During the 1999 General Assembly session, the legislature enacted House Bill 605, resulting in a series of changes, revisions, and clarifications to Maryland state law governing landlords and tenants. While as of the time of preparation of this memorandum, the legislation has not yet been signed into law by the Governor, it is expected that these changes will become law effective on October 1, 1999.

Alterations will be required to many lease forms to enable landlords to avail themselves of some of the new provisions, and modifications to business practices will be required to take advantage of other changes.

This memorandum contains a summary of the provisions of House Bill 605:

Security Deposits

Under current law, landlords are required to deposit residential security deposits into a bank or savings institution located in Maryland, and to pay four percent simple interest on security deposits. Landlords are also required to notify the tenant within 30 days after the end of the tenancy the amount the landlord intends to withhold, and the actual costs incurred to repair damages. If the landlord fails to give such notice, the landlord forfeits the right to withhold any security deposit (although the deposit is not required to be returned until 45 days after the end of the tenancy). Current law also does not define “leased premises” which creates some confusion as to what damages may be assessed against a security deposit and many judges do not permit the security deposit to be applied to damage to other than the leased premises, that is, not for damage to the common elements, appliances, etc. Additionally, landlords are required to provide a tenant with a statutory receipt for a security deposit.

The new bill authorizes landlords to hold security deposits in a broader range of insured financial instruments including certificates of deposit and Federal and State securities. The bill also authorizes a landlord to use a security deposit to recover damages caused by tenants, their guests and invitees, to more than the leased premises, that is the common areas, appliances, furnishings, etc. The new law also clarifies the technical ambiguity that defined a security deposit as given by a tenant to a landlord when such deposits are usually given before the landlord-tenant relationship exists. The bill also: creates a separate Code section specifying the required contents of security deposit receipts; requires the landlord to retain a copy of the receipt for two years after the termination of the tenancy; and makes the landlord liable to the tenant for $25 if the landlord fails to provide a written receipt for the security deposit.

Protective Orders

Under current law, when disputes over nonpayment of rent arise, a tenant may request a trial by jury if the dollar amount in dispute exceeds the jurisdictional threshold for trial by jury. The case must then be transferred to the Circuit Court because the District Court does not have jurisdiction to hold a jury trial.

The delay caused by the request may cause the landlord to request for the District Court to enter an order requiring future rents to be paid into the registry of the Circuit Court. Because the tenant could occupy the leased premises for several months before the case goes to the Circuit Court, the protective order is designed to ensure that the funds are available to be disbursed in accordance with the court’s final order. If rent is not paid into the registry the tenant loses the right to a jury trial, but still has the right to a trial. As a result of these delays a landlord may lose substantial amount of rent if the tenant is found to have failed to pay without justification. Also, under the current law in failure to pay rent cases, the District Court is required to order the rent to be paid to the clerk of the Circuit Court or the administrative agency of the county empowered by local law to hold rent in escrow.

The new law allows rent to accrue up to the court date in nonpayment of rent cases and eliminates the need for a landlord to file a separate law suit for each month the rent is paid late. The bill authorizes the District Court to order that rent be paid directly to the landlord instead of the court if the landlord and tenant agree or at the discretion of the court, and the bill specifies when the payments of rent under a protective order commence. The new law clarifies that acceptance of rent by a landlord does not constitute a waiver of the basis of the landlord’s claim. The bill adds a new section which contains provisions equivalent to those that govern protective orders in nonpayment of rent cases, and creates a separate section to cover protective orders in wrongful detainer cases.

Lease Option Agreements

Under current law, leases may contain option agreements. These agreements give the tenant the right to buy the property that is subject to the lease. The landlord is required to provide certain information to the tenant who has entered into a residential lease option agreement. If a lease option agreement is defective, the lease and the lease option agreement are void. The voided option and lease affects both parties regardless which party provided the defective agreement or the desire of that party to continue the agreement and/or the lease.

The new law authorizes a residential lease option to be a separate document from the lease and requires it to contain specified information, including language clarifying that it is not a contract to buy. The bill offers less than complete protection for a landlord in that it authorizes the party that did not draft the lease option agreement to void the lease and/or the lease option agreement if the lease option agreement is defective by not containing the required disclosure language.

