Maryland Laws Update for Financial Services

We are pleased to provide our clients and friends this review of 2020 Maryland laws affecting financial services providers. The new laws present challenges and opportunities for financial institutions. As always, Gordon Feinblatt's Financial Services Team is able to assist you with any questions. Please email or call us using the contact information found below.

Table of Topics

• BANKING

• CONSUMER PROTECTION

• CORPORATE/BUSINESS

• DEBT COLLECTION

• EMPLOYMENT

• ESTATES AND TRUSTS

• INSURANCE

• LICENSED ACTIVITIES

• NOTARY

• REAL PROPERTY

• REGULATORY

• TAXES

• VEHICLE

Contacts

Please call or email us if you would like more information about these new laws and their impact on your business.

Charles R. Bacharach, 410-576-4169
Andrew D. Bulgin, 410-576-4280
Douglas T. Coats, 410-576-4002
Lawrence D. Coppel, 410-576-4238
D. Robert Enten, 410-576-4114
Robert A. Gaumont, 410-576-4007
Ned T. Himmelrich, 410-576-4171
Laura L. Johnson, 410-576-4065
Christopher T. Magette, 410-576-4191
Bryan M. Mull, 410-576-4227
David S. Musgrave, 410-576-4194
Christopher R. Rahl, 410-576-4222
Peter B. Rosenwald, II, 410-576-4193

Maryland Laws Update

BANKING

Financial Institutions — State Banks, Trust Companies, and Savings Banks — Incorporators
SB 14 (Chapter 498)
(effective October 1, 2020)

This law changes the number and qualifications of the incorporators of Maryland commercial banks (i.e.¸ state banks and trust companies) and Maryland savings banks. Currently, there must be at least five incorporators of a Maryland commercial bank and at least 15 incorporators of a savings bank, and, in each case, all of them must be citizens of the State of Maryland. For both commercial banks and savings banks, this legislation will reduce the number of incorporators to three and will require only one of them to be a Maryland citizen. In addition, this law removes a statute that provides that a commercial bank’s stockholders are empowered to add up to two directors at any stockholders’ meeting. This statute has caused confusion in the past, as many banks and their advisors have historically interpreted this statute as prohibiting a bank’s board of directors from increasing the number of directorships, which is a power typically given to the board of directors in a corporation’s bylaws.

Financial Institutions — Commissioner of Financial Regulation — Banking Institution Powers
SB 15 (Chapter 499)
(effective October 1, 2020)

This law amends the statute that many refer to colloquially as the “wild card statute.” Under this statute, a Maryland banking institution may engage in any activity in which a national banking association is permitted to engage under federal law if, among other things, the Maryland banking institution seeks and obtains the consent to do so from Maryland’s Office of the Commissioner of Financial Regulation (OCFR). As amended, the statute changes the prior approval requirement to a prior notice requirement and will now permit the banking institution to engage in the activity 45 days after it provides that notice — and any other information that the OCFR requires — unless the OCFR specifies a different date or prohibits the activity.

CONSUMER PROTECTION

Consumer Protection — Mobile Home Purchasers
HB 93/SB 155 (Chapters 48/49)
(effective October 1, 2020)

This law stems from recommendations made by the Maryland Financial Consumer Protection Commission concerning mobile home financing. The law establishes that a mobile home retailer has a duty of good faith and fair dealing in providing information to consumers regarding financing for the purchase of a mobile home. The law also prohibits mobile home retailers from steering consumers to financing products that offer less favorable terms. A mobile home retailer must also provide certain disclosures (on a form prescribed by the Maryland’s Office of the Commissioner of Financial Regulation [OCFR]) to consumer borrowers regarding the retailer’s affiliation with a financing source, the borrower’s options to obtain financing from other sources, the borrower’s rights, and OCFR complaint procedures.

The law amends the definition of dwelling under the Maryland Mortgage Lender Law to include mobile homes and provides a uniform definition under state law for a mobile home. The law also clarifies that mobile home retailers are not considered “mortgage loan originators” if their compensation for mortgage loan origination activities does not exceed their compensation for a comparable cash transaction.

The law also increases the notice period for lenders seeking to repossess mobile homes from 10 days to 30 days. Lenders may avoid the 30-day notice requirement if the property is abandoned or voluntarily surrendered to the lender.

Practice Point: Under existing law, mobile homes were treated more like personal property rather than real property. This law aims to bring some of the protections afforded to mortgage consumers to mobile home consumer borrowers. Lenders and retailers dealing in mobile home financing should review their sales processes to ensure compliance with these changes.

Consumer Protection — Unfair, Abusive, or Deceptive Trade Practices — Exploitation of Vulnerable Adults
HB 304 (Chapter 160)
(effective October 1, 2020)

This law expands the penalties that apply to a person who uses deception, intimidation, or undue influence to deprive a vulnerable adult, or an individual who is at least 68 years old, of the vulnerable adult’s or individual’s property. In addition to the criminal penalties provided by law, the law provides that a person who is found to have engaged in such practices will be considered as having committed an unfair, abusive, or trade practice within the meaning of the Maryland Consumer Protection Act and is subject to the enforcement and penalty provisions of the act.

