Sec. 11A-1. Legislative findings.

Cross references—Buildings, ch. 8; common ownership communities, ch. 10B; consumer protection, ch. 11; cooperative housing, ch. 11C; homeowners' associations, ch. 24B; moderately priced housing, ch. 25A; housing policy, ch. 25B; housing standards, ch. 26; discrimination in housing, § 27-11 et seq.; real property, ch. 40; subdivision of land, ch. 50; tenant displacement aid fund, § 56-33 et seq.; zoning, ch. 59.

The county council for Montgomery County hereby finds, recognizes and declares that a rental housing emergency exists throughout the county and has been caused, in large part, by the conversion of rental housing in the county to condominiums. The county council finds that the incidence of condominium conversion is substantial and poses a serious threat to the existence of a sufficient supply of rental stock in the county to accommodate the needs of the citizens. The county council recognizes that in the past eighteen (18) months, approximately five thousand (5,000) rental units out of approximately fifty-five thousand (55,000) rental units in rental facilities in the county have converted or are in the process of converting to condominium. These conversions are in addition to nearly ten thousand (10,000) conversions of existing rental units to condominium in the county which have occurred in the past ten years.

The county council further finds that there is an increasing percentage of construction of residential units in the county that are intended for condominium development and that few, if any, units are being constructed for rental purposes.

As a result, the county council finds that the combination of the conversion of existing rental units and the lack of construction of new rental units in the county has resulted in an extreme scarcity of rental housing in the county and insufficient and inadequate numbers of rental dwelling units available to citizens whose economic or other circumstances require such rental facilities.

The county council further finds that conversions of rental facilities have resulted in large-scale displacement of tenants from their rental homes and have caused many tenants extreme financial and emotional hardships associated with moving and attempting to relocate in another rental facility. The county council finds that the hardship to tenants from displacement caused by condominium conversion is particularly acute for the elderly, the handicapped and the economically disadvantaged.

In addition, the county council finds that prospective purchasers of condominium units are often without knowledge of the unique concepts of ownership involved in condominium housing and that buyers do not always have a sufficient factual basis presented to them on which to make a reasonable decision. The county council is aware of reported abuses by sellers of condominium units.

Accordingly, the county council finds that it is in the interests of the public health, safety and general welfare to provide for the exercise of a reasonable right of first refusal by the county or the Montgomery County Housing Opportunities Commission to purchase a rental facility or units therein, as permitted by state law and to provide for extended tenancies to certain tenants. Further, in order to facilitate fair and equitable bargaining and to provide the buyers of condominium units with basic information by which to make an intelligent housing choice, it is necessary and appropriate for the county to require the sellers of condominium units to prepare and distribute information deemed relevant to the buyers of this type of residential property, to file certain documents and notices with the county, and to provide additional consumer and tenant protections for the public welfare. (1982 L.M.C., ch. 2, § 1.)

Sec. 11A-2. Definitions.

In this Chapter, the following words and phrases have the following meanings:

(a) Condominium; condominium regime. "Condominium" and "condominium regime" mean properly established as a condominium regime under title 11, Real Property Article, Annotated Code of Maryland.

(b) Condominium unit; unit. "Condominium unit:" and "unit" mean a three-dimensional space identified as such in the declaration and on the condominium plat the boundaries of which are established in accordance with title 11, Real Property Article, Annotated Code of Maryland. A unit may include two (2) or more noncontiguous spaces.

(c) Conversion. "Conversion" means the subjection of a property which was previously rental property to a condominium regime.

(d) Department. "Department" means the Department of Housing and Community Affairs.

(e) Developer. "Developer" means any person who subjects his/her property to a condominium regime.

(f) Director. "Director" means the Director of the Department of Housing and Community Affairs.

(g) Landlord. "Landlord" means the owner, the owner's agent, lessor or sublessor of the dwelling unit or the property of which it is a part and, in addition, means any person authorized to exercise any aspect of the management of the premises except those persons engaged solely in custodial and maintenance functions.

(h) Local government. "Local government" means the County or a housing agency designated by the County.

(i) Person. "Person" means an individual, corporation, partnership, association, organization or any other legal entity.

(j) Real Property Article. "Real Property Article" means the Real Property Article, Annotated Code of Maryland.

(k) Rental facility. "Rental facility" means any structure, or combination of related structures and appurtenances, operated as a single entity, in which the operator provides for a consideration 2 or more dwelling units; rental facility does not mean any transient facility such as a boarding house, tourist home, inn, motel, hotel, school dormitory, hospital, medical facility, or any facility operated for religious or eleemosynary purposes.

(l) Tenant organization. "Tenant organization" means a bona fide association of resident tenants of a rental facility, certified by the Department as representing at least 30 percent, or 5 units, whichever is the greater number, of units occupied by tenants of the rental facility.

