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New Maryland Residential Real Property Contract Disclosures

New Maryland Residential Real Property Contract Disclosures

With the first half of 2014 came two changes to Maryland's already extensive residential real property disclosure requirements. The first, a minor and mostly unnoticed change, was an update to the Office of the Attorney General, Consumer Protection Division's consumer information pamphlet. The more substantial change relates to the disclosure and administration of deferred private water and sewer assessments in Prince George's County.

Consumer Information Pamphlet

In January of 2014, the Consumer Protection Division of the Office of the Attorney General issued a new form for its consumer information pamphlet entitled "Buying a New Home:  Consumer Rights and Remedies Under Maryland Law." This consumer information pamphlet is required to be provided to each consumer purchaser of a new home prior to entering into the contract for the initial sale of a new home and the receipt thereof must be acknowledged by the purchaser in writing.

Most of the changes in the updated form are minor typographical changes. The only substantive changes relate to subcontractor liens and appear on pages 10 and 15 of the updated brochure. The updated brochure can be found here.

Prince George’s County – Deferred Water and Sewer Charges Homeowner Disclosure Act of 2014

Among the bills signed by Governor O'Malley on May 5, 2014, was House Bill 1043 (Chapter 441), which amends Section 14-117 of the Real Property Article of the Maryland Code and adds a new Section 14-117.1. Both changes relate solely to deferred private water and sewer assessments on single-family residential real property in Prince George's County. The law takes effect on October 1, 2014.

Currently, the specific disclosure requirements for deferred water and sewer charges for new homes in Prince George's County are contained in Section 2-162(g) of the Prince George's County Code.

The new 14-117(b)(3)(I) creates additional disclosure requirements relating to deferred private water and sewer charges in Prince George's County, expanding upon the current disclosure requirements contained in the Prince George's County Code. The new rules require the seller to disclose: (1) the existence of the deferred private water and sewer assessments; (2) the amount of the annual assessment; (3) the approximate number of payments remaining on the assessment; (4) the amount remaining on the assessment, including interest; (5) the name and address of the person or entity most recently responsible for collection of the assessment; (6) the interest rate on the assessment; (7) the estimated payoff amount of the assessment; and (8) a statement that payoff of the assessment is allowed without prepayment penalty. The law also sets forth the penalties for failure to comply with the disclosure requirements, including recovering from the seller the total amount of deferred charges the purchaser will be obligated to pay.

New Section 14-117.1 sets forth the requirements for information that must be included with each bill for deferred water and sewer charges on existing single-family residential real property in Prince George's County. The disclosures are similar to those listed in Section 14-117(b)(3)(I) with a few additional requirements, including the method used to compute the deferred water and sewer charges and a statement that the balance owed may be redeemed at the present value of the assessment.

Perhaps the most substantial change to the law is contained in new Section 14-117(b)(3)(II). That section restricts the time period for which the developer establishing water and sewer costs may amortize the costs to 20 years after the date of the initial sale. Many existing water and sewer declarations provide for amortization periods in excess of 20 years. It is not yet clear how the law will affect such existing declarations in cases where there are additional units to be sold. The costs have already been "established," but the "initial sale" of the residential real property may not yet have occurred.

Finally, the law requires Prince George's County to study: (1) the feasibility of establishing a centralized clearinghouse for the registration of deferred water and sewer charges; (2) methods to certify the accuracy of deferred water and sewer charges; and (3) methods to audit previously imposed deferred water and sewer charges. So, stay tuned, additional changes may be forthcoming. Notably, the changes already go further than the requirements applicable to other counties, including Anne Arundel, Baltimore and Howard.

There has been litigation in recent years surrounding the enforcement of deferred private water and sewer charges. The take away from such cases is that it is important to structure the declarations establishing such charges properly and to provide the requisite notices to consumers to ensure enforceability. In addition to advising clients on the structure of deferred private water and sewer charges, Kramon and Graham has also successfully defended the enforceability of such charges in two notable cases (click here for an article).

More information about the bill, including the final text, can be found here.

For additional information, please contact:
Erin R. Guiffre
Kramon & Graham, P.A.
410-752-6030
eguiffre@kg-law.com

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