(a) Right of first refusal. An owner must offer the County, HOC, and any tenant organization the right to buy rental housing before selling the rental housing to another party, except as provided under Section 53A-5.
(b) Requirements for offer. An offer required by subsection (a) must:
(1) be in writing;
(2) be sent electronically to the Department or, at the discretion of the Director, be sent by an alternative delivery method to the Department if electronic delivery would cause an undue burden to the owner, within 5 business days after:
(A) the execution of a bona fide contract of sale, for the County, HOC, and any existing tenant organization; or
(B) the Department certifies a tenant organization, for a new tenant organization formed under Section 53A-3(b);
(3) include substantially the same terms and conditions as a pending bona fide contract of sale from a third party to buy the rental housing; and
(4) remain open for:
(A) 60 days after it is received by the County and HOC; and
(B) 90 days after it is received by any tenant organization, including a new tenant organization formed under Section 53A-3(b).
(5) The County must send an electronic copy of the offer to all qualified entities.
(c) Information and inspection. The owner must give the County, HOC, any tenant organization, and any County assignee:
(1) any information about the rental housing relevant to exercising the right of first refusal, such as architectural and engineering plans and specifications, and operating data; and
(2) access to the rental housing to inspect the property and conduct reasonable tests at reasonable times after reasonable notice.
The County, HOC, any tenant organization, and any County assignee must pay the owner a reasonable deposit for any architectural and engineering plans that the owner provides. The owner must refund the deposit when the plans are returned to the owner. The County Executive must issue regulations to implement this subsection.
(d) Exercise of right of first refusal.
(1) The County, HOC, any tenant organization, or any County assignee may exercise the right of first refusal by accepting the offer within the applicable period under subsection (b)(4). The County, County assignee, and HOC may accept an offer to buy rental housing in a municipality only if the municipality approves.
(2) The owner must sell the rental housing under the right of first refusal if the acceptance includes substantially the same terms and conditions contained in the owner’s bona fide contract of sale with the third party, including any contract term that provides for a bona fide real estate commission payable to an independent broker. Notwithstanding this general requirement or any term of the contract, the County, HOC, any tenant organization, or any County assignee may condition its acceptance on obtaining financing at any time before the deadline in paragraph (4) for completing the sale.
(3) The County, HOC, any tenant organization, or any County assignee must not be required to pay to the owner a deposit of more than 5 percent of the contract price to accept the offer and exercise its right of first refusal. The deposit is refundable in the event of a good faith failure of the County, HOC, any tenant organization, or any County assignee to satisfy the financing contingency under paragraph (2).
(4) The owner and the County, HOC, tenant organization, or County assignee must complete a sale under this subsection within 180 days after the County, HOC, or tenant organization receives the owner’s offer unless the owner agrees to extend the 180-day period. If the County, HOC, tenant organization or County assignee exercises the right of first refusal and fails to close within the 180 day deadline, then the owner, without first providing a new offer, may transfer the rental housing to any purchaser within 365 days following the date of the offer, provided that the purchase price is not less than 90 percent of the purchase price set forth in the original offer under subsection (a).
(5) Before a tenant organization completes a sale under paragraph (4), a majority of all tenants must ratify the purchase.
(6) The right of first refusal applies in the following order of priority:
(A) the County or County assignee;
(B) HOC; and
(C) any tenant organization.
(7) The Executive must issue regulations that establish procedures and guidelines for exercising the County’s right of first refusal.
(e) Expiration of right of first refusal. If the County, HOC, any tenant organization, and any County assignee do not exercise their rights of first refusal within the applicable period under subsection (b)(4), the owner may sell the rental housing to the third-party buyer under substantially the same terms and conditions offered to the County, HOC, and any tenant organization.
(f) Immunity. The County, HOC, any tenant organization, and any County assignee are not liable for any damages incurred by the owner, a third-party buyer, a tenant, or any other person in connection with a decision to exercise or not exercise a right of first refusal under this Section.
(g) Assignment.
(1) The County Executive may assign the right of first refusal, or a contract to purchase rental housing, to an entity qualified by the Department to receive such assignment under this subsection. The Department may designate an entity as a qualified entity if the Department determines that the entity:
(A) has demonstrated expertise in acquiring, maintaining, and managing rental and affordable housing;
(B) is a bona fide nonprofit, a for-profit entity, or a governmental housing agency or authority, in good standing under the laws of the State of Maryland at the time of assignment;
(C) is registered and licensed to do business in Maryland;
(D) commits in writing to maintain the affordability of housing acquired under this subsection; and
(E) commits in writing that it must not disclose any information or documentation it receives from an owner pursuant to this Chapter unless required by law.
(2) The County Executive must adopt regulations under Method (2) to establish a process for qualifying and selecting entities to receive an assignment under this subsection. The regulations must establish:
(A) a process that provides entities a fair opportunity to demonstrate to the County Executive or the County Executive’s designee its qualifications to receive an assignment;
(B) factors that an entity must demonstrate to be deemed a qualified entity;
(C) affordable housing restrictions that a qualified entity must commit in writing to maintain, if selected as a County assignee; and
(D) criteria the County Executive or the County Executive’s designee must use for selecting County assignees from among qualified entities.
(3) An assignment by the County Executive of the County’s right of first refusal must be accomplished by a written agreement with the assignee that includes an assignment and assumption of the County’s rights and obligations under this Chapter as to its right of first refusal. The County must provide an owner with a copy of the assignment and assumption agreement within 3 business days of execution. The County’s option to assign its right of first refusal to a qualified entity must not extend the 60 day exercise period under Section 53A-4(b)(4) or the 180 day closing deadline under Section 53A-4(d)(4). (1990 L.M.C., ch. 34, § 1; 1996 L.M.C., ch. 13, § 1; 2001 L.M.C., ch. 32
, § 1; 2024 L.M.C., ch. 5, § 1.)
Editor’s note—2024 L.M.C., ch. 5
, §§ 2, 3 and 4, state: Sec. 2. Expedited Effective Date. The Council declares that this legislation is necessary for the immediate protection of the public interest. This Act takes effect on the date on which it becomes law and applies retroactively to any right of first refusal offer of sale received by the County after January 1, 2024.
Sec. 3. Transition. As to any offer of sale received by the County after January 1, 2024, and prior to the effective date of Method (2) regulations adopted by the Council under this Act, the County Executive, by executive order, may assign to an entity qualified by the Department the right of first refusal if the entity:
(a) demonstrates that the entity is either a bona fide nonprofit or for-profit entity in good standing under the laws of the State of Maryland, or a designated entity under Section 52A-2;
(b) certifies in writing that for the past 10 years the person or each principal in the entity has complied with all laws related to the acquisition, maintenance, and management of rental and affordable housing;
(c) demonstrates that the entity has expertise and experience acquiring, owning, operating, managing, and developing multi-unit affordable rental housing projects in the last five years, including a certification that the entity has never been in financial default as either a borrower or guarantor, or if to the contrary, explaining in complete detail all the circumstances;
(d) demonstrates proof of readiness to purchase the property; and
(e) demonstrates a commitment to community engagement, such as working with community-based organizations or tenant counseling organizations on anti-displacement activities.
Sec. 4. Sunset. Section 3 must sunset, and must have no further force or effect, 90 days after this Act becomes law.
Former § 53A-3, was amended and divided into two new sections, numbered §§ 53A-4 and 53A-5, pursuant to 2001 L.M.C., ch. 32, §1.