Practice Point: Businesses dealing with elderly customers or vulnerable adult populations should be mindful of the potential liability for claims of unfair, abusive, or deceptive trade practices.

Housing Opportunities Made Equal Act
HB 231/SB 530 (Chapters 116/117)
(effective October 1, 2020)

Known as the “HOME Act,” this law prohibits landlords and other persons involved in the residential housing market from taking certain actions based upon a person’s source of income, most notably, housing vouchers. Baltimore, Annapolis, and Frederick cities as well as Baltimore, Prince George’s, Montgomery, and Howard counties already have laws prohibiting housing discrimination based upon source of income. The HOME Act seeks to establish a uniform policy statewide.

The HOME Act prohibits discrimination in the renting or buying of residential property based on a person’s source of income, including refusing to sell or rent a dwelling; refusing to negotiate; making a dwelling unavailable; imposing discriminatory terms or conditions; discriminating in the provision of services or facilities; posting a notice purporting to limit applicants by income source; and falsely representing to a person that a dwelling is not available.

The HOME Act also prohibits a person engaging in residential real estate-related transactions from discriminating against a person because of the person’s source of income. The law does not, however, prohibit a person from determining the ability of a potential buyer or renter to pay (in a commercially reasonable manner) by verifying the applicant’s source and amount of income, or creditworthiness. The law also does not prohibit a person from determining the ability of a potential buyer to repay a mortgage loan in accordance with applicable law.

The law also prohibits a person from denying a person access to, or membership or participation in, a multiple-listing service, real estate brokers’ organization, or other similar service.

This law does not apply to rented rooms or apartments in the landlord’s principal residence (for dwellings with up to five rental units) if the source of income is housing vouchers. The bill does not limit the rights or remedies otherwise available to a landlord or tenant under any other law.

Practice Point:The HOME Act principally seeks to protect persons using housing vouchers. Landlords and residential real estate professionals should be mindful of the requirements of this law when dealing with persons using housing vouchers or other nontraditional sources of income.

CORPORATE/BUSINESS

Business Regulation — Trademarks, Service Marks, and Trade Names — Registration
SB 23 (Chapter 501)
(effective October 1, 2020)

This law expands the definition of “mark” to include a logo, slogan or tagline, program name, or brand name different from the business name. Currently, “mark” is defined narrowly to mean a name, symbol, word, or a combination of these. The law also prohibits a person from registering an individual’s name as a mark.

This law also updates the list of classifications of goods and services for the purpose of registering trademarks and service marks by repealing 15 goods classifications and establishing 15 new goods classifications and 25 new service classifications, including employment and employee benefits, hospitality and lodging, research and development, legal, and consulting.

The law also revises registration requirements by requiring an applicant for registration or renewal of a mark to submit three different specimens or reproductions of the mark as used.

The law also authorizes an officer of a party assigning a mark and its registration to submit the written assignment to the Maryland’s Office of the Secretary of State.

Corporations and Associations — Corporations and Real Estate Investment Trusts — Miscellaneous
HB 668/SB 496 (Chapters 292/293)
(effective October 1, 2020)

In addition to making some technical and clarifying changes, this law alters numerous provisions relating to:

• Various types of corporation filings with the Maryland State Department of Assessments and Taxation (SDAT) and their effective dates;
• Certain rights of inspection of specified stockholders;
• The process for determining whether indemnification of directors is proper;
• Various approvals by specified Maryland corporations registered as open-end companies;
• The contents of charters and bylaws of nonstock corporations; and
• The authority of real estate investment trusts.

Among the foregoing, there are two noteworthy changes. First, the General Assembly included a provision in the Maryland General Corporation Law (MGCL) that allows the articles of incorporation of a Maryland corporation to state a future effective date, up to 30 days after the articles are filed with SDAT. Second, this law revises the section of the MGCL that entitles stockholders holding at least 5% of the outstanding stock to inspect certain corporate records under specified conditions. Under the new law, unless the corporation’s charter provides otherwise, this inspection right is not available as a matter of law to holders of any shares of any class or series of stock, other than common stock, that is classified or reclassified by articles supplementary or created by articles of incorporation or by an amendment to the charter that are filed with SDAT on or after October 1, 2020.

Corporations and Associations — Limited Liability Companies and Partnerships — Series — Conversion
HB 983/SB 888 (Chapters 400/401)
(effective October 1, 2020)

This law amends the Maryland Limited Liability Company Act provisions dealing with the death or adjudication of incompetence of the last remaining member of a limited liability company (LLC). The law provides that the last remaining member’s personal representative or guardian will automatically become a member of the LLC upon the last remaining member’s death or adjudication of incompetence, unless, within 90 days after the personal representative or guardian first learns of the triggering event, the personal representative or guardian either renounces admission into the LLC, or designates a person, with such person’s written acceptance, to become the last remaining member of the LLC. The law also provides authority to the personal representative, guardian, or designee to wind up the LLC’s affairs, or to apply for a court order winding up the LLC’s affairs.

