Baltimore City Mandates Real Estate Contract Provisions
This article identifies issues that must be addressed in an agreement of sale for real estate located within Baltimore City.
Accepting that real estate is one of the most heavily regulated industries, there are federal, state, and local government requirements of language that must be contained within an agreement for the sale for real property, and in particular in a contract involving residential property. This article addresses only the two requirements imposed by Baltimore City:
Baltimore City Zoning Code, Section 2-503, et seq., requires that “every person who, for a monetary consideration, sells or conveys an interest in or right to real property located in the City must: (1) obtain a transfer certificate …”
A transfer certificate is a document issued by the Zoning Administrator that, on application and payment of a $45 fee, states whether the property complies with the use and density regulations of the zoning district in which it is located.
Significantly, for a transaction involving an “agreement of sale” the seller must, within 15 days after the agreement is executed, provide a transfer certificate to the buyer. This requirement can not be waived.
The definition of agreement of sale in the subtitle is broad and includes even a lease with an option to purchase. If the transaction does not involve such an agreement of sale, a transfer certificate must be attached to the deed or other instrument of conveyance at or before settlement.
There are exceptions, from the requirement for a transfer certificate, for real property being used as a single or 2 family dwelling and owned by and used as a church.
There are no government penalties for failing to comply with this City Zoning Code provision, however, if a seller does not provide a transfer certificate the seller “is conclusively presumed to have represented and warranted that the property involved in the transaction is being used in compliance” with the zoning regulations. Such a representation and warranty is punitive and may put a seller at disadvantage.
Tenant’s Right of First Refusal
Baltimore City Code, Article 13, Section 6-1, et seq., provides that “[b]efore a voluntary transfer of title to a single-family rental residential property may occur, the tenant of that property shall have the right of first refusal to purchase the property.”
The Code sets out the mechanics implementing this social engineering policy in great detail and the seller of rental residential property should carefully review the nine page law.
In general, prior to the transfer of title to a single-family residential rental property, a written offer of sale, must be sent to the tenant, via first class mail, receipt return, with a copy to the Department of Housing and Community Development. The offer must include the offered sales price, the required conditions (including, a date of settlement in not less than 60 days, a deposit not to exceed 7% of the price, a reasonable financing contingency, etc.), and not be inconsistent with this law. The tenant has 30 days from the date of mailing to exercise his right of first refusal. A tenant may not waive his right to receive an offer of sale, but he may waive the stipulated time periods.
If the owner enters into a contract of sale with anyone other than the tenant prior to mailing an offer of sale (as described above) or the expiration of the 30 day period, That contract must state that it is “contingent on compliance” with the tenant’s right of first refusal, and the notice of the contract must be mailed to the tenant and the tenant has 30 days to contract with the owner in lieu of the 3rd party. If the 3rd party contract is for the sale of 2 or more properties, the owner must still offer the individual property to a tenant, but may seek a 1.75% premium over the severed price.
The subtitle lists a series of transfers that are exempt from the tenant’s right, including most transfers between family members and, significantly, any sale in which the property is listed for sale with a bona fide third party real estate broker, when the tenant is notified in writing within 48 hours after the listing of the property, in accordance with the notice in Section 6-7(11).
In any transfer of property subject to this subtitle to anyone other than a tenant, the seller “shall file in the land records of Baltimore City an affidavit [incorporating one of the following four statements] … certifying that the requirements of this subtitle have been met, as a part of the deed conveyance.”
1. Where the property not occupied by tenant within 6 months of transfer: “The property known as (street address) in Baltimore City has not been occupied by a tenant since (date).”
2. Where the property has been occupied by a tenant within 6 months of transfer, but the tenant cannot be contacted or has not responded to the offer of sale: “The property known as (street address) had been let to (name of last tenant), as a single family residence, and an offer of sale as required by Section 6-4(a) of Article 13 of the Baltimore City Code was sent on (date of mailing) to (last known address), being the last address known to me (us) of the aforenamed tenant, and I (we) have received no response to said offer of sale.”
3. Where the tenant has responded to the notice: “(Name of tenant), being the tenant of the property known as (street address) in Baltimore City, following an offer of sale as required by Section 6-4(a) of Article 13 of the Baltimore City Code, sent (date of mailing), has failed to enter into a contract to purchase said property in the manner and time provided by Subtitle 6 Article 13 of the Baltimore City Code.”
And add if applicable: “Notice pursuant to Section 6-4(b) of Article 13 of the Baltimore City Code was subsequently sent to said tenant on (date of mailing), and the tenant subsequently failed to contract to purchase the property in lieu of (name of third party) within the period of time provided by said Section 6-4(b), that period being ____ days.”
4. Where the tenant has waived the right of first refusal: “(Name of tenant), being the tenant of the property known as (street address) in Baltimore City, following an offer of sale as required by Section 6-4(a) of Article 13 of the Baltimore City Code, sent (date of mailing), has executed a waiver of the right of first refusal in a manner consistent with Section 6-6(c) of Article 13 of the Baltimore City Code.”
Where a property is owned by a corporation, the Code provides the affidavit shall be made by the president and the secretary. No similar prescript exists for other form of business entity.
The penalty, in addition to any penalty for making a false affidavit, for not complying with this provision of the Code is a misdemeanor and subject to a fine of up to $500.
This compilation is only of the two matters mandated to be included within an agreement of sale and does not include other Baltimore City mandates for owners of real estate. Beyond these mandates, the Baltimore City Code regulates: the practices of real estate brokers (Article 2, Sec. 13-1); the advertisement for sale of single family dwellings (Article 2, Sec. 14-1); the registration of rental properties (Article 13, Sec. 14-1); the licensing of multiple family dwellings (Article 13, Sec. 5-1); the language contained within residential leases (Article 13, Sec. 7-1); and, landlord and tenant law, generally (PLL, Sec. 9-1).
Beyond the scope of this compilation of Baltimore City requirements, be aware there are federal notices on the thickness of insulation in a new house, federal and state lead paint disclosures and warnings, state disclaimers or disclosures with respect to the condition of a property, state forest conservation notices, and a host of other provisions that may be required to be contained within a particular contract of sale for real estate or the parties risk that the contract may be voidable or worse.
Also beyond the matters described in this article, most other local governments within Maryland impose requirements on sellers of real estate, including mandates to incorporate specific language within an agreement of sale. In fact, the article Checklist of Required Real Estate Contract Provisions in Baltimore County, Maryland is among the most popular articles on this firm’s website.
This article simply identifies two issues that should be considered by a seller or purchaser of real estate in Baltimore City in advance of consulting with an attorney about a final form of contract.
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