Receipt For Rent

Except for Anne Arundel County, a landlord is only required to provide a residential tenant with a receipt if the tenant makes payment in person other than by means of a check. As a result a landlord whose tenants pay by money order or who do not pay in person is not required to provide those tenants with a receipt. In Anne Arundel County, a landlord is required to provide a residential tenant who pays by any means except a check with a receipt showing payment and the time period which the payment covers. On violation, the landlord is required to forfeit the rent for the period in question!

The new bill requires all landlords to provide tenants with a receipt for rent if the tenant makes the payment in cash or requests a receipt. In addition to any other penalty, the bill makes the landlord liable to the tenant for $25 if the landlord does not provide the required receipt.

Written Leases

Under current law, written leases for residential property are optional. However, there are numerous provisions which are prohibited from inclusion in a written lease if the landlord owns more than four units in a jurisdiction, including a tenant’s ability to waive certain rights, late fees in excess of five percent of the rent due for the rental period for which the payment was late, and a shorter notice to quit the lease. Prohibited lease provisions are unenforceable by the landlord and a tenant is entitled to recover actual damages, including reasonable attorney’s fees, if the landlord attempts to enforce such a provision.

The new law requires landlords who own five or more rental units throughout the State to use a written lease that includes specified information (the condition of the premises, obligations as to utilities, etc.) and is prohibited from containing other specified information (confessed judgement, waiver of a remedy provided by law, etc.). House Bill 605 merges the existing provisions governing the content of a lease from into one section. It also adds a new prohibition on the eviction of a tenant as retaliation for taking action to organize other tenants and to negotiate collectively with the landlord.

Retaliatory Evictions

Currently, to be a retaliatory eviction, an action must be based solely on certain actions of the tenant. However, the Code specifically allows eviction on the basis of a notice to quit, breach of lease, nonpayment of rent, etc.

The new bill keeps “solely” in §8-208 but if the tenant can meet the high standard of proof in §8-208.1 that the landlords efforts are solely in response to the protected acts of the tenant, current law has been interpreted to prevent any eviction from being brought.

Failure To Pay Rent

Current law requires that each time the tenant fails to pay rent a landlord is required to file a new case in the District Court against the tenant. According to the Commission to Review Landlord-Tenant Laws, the courts do not generally permit an existing case to be amended to increase the amount due to the landlord. As a result, if a tenant fails to pay rent and the case is heard after the next month’s rent is due, the court is only authorized to consider the rent due from the month for which the case was filed, although additional rent may then be owed the landlord.

Significantly, the new bill authorizes a landlord, when seeking possession from a tenant for nonpayment of rent, to amend the filing to include all rent that is due as of the court date. The court may award all rent due, including rent accruing from the filing of the complaint, and including not more than one month’s late fees. Court costs may also be awarded to a landlord if the tenant was personally served with a summons or in certain other limited circumstances.

Wrongful Detainer

Under current law, wrongful detainer is procedurally governed by §8-402 (Tenant Holding Over) but is substantively governed by British common law, which is difficult to find and understand, according to the Commission to Review Landlord-Tenant Laws. Also according to the Commission, forcible entry and detainer is primarily used in cases where a non-tenant is in possession of property and occurs most frequently in instances of a foreclosure. It is a method by which persons entitled to possession are able to recover from non-tenants.

This new law creates a new Code section that governs wrongful detainer. The causes of action of forcible entry and detainer are found in British common law and are admittedly difficult to understand. The new section is created to modernize the law and clarify the distinctions between tenant holding over and a non-tenant in possession.

Jury Demands

It has been unclear how the District Court should handle jury demands, particularly in light of the process referring to civil rules that do not exist. Currently, a preliminary decision is made by the District Court before the case is transferred to the Circuit Court. Some confusion exists because District Court judges often interpret the process differently.

House Bill 605 specifies how the District Court is required to process jury demands including filing requirements, notification requirements, and review of demand. Also, and significantly, the new law makes clear that waiver of a trial by jury, in a lease, is effective except for residential leases occupied as a primary residence.

Be aware that this article is only a summary of key provisions of HB 605. This is not intended to be a comprehensive compilation of all laws that may impact the landlord tenant relationship.