In addition, the law amends the registration requirement of a foreign LLC that is a series company by requiring the foreign LLC to disclose that it is a series company. The law repeals a requirement that the foreign LLC also disclose the name or other designation of each series of the LLC doing business in Maryland.

DEBT COLLECTION

Debt Collection — Exemptions from Attachment and Execution
HB 365/SB 425 (Chapters 183/184)
(effective October 1, 2020)

This law amends the amount that may be exempt from a wage attachment. Presently, an employee whose wages are attached by a judgment creditor may exempt from the attachment the greater of $145.00 per week times the number of weeks wages are due, or 75% of disposable wages due, plus any amount deducted for medical insurance. In Caroline, Kent, Queen Anne’s, and Worcester counties, the amount that may be exempted is the greater of 75% of disposable wages, or 30 times the federal minimum hourly wage, plus any amount deducted for medical insurance. Under the amendment, the amount that may be exempted, in all Maryland counties, will be the greater of 75% of disposable wages, or 30 times the Maryland minimum hourly wage, plus any amount deducted for a medical insurance payment.

Practice Point: The increase in the wage exemption will primarily benefit lower hourly wage employees in Maryland. As of January 1, 2020, the minimum hourly rate in Maryland is $11.00. The minimum will increase each year until it is $15.00 per hour in 2025 for employers with 15 or more employees.

EMPLOYMENT

Labor and Employment — Wage History and Wage Range
HB 123 (Chapter 67)
(effective October 1, 2020)

Maryland’s Equal Pay for Equal Work law, passed in 2016 to expand Maryland’s prohibitions against discriminatory pay practices, prohibits gender-based pay discrimination. Previously, the law applied only to employees and not job applicants. This amendment adds two components to the law:

• A requirement for employers to provide a wage range for a position to job applicants upon request, and
• A salary history ban.

Regarding the wage range element, the law now obligates an employer to provide an applicant, upon request, the wage range for the position for which the applicant applied. Employers may not retaliate against or refuse to interview, hire, or employ an applicant who does not provide a wage history or requests a wage range from the employer.

As for the salary history ban, the law also provides that an employer may not:

• Rely on an applicant’s wage history in screening or considering the applicant for employment or in determining the applicant’s wage; or
• Seek an applicant’s wage history either orally or in writing, or through an employee or agent or an applicant’s current or former employer.

Applicants may voluntarily share their wage history with an employer during the hiring process. After an employer makes an initial offer of employment, including a proposed level of compensation, the employer may:

• Rely on an applicant’s voluntarily provided wage history to support a wage offer higher than the initial wage offered; or
• Seek to confirm an applicant’s voluntarily provided wage history to support a wage offer higher than the initial wage offered.

However, an employer may only rely on voluntarily provided wage history if doing so does not create an unlawful pay differential based on sex or gender identity.

The Maryland Commissioner of Labor and Industry is empowered to enforce the law by issuing an order requiring compliance and by imposing prescribed civil penalties ranging from $300 to $600 per applicant based on the number of violations committed by the employer.

Practice Point: To ensure compliance with these new requirements, employers will need to create formal wage ranges for all positions. Employers should also review their application materials to be sure they do not require applicants to provide information about salary history. Also, managers, hiring personnel, and human resources employees must be trained on these new restrictions during the hiring process.

Equal Pay for Equal Work — Inquiring about Wages — Prohibition on Adverse Action
HB 14 (Chapter 25)
(effective October 1, 2020)

This law amends the Maryland Equal Pay for Equal Work Law by providing that an employer may not take any “adverse employment action” against an employee who inquires about the employee’s wages.

Practice Point: This amendment corrects a loophole that had only protected employees from retaliation for inquiring about the wages of other employees.

Labor and Employment — Economic Stabilization Act — Revisions
HB 1018/SB 780 (Chapters 406/407)
(effective October 1, 2020)

Maryland has joined about 20 states that mandate advance written notice to employees of certain workforce reductions. These state laws are known as “mini-WARN Acts,” a reference to the federal Worker Adjustment and Retraining Notification (WARN) Act.

Maryland’s mini-WARN law (formally known as the Economic Stabilization Act) previously contained only voluntary guidelines for employers faced with a reduction in operations. An employer’s failure to comply with the voluntary guidelines would not result in any penalties.

The new Maryland law applies to all employers with 50 or more employees, except employers that have been doing business in Maryland for less than one year. Covered employers conducting a reduction in force must provide at least 60 days’ advance written notice to affected employees and a host of other parties, including elected officials in the jurisdiction where the reduction is located.