(m) Transfer; transfer of title. "Transfer" and "transfer of title" mean (1) the transfer of legal title to a rental facility, or (2) transfer of substantial ownership or beneficial interests, or both, in the general or limited partnerships, corporations, trusts or any combination thereof which hold the legal title to the rental facility. The transfer of substantial ownership or beneficial interests means the transfer within a one-year period of a total of 51 percent or more of the ownership of the partnerships, stock in the corporations, beneficial interests in the trust or any combination thereof. (1982 L.M.C., ch. 2, § 1; 1996 L.M.C., ch. 13, § 1.)

Sec. 11A-3. Right of first refusal to purchase rental facilities.

(a) Sale of rental facilities. Prior to the sale of a rental facility of more than ten (10) rental units to any person for the purpose of creation of a condominium regime, the owner shall provide a right of first refusal to the county and its designated housing agency to purchase the rental facility.

(1) All sales or transfers of rental facilities of more than ten (10) units shall be deemed to be sales for the purpose of creation of a condominium regime and subject to the requirements of this section, unless the contract purchaser, at least thirty (30) days prior to transfer, enters into an agreement with the County to retain the property as a rental facility for three (3) years after the date of transfer of the property.

(2) An owner may rebut the presumption that the sale of the rental facility is for the purpose of creation of a condominium regime under this Section by notifying the Department in writing, and must thereafter satisfy the requirements of Chapter 53A.

(3) For purposes of this section, the Montgomery County Housing Opportunities Commission is the designated housing agency.

(4) All contracts and agreements for purchase of a rental facility, and title obtained pursuant thereto, shall be contingent upon and subject to full compliance with the requirements of this section.

(b) Notice required; exercise of right of first refusal.

(1) Prior to the sale of any rental facility under this section, the owner shall give written notice to the County and its designated housing agency of the terms and conditions under which the owner would agree to sell the rental facility. Notice shall be deemed given on the latest date this notice is actually received by both Montgomery County and its designated housing agency. This notice shall constitute the terms and conditions of the right of first refusal exercisable by the County or its designated housing agency hereunder.

(2) The County Executive may require the owner, by executive regulations adopted under method (3) of Section 2A-15 of this Code, to make available to the County and its designated housing agency information regarding the characteristics and condition of the facility deemed relevant to the exercise of the right of first refusal, including but not limited to architectural and engineering plans and specifications and facility operating data. In addition, the County Executive by regulation adopted under method (3) of Section 2A-15 of this Code may require the owner to provide access to the facility for purposes of inspection by the County or its designated housing agency; provided, the County, its designated housing agency, and their agents shall be responsible for any damage to the property caused by such inspection. The County Executive may provide by regulation that any information received by either the County or its designated housing agency, pursuant to this subsection, is confidential and not subject to public disclosure.

(3) The County or its designated housing agency may exercise the right of first refusal by compliance with the following:

a. The County or its designated housing agency shall, within sixty (60) days of the date notice is given, offer to the owner a binding contract containing substantially the same terms and conditions contained in the owner's notice, which contract shall be binding on the owner if the contract contains a contingency entitling the local government to secure financing within one hundred eighty (180) days from the date notice was given.

b. Thereafter, the County or its designated housing agency shall satisfy or waive the financing contingency clause within the one hundred-eighty-day period.

c. The settlement on the contract shall occur within one hundred eighty (180) days from the date notice was given.

(4) Notwithstanding the above, the owner and the County or designated housing agency may agree by the terms of the contract to extend the date within which the County or the designated housing agency shall secure financing, and within which settlement shall occur.

(5) Owner's Right To Proceed; Liability of County or Its Designated Housing Agency.

a. If the County and its designated housing agency do not exercise their right of first refusal, the owner may enter into a contract and transfer title to any other buyer under substantially the same terms and conditions as contained in the notice to the County and its designated housing agency if the owner files an affidavit with the Department certifying that the requirements of this Section have been met.

b. If the County and its designated housing agency fail to exercise their right of first refusal, the purchaser may proceed with creation of a condominium regime.

c. The County and its designated housing agency shall be under no obligation to exercise their right of first refusal and shall have no liability for failure to exercise the right of first refusal created hereunder.

(6) If the County or its designated housing agency purchases the rental facility pursuant to exercise of the right of first refusal, it shall retain or provide for the retention of the property as a rental facility for at least three (3) years from the date of acquisition.

a. This shall not, however, be construed as limiting the right to sell the property, enter into lease-purchase agreements, or do anything else permitted to be done by a property owner, subject only to the retention requirements set forth above.

b. In the event of purchase and subsequent sale of a rental facility by the County or its designated housing agency pursuant to this section, the County or its designated housing agency shall endeavor to first sell the property to an organization or entity which will minimize displacement of the tenants residing in the facility, as determined in the sole discretion of the County Executive.

(c) Exemptions. The right of first refusal provided under this section shall not apply to any of the following transfers of rental facilities:

(1) Any transfer made pursuant to the terms of a bona fide mortgage or deed of trust agreement.

