Relating to Real Estate

The Baltimore City Council recently passed three bills regarding landlord-tenant matters. Two of the bills have become law, while the other faced a mayoral veto.

Landlords Required to Offer Lease Renewals Absent 'Good Cause'

In an effort to protect low-income renters and to combat the negative impact COVID-19 has had on affordable housing, the Council enacted legislation titled Landlord-Tenant Lease Renewals that prohibits, on a temporary basis, landlords from declining lease renewals, except for “good cause.” The bill requires landlords to temporarily offer tenants an opportunity to renew their leases subject to “a reasonable, non-retaliatory increase in the rent or change in lease terms.” The renewal offer must be made between 75 and 100 days prior to the end of the lease term or periodic tenancy. Landlords may not decline to renew a lease unless one of the following good cause exceptions exists:

1. The tenant has caused a substantial breach of the lease that warrants nonrenewal, and after receiving written notice to cure or correct the breach, the tenant has failed to comply within 45 days;
2. The landlord seeks to recover possession of the leased premises for use by the landlord or the landlord’s spouse, child, parent or grandparent as their primary residence;
3. The landlord seeks to permanently remove the leased premises from the rental market;
4. The landlord, after having obtained all necessary permits, seeks to undertake substantial repairs or renovations that cannot be completed while the leased premises is occupied; or
5. The leased premises are owner-occupied and the landlord leases out a single rental unit on the premises.

If a landlord declines to renew a lease for one of the good cause exceptions, the landlord must send notice between 75 and 100 days prior to the end of the lease term so advising. The notice must state with specificity the facts related to the good cause for declining to offer a renewal. It is important to note that a “substantial breach of the lease” does not include failure to pay rent or other charges.

The legislation was passed without the signature of Baltimore Mayor Brandon Scott, who stated in a letter to the Council that although the bill is “well-intended and temporary in nature,” the bill “failed to meet the Law Department’s threshold for legal form and sufficiency as certain provisions conflict with state law.” Mayor Scott specifically noted uncertainty “about the City’s authority to implement and enforce this bill’s provisions locally due to the significant state law governing this subject.”

This legislation will automatically expire on the 181st day following the expiration of the Maryland state of emergency because of the pandemic. Anyone in violation of the legislation is subject to a fine of up to $1,000 for each offense.

Late Fees for Past Due Rent

The Council passed recent legislation that impacts when a landlord may impose late fees and requires that a new provision be included in all residential leases.

The law, titled Late Fees for Past Due Rent, prohibits landlords from charging late fees for past due rent without first allowing the tenant a 10-day grace period. Specifically, the law provides that “a residential lease shall include a provision that the landlord may not apply late fees to the rent until the tenant is more than 10 days past due with the rent.” The law also limits the amount a landlord may charge for a late fee to no more than 1% of the total monthly rental payment per day for each day the tenant’s rent payment is late, commencing with the 11th day of the rental period, not to exceed a total of 5% of the total monthly rental payment.

The Late Fees for Past Due Rent law went into effect on April 30, 2021, and does not apply to leases entered into prior to that date.

Security Deposit Alternatives Bill

On June 8, 2021, the Council sustained Mayor Scott’s veto of a security deposit bill that would have required residential leases to contain provisions permitting security deposit alternatives to renters.

The bill, titled Security Deposit Alternatives, would have required landlords with 10 or more units who charge a security deposit of more than 60% of the monthly rent to offer prospective tenants one of two alternatives to paying a traditional security deposit: pay the deposit in three monthly installments or purchase “rental security insurance.”

The bill, which the Council initially passed by a 12-2 vote, had been the subject of much scrutiny, primarily because of the rental security insurance provision. Although, supporters claimed the bill would give renters more flexibility when paying security deposits, opponents argued the bill’s rental security insurance option could have negative financial impacts on renters, many of whom are financially vulnerable. Many opponents suggested that rental security insurance products are deceptive and function not as insurance but as a surety bond.

The rental security insurance arrangement would have required a tenant to pay the rental insurance company a nonrefundable premium in exchange for a company’s agreement to cover the landlord’s claims up to the value of the premium. However, unlike a typical insurance premium, the nonrefundable premium is not paid toward any claims made by the landlord. Instead, when a landlord files a valid claim for damages, the company pays the landlord and bills the tenant for the full cost of the claim. Because of this structure, opponents argued the term “security deposit insurance” is misleading and may trick tenants into paying additional charges that could cost more than the security deposit itself.

Mayor Scott vetoed the bill on May 17, 2021, and said in a written statement that he “could not ignore” the concerns expressed by activists, tenant advocates, and other progressive groups. Additionally, Mayor Scott stated, “The benefits of an installment plan for security deposits do not outweigh the potential costs of the security deposit insurance provision to already vulnerable residents.”

Since the veto of the Security Deposit Alternatives bill, the bill’s sponsor, City Council Vice President Sharon Green Middleton, introduced a new alternative bill called the “Emergency Security Deposit Relief Act.” This bill seeks to establish a security deposit voucher program that will assist eligible families in need of permanent housing with payment of the security deposit.

For more information, contact our Real Estate Team.