A “reduction in operations” is defined as either:

• The shutting down of a workplace that reduces the number of employees by at least 25%, or 15 employees, whichever is greater, over any three-month period (not counting employees working less than 20 hours on average each week and those who have worked less than six months); or
• The relocation of part of an employer’s operation from one workplace to another existing or proposed site.

The employer’s written notice must contain specific information, including the name and address of the reduced workplace, contact information of supervisors for further information, a statement whether the reduction will be permanent or temporary, and when the expected reduction will begin.

Failure to abide by the new law may result in a civil penalty, as the Maryland Secretary of Labor may assess up to $10,000 per day for each day that an employer violations the statute.

Practice Point:Maryland employers must exercise additional caution when planning and implementing reductions in operations or workforce relocations that will take place on or after October 1, 2020. Employers with 50 or more employees must comply with the new Maryland mini-WARN law, and those with 100 or more employees must comply with the Maryland law and the federal WARN Act.

Labor and Employment — Use of Facial Recognition Services — Prohibition
HB 1202 (Chapter 446)
(effective date October 1, 2020)

This law prohibits an employer from using a facial recognition service for the purpose of creating a facial template during an applicant’s interview unless the applicant consents by signing a specified waiver.

Under the new law, an applicant may consent to the use of facial recognition service technology by signing a waiver that states the applicant’s name, the date of the interview, that the applicant consents to use of facial recognition during the interview, and that the applicant has read the consent wavier. While no specific penalty or fine is associated with a violation of this new measure, employers who fail to follow this new law could run afoul of discrimination in hiring laws, which could lead to a Charge of Discrimination in front of the U.S. Equal Employment Opportunity Commission or Maryland Commission on Civil Rights.

Practice Point: Maryland employers utilizing facial recognition technology as part of their hiring process need to create a consent waiver for its applicants and train its human resources and hiring professionals to ensure applicants sign the waiver prior to any interview utilizing the technology.

Discrimination — Definition of Race — Hair Texture and Hairstyles
HB 1444/ SB 531 (Chapters 473/474)
(effective October 1, 2020)

Maryland joined a growing number of states that have expanded their discrimination laws to cover discrimination based on hairstyles associated with race. The new law, known informally as the “Crown Act,” expands the definition of “race” to include “traits associated with race, including hair texture, afro hairstyles, and protective hairstyles” and defines a “protective hairstyle” as including “braids, twists, and locks.” The new law makes such hairstyles a protected characteristic under the state’s anti-discrimination law dealing with employment, public accommodations, and housing.

Practice Point:Employers also should be aware that hairstyles associated with an employee’s religious expression or national origin may enjoy protection under the anti-discrimination laws. Employers should ensure their managers and human resources employees are aware of this expansion of Maryland’s anti-discrimination law. 

ESTATES AND TRUSTS

Estates and Trusts — Closed Estates — Subsequent Discovery of Check
HB 543/SB 151 (Chapters 239/240)
(effective October 1, 2020)

This new law provides a procedure to enable the negotiation of checks not exceeding $1,000 that are payable to a decedent or the estate of a decedent that are discovered or received after an estate has been closed. If the eligible check  is discovered or received after the estate has been closed and the appointment of the personal representative has been terminated, an interested person may file a petition and the court may enter an order authorizing the interested person to endorse and deposit the check into the interested person’s bank account for the limited purpose of distributing the funds as set forth in the decedent’s will (or under the rules of distribution applicable to decedents who have died intestate). The new procedure does not require a hearing before the court can enter an appropriate order, and an interested person must distribute any funds deposited within 60 days after the date of the court order.

The new procedure is not available:

• If the estate was insolvent,
• If all inheritance taxes and estate administration fees are not paid as part of the request for the order, or
• If the amount of the check causes the size of the estate to exceed the small estate threshold.

Maryland Trust Act — Liability of Trustee — Report and Release by Interested Party
HB 904/SB 886 (Chapters 361/362)
(effective October 1, 2020)

The new law provides a procedure for a trustee of a trust to seek a release from liability from the interested parties of the trust upon the trust’s termination or upon the trustee’s removal or resignation, in accordance with the terms of the trust agreement or with the provisions of the Maryland Trust Act. The new law authorizes the trustee to send a certain report to each interested party of the trust and provides that, if an interested party does not submit a written objection within 120 days of the date the trustee mails the report, the interested party is deemed to have released the trustee from liability and consented to and ratified all actions of the trustee. If no interested party submits a written objection to the court within the 120-dayperiod, the new law authorizes the trustee to distribute the trust property to the appropriate successor.

Practice Point: A trustee may still prefer to request that interested parties sign a specific release, but this new law provides a mechanism for obtaining a release in circumstances where that is not possible or necessary.

