(a) Agreement not to convert.
(1) An owner may sell rental housing without providing any right of first refusal under Section 53A-4 if the Department approves a written agreement that:
(A) prohibits the buyer from converting the rental housing for at least 5 years after the sale;
(B) the Department received from the prospective buyer at least 30 days before the sale; and
(C) except as provided in paragraph (2)(B), requires the buyer to follow the voluntary rent increase guidelines published annually under Section 29-53 during:
(i) the first 3 years of the agreement, for all tenants who resided in the rental housing when the Department approved the agreement; and
(ii) the last 2 years, for each of these tenants who qualifies as a low- or moderate-income tenant under Department regulations.
(2) The Department may:
(A) approve or reject an agreement with the buyer under this subsection only after considering the:
(i) physical condition of the rental housing, including any rehabilitation necessary to correct dangerous defects;
(ii) tenants' ability to afford rent increases; and
(iii) need to preserve low- and moderate-income rental housing in the County;
(B) allow the buyer to increase rents above the limits in paragraph (1)(C) only when the Department decides that a greater increase is justified by:
(i) unforeseen circumstances beyond the buyer’s control; or
(ii)
rehabilitation or renovation to the rental housing.
(3) The Department annually must verify the buyer’s compliance with the rent increase limits required by this subsection.
(b) Other exceptions. An owner also does not have to provide a right of first refusal for a sale:
(1) under the terms of a bona fide mortgage or deed of trust;
(2) to a mortgagee in lieu of foreclosure;
(3) under a court order;
(4) from one co-tenant to another co-tenant by operation of law;
(5) under a will or intestate distribution;
(6) to the State or a local government;
(7) of a minority title interest; or
(8) under subsection (c).
(c) Exemption for low income housing tax credit transfers.
(1) Definitions. For purposes of this subsection, the following terms have the meanings indicated.
Low Income Housing Tax Credit or LIHTC means a low income housing tax credit program under:
(A) section 42 of the United States Internal Revenue Code of 1986, as amended; or
(B) a comparable County or State of Maryland low income housing tax credit program with occupancy, rent, and income requirements at least as restrictive as those under section 42 of the United States Internal Revenue Code, as amended.
LIHTC transfer means:
(A) a transfer of interest in a partnership or limited liability company that owns rental housing as its sole or principal asset, if the sole purpose of the transfer is to admit one or more limited partners or investor members who will make capital contributions and receive tax benefits under the LIHTC;
(B) a transfer of interest in an entity that owns rental housing, or a transfer of title to rental housing, if each of the following conditions is satisfied:
(i) the credit period for the rental housing under the LIHTC has ended;
(ii) immediately prior to the transfer, the rental housing is subject to an extended low-income housing commitment under the LIHTC;
(iii) before and after the transfer, the owner of the rental housing is controlled, directly or indirectly, by the same person or entity; and
(iv) immediately following the transfer, the rental housing must, for a term of not less than 10 years, remain subject to, or become subject to, an extended low-income housing commitment under the LIHTC;
(C) a transfer of interest in a partnership or limited liability company that owns rental housing as its sole or principal asset, if the sole purpose of the transfer is to allow for the exit of one or more limited partners or investor members who have made capital contributions and received tax benefits under LIHTC; or
(D) a transfer of interest in an entity that owns rental housing as its sole or principal asset, or a transfer of title to rental housing, if the sole purpose of the transfer is to qualify for and enter into a new credit period under the LIHTC for purposes of the rehabilitation of the rental housing if, before and after the transfer, the owner of the rental housing is controlled, directly or indirectly, by the same person or entity.
LIHTC transfer notice means the notice under paragraph (2)(C).
(2) LIHTC transfer notice – required. An owner may sell rental housing without providing any right of first refusal under Section 53A-4 if:
(A) the property is financed or to be financed by the LIHTC;
(B) the sale or transfer is a LIHTC transfer; and
(C) not less than 90 days prior to the projected transfer date of the property or interest in the property, the owner provides written notice to the Department of such transfer, which notice must contain:
(i) the draft transfer agreement;
(ii) the existing low income tax credit covenant recorded on the property or, if none is recorded on the property, the draft low income tax credit covenant to be recorded on the property; and
(iii) the proposed date of closing.
(3) Agreement not to convert for LIHTC. Upon receipt of the LIHTC transfer notice, the Department must have 30 days to approve or deny the LIHTC transfer under the notice. If the Department denies the LIHTC transfer, the owner may pursue an agreement not to convert as set forth in Section 53A-5(a).
(4) Properties funded by LIHTC and the County – no additional notice required. An owner may sell rental housing without providing any right of first refusal under Section 53A-4, and without providing a LIHTC transfer notice, if:
(A) the property is financed or to be financed by the LIHTC; and
(B) either:
(i) the sale or transfer is a LIHTC transfer and, immediately prior to the transfer, the rental housing is subject to a regulatory agreement or deed of trust with the County that requires the owner to provide the County with notice and approval rights over any transfer; or
(ii) the sale or transfer is a LIHTC transfer and, simultaneously with the transfer, the rental housing will become subject to a regulatory agreement or deed of trust with the County that requires the owner to provide the County with notice and approval rights over any transfer. (1990 L.M.C., ch. 34, § 1; 1996 L.M.C., ch. 13, § 1; 2001 L.M.C., ch. 32
, § 1; 2007 L.M.C., ch. 6, § 1; 2007 L.M.C., ch. 11, § 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. Former § 53A-5, which was derived from 1990 L.M.C., ch. 34, § 1, was repealed pursuant to 2001 L.M.C., ch. 32, § 1.