(2) Any transfer to a mortgagee in lieu of foreclosure or any transfer pursuant to any other proceedings, arrangement or deed in lieu of foreclosure.

(3) Any transfer made pursuant to a judicial sale or other judicial proceeding brought to secure payment of a debt or for the purpose of securing the performance of an obligation.

(4) Any transfer of the interest of one co-tenant to another co-tenant by operation of law or otherwise.

(5) Any transfer made by will or descent, or by intestate distribution.

(6) Any transfer made to any municipal, County or state government or to any agencies, instrumentalities or political subdivisions thereof.

(7) Any transfer to a spouse, son or daughter.

(8) Any transfer made pursuant to the liquidation of a partnership or corporation; or,

(9) Any transfer into a partnership or corporation wholly owned by the person(s) so contributing.

(d) Certificate of compliance or exemption. Within 10 days after the written application of any interested person, and upon the receipt of satisfactory proof, the Director must deliver to that person a written certificate in recordable form on, or incorporating by specific reference, any instrument made to evidence the transfer of a rental facility stating, as the circumstances may require, that either:

(1) As to that transfer, the requirements of this section have been fully complied with and the rights of the County and its designated housing agency pursuant to this section have terminated; or

(2) That transfer is exempt from the requirements of this section.

The certificate of the Director shall be conclusive as to the County, its designated housing agency, the parties to the instrument, and all persons claiming under or through any of them. The Director may require the payment of a reasonable fee for the certificate.

If the Director fails or refuses to deliver the certificate within the time specified, then the Director shall so notify the applicant in writing within the time specified and shall state, in reasonable detail, the reason or reasons for such failure or refusal.

(e) Applicability. The right of first refusal provided under this section shall not apply to any sale or transfer of a rental facility for which a contract for sale or transfer of the rental facility was entered into prior to July 1, 1981, and a notice of intention to convert to condominium was given prior to July 1, 1981, provided there is compliance with the law in effect prior to July 1, 1981.

If a notice of the right of first refusal to purchase a rental facility was given prior to July 1, 1981, pursuant to any law in effect at the time the notice was given, the right of first refusal provided under this section shall not apply to any transfer of that rental facility made on substantially the same terms and conditions contained in that notice, provided there is full compliance with the law in effect at the time the notice was given. (1982 L.M.C., ch. 2, § 1; 1983 L.M.C., ch. 55, § 1; 1984 L.M.C., ch. 24, § 14; 1984 L.M.C., ch. 27, § 13; 1996 L.M.C., ch. 13, § 1.)

Sec. 11A-4. Right of first refusal to purchase condominium units in a condominium regime.

(a) Prior to the initial sale of individual condominium units in a conversion to a condominium regime, where the facility is registered with the secretary of state under section 11-127, Real Property Article, the owner, developer and landlord of the facility shall provide the county and its designated housing agency a right of first refusal to purchase certain individual condominium units in the condominium regime.

(1) For purposes of this section, the Montgomery County Housing Opportunities Commission is the designated housing agency.

(2) All contracts and agreements for the initial sale of an individual condominium unit in a condominium regime, and title obtained pursuant thereto, shall be contingent upon and subject to full compliance with the requirements of this section.

(b) Notice required; exercise of right of first refusal.

(1) Prior to the transfer of any condominium unit under this section, the owner, developer and landlord of the facility shall give written notice to the county and its designated housing agency of the terms and conditions under which the owner would agree to sell the condominium unit. Notice shall be deemed given on the latest date the notice is actually received by both the county and its designated housing agency. This notice shall constitute the terms and conditions of the right of first refusal exercisable by the county or its designated housing agency hereunder.

(2) The county or its designated housing agency may exercise the right of first refusal by entering into a binding contract with the owner within sixty (60) days following the date notice is given or the date by which a tenant in possession notifies the owner under section 11-136(a)(3), Real Property Article, whichever is later.

(3) The purchase price, terms and conditions of the contract of sale of the unit to the county or its designated housing agency shall be no less favorable than the purchase price, terms and conditions of comparable units offered to tenants under section 11-136, Real Property Article, unless otherwise agreed by all parties to the contract of sale.

(c) The right of first refusal under this section is subject to the limitations contained in sections 11-139(c)(1) and 11-139(c)(2), Real Property Article.

(d) If any grant of a condominium unit contains an affidavit by the grantor that the requirements of this section, if applicable, have been satisfied, then failure to satisfy the requirements of this section does not affect the validity of that grant and the grantee takes title free of any claim by the county or its designated housing agency arising pursuant to this section. (1982 L.M.C., ch. 2, § 1.)

Editor’s note-Section 11A-4(a) was held valid in Rockville Grosvenor, Inc. v. Montgomery County, 289 Md. 74, 422 A.2d 353 (1980).

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