Maryland Estate Tax — Portability
HB 219 (Chapter 111)
(effective June 1, 2020)

The new law provides that if a person files a Maryland Estate Tax Return solely for the purpose of making the election to port the deceased spouse’s unused exclusion amount for Maryland Estate Tax purposes, the person shall file the return within two years of the decedent’s death. The new law also authorizes the Maryland Comptroller to examine a Maryland Estate Tax Return of a predeceased spouse after the three-year statute of limitations has expired solely for the purposes of determining the validity of the deceased spousal unused exclusion election. The Comptroller may not assess additional tax after the expiration of the three-year statute of limitations has expired.

Practice Point: The new law brings into alignment the time to file a Maryland Estate Tax Return solely for portability purposes with the time to file a federal estate tax return solely for portability purposes.

Orphans’ Court — Appeals — Procedures
HB 247/SB 149 (Chapters 130/131)
(effective October 1, 2020)

The new law extends the time within which the register of wills must transmit all pleadings and orders of a proceeding to the circuit court from 30 days to 60 days after a party files a notice of appeal of a final judgement of the Orphans’ Court with the register of wills.

Practice Point:This new law is a practical change to give the register of wills sufficient time to transmit the pleadings and orders of a proceeding to the circuit court.

INSURANCE

Health Savings Accounts — Establishment and Application of Trust Law
HB 671/SB 507 (Chapters 616/617)
(emergency measure, effective upon enactment — May 8, 2020)

This new law authorizes the establishment of a health savings account (HSA) on the first day that an individual becomes covered under a high deductible health plan. The new law provides that an account deposit is not required to establish an HSA, and the account holder is generally not required to sign an account agreement as a condition of opening such an account (unless required by the HSA custodian/trustee). It is anticipated that the new law will make it easier for employees with high deductible health plans to establish HSAs.

Insurance — Third-Party Administrators — Term and Reinstatement of Registration
SB 96 (Chapter 522)
(effective October 1, 2020)

A third-party administrator (TPA) is a person who acts on behalf of an insurer or a plan sponsor. To act as a TPA, a person must register with the Maryland Insurance Administration (MIA) and meet other specified requirements. This law allows for the staggering of expiration dates for TPA registrations with MIA. Specifically, the legislation alters registration terms to expire two years after the date of issuance, rather than every other June 30. This law also authorizes a TPA to renew a lapsed registration within one year after the expiration date, rather than within three months; establishes a $100 reinstatement fee; and repeals the existing tiered reinstatement fee schedule.

LICENSED ACTIVITIES

Real Estate Appraisers and Real Estate Appraiser Trainees — Licenses and Certificates — Experience, Renewal, and Reinstatement Requirements
SB 117 (Chapter 531)
(effective October 1, 2020)

The new law reduces from 2,000 to 1,000 the number of hours of experience required as a real estate appraiser trainee under the supervision of a certified appraiser for an applicant to qualify for a real estate appraisal license for residential or general real estate appraisal. This law also reduces from 2,000 to 1,500 the number of hours of experience required as a real estate appraiser trainee under the supervision of a certified appraiser for an applicant to qualify for a certificate for residential or general real estate appraisal. The law also extends from two to three years the time period during which an individual who fails to renew a real estate appraisal license or a certificate of a real estate appraiser must apply for reinstatement.

NOTARY

Maryland Revised Uniform Law on Notarial Acts — Requirements for Appointment as a Notary Public — Alterations
SB 636 (Chapter 571)
(effective October 1, 2020)

This law delays the date — by one year, to October 1, 2021 — on or after which an initial or renewal applicant for appointment as a notary public in the state must meet the education and examination requirements established under Chapter 407 of 2019.

Practice Point: Chapter 407 of 2019, which takes effect October 1, 2020, updates several provisions of law governing notaries public and notarial acts. Among other things, the act alters requirements for appointment as a notary public, authorizes a notary to perform electronic notarization and remote notarization under specified conditions, specifies restrictions on allowable acts by a notary public, and authorizes the Maryland Secretary of State to adopt regulations to implement various provisions of the bill. The one-year delay is intended to provide the Secretary of State with additional time to prepare to implement the requirements of Chapter 407.

REAL PROPERTY

Real Property — Lien Priority of Refinance Mortgages — Exception for Government Junior Mortgages
HB 314 (Chapter 163)
(effective June 1, 2020)

Existing Maryland law provides that certain first mortgage loans may be refinanced without losing priority to a later recorded “junior” lien loan even without the consent of the junior lien lender. To qualify, the principal amount secured by the junior lien must not exceed $150,000, and the first mortgage loan must be refinanced at an interest rate less than its current interest rate and be in an amount no more than the unpaid principal amount of the first mortgage loan plus $5,000 (for closing costs). This new law provides that the existing refinance/priority provisions do not apply to a junior lien securing a loan made by a state or local government agency with a 0% interest rate. This new law applies prospectively only, to refinances that take place on or after the effective date.

Practice Pointer: Lenders will need to adjust their procedures to obtain consent from junior lien holders where the junior lien lender is a state or local government that has made a 0% interest loan.

