Maryland renters who are experiencing housing instability. While the Act intends to protect Maryland tenants, it also impacts landlords and developers managing residential and commercial properties. These consequences have sparked criticism and concern that the Act will create an unfriendly market for property owners. Will the statute counter efforts to increase the supply of affordable housing for the renters it’s intended to serve?
Key Provisions of the Act
The key provisions of the Renters’ Rights Stabilization Act of 2024 and areas affected include:
- Tenant’s Right of First Refusal (Residential)
- Surcharge for Landlord-Tenant Cases (Residential & Commercial)
- Security Deposits (Residential)
- Warrants of Restitution (Residential & Commercial)
- Office of Tenant and Landlord Affairs & Tenants’ Bill of Rights (Residential)
Tenant’s Right of First Refusal under the Renters’ Rights Stabilization Act of 2024
The Renters’ Rights and Stabilization Act grants a right of first refusal to tenants of residential rental properties that contain 3 or fewer individual dwelling units. This means that owners of such property are now required to give tenants the opportunity to purchase the rental property before selling to outside parties. The tenants who have an opportunity to purchase must have lived in the property for at least six months and be on the lease. This right cannot be waived in advance.
The Act does not mandate a right of first refusal in all circumstances. Excluded are situations involving residential rental properties with 4 or more individual dwelling units, transfers of title to a business entity wholly owned by the owner, transfers by a fiduciary, transfers of title in lieu of foreclosure of a mortgage/deed of trust, and family transfers, among other cases. Nevertheless, the requirement will be detrimental to the value and marketability of residential property, as owners will only be able to negotiate with other buyers after each tenant declines to exercise his/her right. This is the first statewide right of first refusal. (DC has a very complicated Tenant Opportunity to Purchase Act which typically applies to larger properties such as four unit buildings. Single family properties are exempt under many circumstances.)
Under the Renters’ Rights Stabilization Act of 2024, covered tenants have the right to make an offer to purchase the property from the seller before the seller can offer the property on the open market to a third party. If the owner of a non-exempt property intends to sell the property to a third party, the owner must first offer the property to the tenants and give them the opportunity to make a good faith offer to purchase before it can be offered to a third party or listed with a realtor.
The owner may not offer the property or list it during this thirty day exclusive negotiation period until the tenants decide not to make an offer or the tenant and landlord are unable to reach an agreement on price, terms and conditions. If the tenant makes an offer to the landlord which does not match the landlord’s terms, then the landlord has 5 days to make a counter proposal. The tenant then has 5 additional days to accept the offer or reject it.
Even after this period expires, the landlord is not home free. If the price that the landlord agrees to sell to a third party is at least 10% less than the last offer made to the tenant, then the tenant has the right to match that contract price with the third party and the landlord must sell to the tenant. If no tenant agrees to match the price within 30 days, then the right of first refusal is terminated and the landlord is able to sell to the third party.
If more than one tenant offers to purchase the property, then the landlord may choose the best offer. The landlord is also not required to sell the property to a tenant at a below market price.
This seems like a recipe for disaster. I encourage any landlords to be careful going forward in selling any properties that have a tenant in place. Documentation will be essential in order to avoid a fine of $1000 per violation.
Other Relevant Provisions of the Renters’ Rights and Stabilization Act
Surcharge for Landlord-Tenant Cases (Residential & Commercial)
The Renters’ Rights and Stabilization Act significantly increases the maximum surcharge for certain landlord-tenant cases filed in District Court.
Security Deposits (Residential)
The Renters’ Rights and Stabilization Act limits the maximum security deposit a residential landlord may impose to 1 month’s rent, except under specific circumstances. This 1-month time period is a change from previous law, which permitted a landlord to impose a security deposit of up to 2 months’ rent.
Warrants of Restitution (Residential & Commercial)
The Renters’ Rights and Stabilization Act increases the time period a landlord (residential or commercial) is required to wait between receiving a judgment of possession in its favor and executing a warrant of restitution against a tenant from 4 to 7 days.
The Act also now requires (rather than permits) administrative judges to stay the execution of warrants of restitution for residential properties in cases of extreme weather, including winter storms, hurricanes, and excessive cold and heat warnings.
Although seemingly minor, these changes will still affect the ability of landlords and property owners to address problematic tenancies efficiently, carry out essential property maintenance and enhancements, and collect rental income and reimbursements.
Office of Tenant and Landlord Affairs & Tenants’ Bill of Rights (Residential)
The Renters’ Rights and Stabilization Act creates an Office of Tenant and Landlord Affairs within the Maryland Department of Housing and Community Development, which will develop a Maryland Tenants’ Bill of Rights. The most current copy of the Bill of Rights will now be required to be included as part of all residential leases. However, the Tenant Bill of Rights has not been written yet. It is expected to be produced by January 1, 2025.
Click here for the full text of the Renters’ Rights and Stabilization Act of 2024.
Other Landlord Provisions in Montgomery County MD
Montgomery County already has the Montgomery County Lease Summary that is attached to leases. It presents the key terms of the attached lease and summarizes tenant rights and responsibilities under the Montgomery County laws and as described in the lease.. In addition, Montgomery County provides that tenants may request that the landlord install window guards on any windows not on the ground floor. In addition to the lead registration requirements, landlords are also required to test for radon in any rental property that is on the ground floor or second floor. While condos being offered for sale are not required to provide an up to date radon test, condos being offered for rent must provide results of a recent radon test.
Next Steps After the Implementation of the Renters’ Rights and Stabilization Act
If all these regulations fill you with horror as a landlord, let’s talk. I can help you navigate through the process of offering the property to a tenant (before it is listed and offered to the general public.) You can reach me at 240-401-557 or email me at lise@lisehowe.com
Sometimes being a landlord is not all that it is cracked up to be.