Real Property — Notice of Easements, Covenants, Restrictions, and Conditions — Recordation
SB 570 (Chapter 566)
(effective October 1, 2020)

This new law provides that if an easement, covenant, restriction, or condition has been filed in the land records, a notice of the easement, covenant, restriction, or condition may be recorded in the land records of the county in which the property interest is located.

The law specifies information required to be provided in the notice with respect to:

• The holder of the easement, covenant, restriction, or condition;
• Any affected neighborhood association;
• A representation that the easement, covenant, restriction, or condition remains in effect;
• The original recording information of the easement, covenant, restriction, or condition; and
• The name of the owner of the property or leasehold estate of the property affected by the easement, covenant, restriction, or condition as of the date of the notice.

The law establishes the parties under which the notice will be indexed for recording. The law also makes clear that failure to record a notice does not impair the rights or interests of the holder of the easement, covenant, restriction, or condition or constitute a waiver or release of the property owner encumbered by the easement, covenant, restriction, or condition.

Condominiums and Homeowners Associations — Amendments to Declarations and Governing Documents
HB 25/SB 293 (Chapters 32/33)
(effective October 1, 2020)

This new law eases the process by which a council of unit holders or homeowners association can amend its governing documents where such amendment requires certain an action by the holder of a mortgage or deed of trust on a unit or lot.

Under the new law, a council of unit holders or homeowners association may deliver to the holder of the lien instrument a notice of the proposed amendment to the governing document. If the holder fails to respond to the notice within 60 days, the holder is deemed to consent to the amendment.

Notwithstanding the forgoing, the holder’s consent may not be presumed by a failure to respond to the 60-day notice if the amendment:

• Alters the priority of the holder’s lien,
• Materially impairs or affects the unit or lot as collateral, or
• Materially impairs or affects the rights of the holder to enforce its lien.

Real Property — Recordation of Deeds — Assignments of Rents and Assignments of Leases for Security Purposes
HB 1084/SB 0154 (Chapters 424/423)
(effective October 1, 2020)

This law authorizes an assignment of rents or an assignment of leases for security purposes that is prepared by any attorney or one of the parties named in the instrument to be recorded without certification, as specified.

Practice Point: Maryland law provides that a deed other than a mortgage, deed of trust, or an assignment or release of a mortgage or deed of trust may not be recorded unless the instrument bears either:

• The certification of an attorney admitted to the Bar of the State of Maryland that the instrument has been prepared by the attorney or under the attorney’s supervision or
• A certification by a party named in the instrument that the instrument was prepared by that party.

Currently, the exclusion to this requirement does not include assignments of rents or leases and, as such, a secured party electing to record a separate assignment of rents or leases must include the proper certification on the instrument. Once this law goes into effect, an assignment of rents or leases prepared by any attorney or one of the parties named in the instrument may be recorded without the certification.

Real Property — Ground Leases — Required Notifications — Private Transaction Redemptions
HB 149 (Chapter 82)
(effective October 1, 2020)

This law authorizes a leasehold tenant or an interested party to submit documentation of the redemption of a ground lease to the Maryland State Department of Assessments and Taxation (SDAT) if specified conditions are met. A leasehold tenant or an interested party may submit documentation satisfactory to SDAT of the redemption of a ground lease if:

• The ground lease is redeemed in a private transaction between the ground lease holder and the leasehold tenant, and
• The ground lease holder has failed to notify SDAT of the redemption, as required under current law.

The documentation submitted to SDAT must include a certified copy of the ground lease redemption deed that has been filed in the land records of the appropriate county. After accepting documentation, SDAT must update the online registry to indicate that a ground lease has been redeemed.

Practice Point: Maryland law currently only requires a ground lease holder to notify SDAT of changes to the registration. In some instances, the ground rent is purchased from a lease holder who fails to notify SDAT and cannot be reached. Allowing a leasehold tenant or an interested party to provide appropriate documentation relieves the purchaser of the burden of locating the seller of the ground rent.

Real Property — Ground Leases — Repeal of Registration Fees
HB 172 (Chapter 94)
(effective October 1, 2020)

This law repeals provisions related to fees for the registration of ground leases with SDAT. Currently, the registration fee is $10.00 for the first ground lease and $5.00 for each additional ground lease, per ground lease holder.

Practice Point: While ground leases have been a form of property holding in Maryland since Colonial times, ground lease registrations are becoming increasingly obsolete. SDAT requested repeal of the fees associated with registration to allow for a more efficient use of its resources. As such, effective October 1, 2020, a person registering a ground lease with SDAT will no longer have to pay a fee.

Real Property — Ground Leases — Past Due Ground Rent
HB 241/SB 170 (Chapter 124/125)
(effective October 1, 2020)

This law provides that, notwithstanding any other provision of law, a ground lease holder may not bring any suit, action, or proceeding against a current or former leasehold tenant to recover ground rent that was due before the date the current leasehold tenant acquired title to the leasehold interest if the ground lease was not registered with SDAT in accordance with specified statutory provisions.

Practice Point: Maryland law contains certain restrictions on the ability of a ground lease holder to, among other things, recover past due ground rent and enforce an unregistered ground lease. This law adds an additional restriction in the context of a transfer of a ground lease from one leasehold tenant to another.

Real Property — Deletion of Unlawful Ownership Restrictions — Exemption from Fees and Surcharges
HB 1077 (Chapter 421)
(effective October 1, 2020)

A number of documents recorded in the Maryland land records contain provisions that restrict ownership of property based on race, religious belief, or national origin. These provisions are defined as “unlawfully restrictive covenants.” A 2018 law established a mechanism by which a person who owns property subject to an unlawfully restrictive covenant, or a nonprofit that is required to enforce neighborhood covenants including an unlawfully restrictive covenant, may record a “restrictive covenant modification” to remove an unlawfully restrictive covenant. The 2018 law also required homeowners associations to remove an unlawfully restrictive covenant that is part of a uniform general scheme or plan of development from the common area deeds or other declarations of property in the development by September 30, 2019. The 2018 law also provided for a fee exemption for such recordings until September 30, 2019.

This new law permanently exempts from recording fees the recordation of a restrictive covenant modification or an amendment to the common area deeds or other declarations of a homeowners association if the recordation is to modify or delete an unlawfully restrictive covenant. The new law also repeals the September 30, 2019, deadline for homeowners associations to delete unlawfully restrictive covenants.

REGULATORY

Financial Institutions — Check Cashing Services — Registration and Dissemination of Information
HB 1196/SB 939 (Chapters 443/444)
(effective October 1, 2020)

This law aims to add additional oversight to businesses that provide check cashing services in Maryland. Previously, a business did not have to obtain a check cashing license if it charged a fee that did not exceed 1.5% of the payment instrument and the check cashing services were incidental to the retails sale of goods or services. Businesses could self-certify this exemption, and it is estimated that more than half of the businesses in the state that provided check cashing services did so without a license. Under the new law, the businesses that were previously exempt from licensing now must register with the Maryland Office of the Commissioner of Financial Regulation (OCFR) through the Nationwide Multistate Licensing System and Registry (NMLS), and re-register each year thereafter. Check cashing registrants must also:

• Post a notice stating their fees and how to contact OCFR,
• Provide a receipt to each customer detailing the transaction, and
• Register as a check casher money service business with the U.S. Department of the Treasury.

The law also subjects check cashing registrants to the same enforcement powers as check cashing licensees. OCFR must notify any person affected by the law beginning July 1, 2020, but the law otherwise takes effect October 1, 2020.

Practice Point: Now that all check cashing businesses are subject to either registration or licensure, businesses that had avoided the licensing process under prior law should evaluate whether licensure — which enables a business to charge higher fees — is a more attractive approach moving forward.

Financial Institutions — Commissioner of Financial Regulation — Nondepository Special Fund
HB 774/SB 409 (Chapters 320/321)
(effective July 1, 2020)

Last year, the General Assembly passed a law prohibiting certain fees, fines, and penalties by credit card processors, as well as mandating certain disclosures in a merchant processing agreement. The law also authorized OCFR to use its investigation and enforcement powers to enforce this law. However, the 2019 law did not authorize OFCR to use the Nondepository Special Fund, which funds most of OCFR’s operations, to implement its enforcement of this 2019 law. This new law now authorizes OCFR to use the Nondepository Special Fund to implement its enforcement of the 2019 law.

Practice Point:Credit card processors may now expect OCFR to enforce the 2019 law addressing merchant processing fees and disclosures.

TAXES

Baltimore City — Property Tax Credit for Newly Constructed Dwellings — Reauthorization and Modification
SB 63 (Chapter 609)
(effective June 1, 2020)

This law reauthorizes a tax credit in Baltimore City through June 30, 2025, for newly constructed or substantially rehabilitated dwellings. “Substantially rehabilitated” is defined as a dwelling that has undergone repairs, replacement, or improvements to two or more major building components exceeding $6,500, or 30% of the property’s assessed value after completion. The amount of the property tax credit depends on the value of the property and phases out during five years.

Annual and Personal Property Reports — Submission
SB 115 (Chapter 529)
(effective July 1, 2020)

In Maryland, local governments impose and collect a tax on business-owned personal property. To provide for uniform assessments, SDAT is responsible for assessing all personal property. Each local government is responsible for issuing the tax bills and collecting the tax. This new law alters a reference to a specified personal property tax report and is intended to clarify the different filing requirements for businesses that have and do not have personal property. Under this law, all businesses will be required to file an annual report and pay an appropriate fee, but only those businesses with personal property will be required to file a personal property report.

Property Tax — Credit for Disabled Veterans
HB 257/SB 417 (Chapters 629/630)
(effective June 1, 2020)

This law authorizes local governments to grant a property tax credit to certain disabled veterans and their surviving spouses as to their residences. The law authorizes a 50% tax credit for veterans with a disability rating ranging from 75% to 99% and 25% tax credit for veterans with a disability rating ranging from 50% to 74%. Previously, only veterans with a 100% service-connected disability rating could claim a full exemption of their property taxes.

Property Tax — Homeowners’ and Renters’ Property Tax Credits — Deadlines
SB 48 (Chapter 507)
(effective June 1, 2020)

This law is intended to make the submission and processing of applications for the Homeowners’ Property Tax Credit and Renters’ Property Tax Credit programs easier for both the program applicants and SDAT. The law extends from September 1 to October 1 the deadline by which:

• Homeowners who qualify for the Homeowners’ Property Tax Credit Program may apply for the property tax credits, and
• Qualified renters may apply for financial assistance for rent attributable to state and local real property taxes.

The new law further requires SDAT to make the homeowners’ tax credit application forms available by February 15 of the tax year in which the homeowners’ property tax credit is sought and changes the deadline by which applicants must submit their homeowners’ tax credit applications to SDAT from May 1 to April 15. This change will now give SDAT two additional weeks to process and deliver applications to the county collector to prepare the tax bill.

Income Tax — Pass-Through Entities and Corporations
SB 523 (Chapter 641)
(effective July 1, 2020 and applies to the 2020 tax year)

Under the federal Tax Cuts and Jobs Act of 2017, the deduction for state and local taxes paid is limited to $10,000 — $5,000 for married taxpayers filing separately — in aggregate of income or sales taxes, real property taxes, and certain personal property taxes through tax year 2025. This new law provides a workaround for the federal tax law change by giving Maryland pass-through entities the option to pay income taxes at the entity level — which is fully deductible under current Internal Revenue Service guidance — instead of on the individual income taxes for resident members’ shares. The law requires a pass-through entity to continue to pay taxes on nonresident and nonresident entity members’ shares.

Individuals or corporations can claim a tax credit equal to the tax paid by a pass-through entity on the member’s share of its taxable income.

The law also alters the number of employees that a worldwide headquartered company must have for purposes of the single sales apportionment exemption.

Property Tax — Credit to Offset Increases in Local Income Tax Revenues — Eligibility
HB 1200 (Chapter 445)
(effective June 1, 2022 and applies to taxable years beginning after June 30, 2022)

Under existing law, local governments may provide a property tax credit to offset increases in local income taxes. This new law now requires that a homeowner must have a homestead property tax credit application on file with SDAT in order to be eligible for the credit. Currently, only Montgomery County offers such a property tax credit.

Sales and Use Tax and Personal Property Tax — Exemptions — Data Centers
SB 397 (Chapter 640)
(effective July 1, 2020, and applicable to taxable years beginning after June 30, 2020)

This law provides a sales and use tax exemption for the sale of certain “qualified” data center personal property, which includes:

• Computer equipment or software used for the processing, storage, retrieval, or communication of data (e.g., servers, routers, and related equipment);
• Heating, ventilation, and air-conditioning and mechanical systems; and
• Electrical equipment.

A party is eligible to claim the sales and use tax exemption if it owns a data center at which it has invested at least $5 million in qualified data center personal property ($2 million in certain jurisdictions) and filled at least five positions (must be full-time positions, newly created for data center opening or expansion, which pays at least 150% of the state minimum wage) within three years of submitting the tax exemption application with SDAT. The law further provides that local governments may reduce or eliminate the percentage of the assessment of any data center personal property used in a qualified data center.

VEHICLE

Vehicle Laws — Liens — Electronic Recording
HB 1033/SB 778 (Chapters 411/412)
(effective January 1, 2021)

This law requires the holder of a security interest on a motor vehicle to electronically file a release of the security interest with the Motor Vehicle Administration (MVA) within five business days after the holder has been paid in full. Exempt from this requirement is a lienholder that does not regularly engage in the business of financing motor vehicles. MVA is directed by the law to establish an electronic filing system. A service provider, such as a title agent or motor vehicle dealer, is authorized to act for the holder of the lien.

Consumer Protection — Electronic Transactions — Sale and Lease of Vehicles
HB 139/SB 134 (Chapters 71/72)
(effective October 1, 2020)

This new law provides that only a dealer may contract for the sale and delivery of a vehicle by electronic means. The new law provides that a consumer shall be deemed not to have agreed to enter into a contract for the sale or lease of a vehicle with a dealer by electronic means unless:

• The dealer provides the consumer with a “clear and readable” copy of all documents electronically signed by the consumer, and
• A reasonable opportunity to review such documents before providing an electronic signature.

The new law also generally requires dealers to deliver vehicles within seven days of the electronic signing of a purchase transaction.

Practice Pointer: Lenders that engage in the indirect finance business should examine their dealer agreements and consider adding a representation and warranty from dealers concerning compliance with the new law as to each loan purchased.