Management of Residential Rental Properties 11 Apr 2024, 7:21 pm

            On March 25, 2024, the Supreme Court of Maryland (formerly known as the Court of Appeals, the State’s highest court) issued an opinion which may have significant impacts on the management of residential rental properties.

            The decision was issued in the case of Westminster Management, LLC v. Tenae Smith, et al., a case which originated in the Baltimore City Circuit Court.  A group of tenants sued their former landlord alleging that certain of its management practices were illegal.  The Court agreed.

            The Court issued three holdings which could affect property management practices:

1. The Court confirmed recent decisions that Rent Courts can award judgments only for actual rent due and unpaid, excluding ancillary or related charges. “We hold that in the context of residential leases, “rent,” for purposes of Sec. 8-401 of the Real Property Article (the failure to pay rent law) , means the fixed, periodic payments  a tenant is obligated to pay for use or occupancy of the leased premises.  Provisions of residential leases that purport to expand the definition of “rent” are ineffective for purposes of 8-401.”

                        Thus, rent court claims cannot include charges for items such as utilities, legal fees, repairs, etc.

2. The Court also addressed lease provisions allowing a landlord to allocate rent payments, including those specifically designated as “rent,” to other, “non-rent” obligations. For instance, if a bad check fee is posted to the rent ledger, that charge cannot be paid out of a subsequent rent payment.

                        “We hold that such an allocation violates the prohibition in Real Property Sec. 8-208(d)(2) (which requires)  a tenant  “to waive or to forego any right  any right or remedy  provided by applicable law” because it effectively allows a landlord to bring a summary ejectment proceeding  based on allegedly  overdue “rent”  that the tenant has already paid.”

                        The Court thus voids the common practice of applying rent payments to charges other than rent (such as legal fees or lockout charges), leaving actual rent unpaid.

3. The Court also expanded the scope of the 5% late fee for unpaid rent. Interpreting the history of the late fee statute, the Court held that the 5% late fee includes any cost of collection (such as agent’s fees,) other than court-awarded costs.

                        Thus, the late fee statute precludes a landlord from charging a 5% late fee “…and also imposing additional charges incurred due to the late payment of rent …”

            Leases and rent collection procedures should be reviewed to avoid conflicts with this new ruling.

            Contact our office if you have questions regarding this matter.

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Sales of Digital Products now subject to Maryland’s 6% Sales and UseTax 13 Aug 2021, 4:13 pm

This week, LMCHS&P partner Scott Schwartzberg gave a presentation to the American Advertising Federation (AAF) of Baltimore regarding the State of Maryland’s new law subjecting the sale of digital products and codes to the State’s 6% Sales and Use Tax. Many digital products that were not formerly subject to tax are as of March 2021. There is a limited tax credit available to businesses to offset the impact of the tax. Businesses should immediately consult with their tax advisors to determine the impact of the newly expanded tax on their business and to plan accordingly to comply with any obligation to collect and/or pay the tax. Failure to properly collect and/or pay can result in personal liability for owners and/or managers of the business.

Call our tax attorneys today at (410) 998-2000.

Scott Schwartzberg can be reached directly at (410) 998-2006.

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Due Diligence Tips 15 Mar 2021, 5:01 pm

Due Diligence

A crucial term in any contract for the purchase of real property or a business is the “due diligence” or “study period”. A buyer must get a lot done in a short period of time, often 30-60 days, in order to avoid unknown problems with the assets being purchased, resolve contingencies or to lock in third party financing. I’ll share a few tips to make this process as efficient as possible:

• Start organizing before your contract is signed, so you’ll be ready to dive in ASAP.
• Line up your title company, surveyor, banker, accountant, attorney for whatever help you will need for the study. For work that takes the longest, try to get a time estimate.
• When negotiating the contract, make sure seller’s “delivery of materials” covers what you need and will be made promptly. Many contracts extend the study period if seller’s deliveries are late. 5 days is a common time frame.
• Make sure your bank can get their work done during the study period, with a cushion of time before the last day of the study.
• Include an extension option is you might need one, rather than having to request one from seller at the last minute.
• Line up insurance coverage if you are doing physical inspections of a property or business. Many contracts will require general liability coverage.
• Mark your calendar for a few days before the study expires, so you will have time to send any required notice.
• Check the notice provision in your contract, try to include notice by email if possible, don’t rely on timely mail or costly delivery services.

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Do you have a tax lien filed against you? 27 Nov 2020, 3:49 pm

If you have a State or Federal tax lien filed against you or your business, it may be impacting your ability to borrow, buy or sell real estate, or to land a job. Call us to discuss your options to have the lien withdrawn, released, or discharged from your property. Don’t allow the existence of the lien to put off your plans to move forward in life. If you owe taxes but don’t have a lien filed against you yet, call us to discuss your options to avoid the lien so that you can avoid the draconian effects of having one filed against you or your business. Take advantage of the opportunity to avoid the lien as it is easier to avoid it than to have it removed after it is already filed. You have options. Call us today.

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Welcome to LMCH&P Blog 11 Sep 2020, 3:18 pm

LMCH&P is approaching our 20^th anniversary of starting our law practice in Owings Mills (in 6 months). The Firm has grown significantly in these years, in attorneys, office space, experience and affiliates in the legal and business community. 2020 has been a challenging year, new ways of working together, new ways of communicating with clients and fellow attorneys, new issues confronting our clients. We will continue to adapt and learn, building our firm for the next 10 years and beyond.

Despite these challenges, LMCH&P has continued to stay very busy, helping clients deal with problems and to take advantage of business opportunities as they arise. We have built a wide network of business and legal contacts, such as accountants, commercial realtors, bankruptcy and other attorneys outside of our practice areas, title companies, insurance agents, etc. We are always looking for ways to expand our network of professionals in the Baltimore Area and beyond.

We plan to use this Blog to let clients, attorneys and friends see what we are up to, focus on some areas of our law practice and answer questions about engaging the firm. Please contact us with any questions or legal needs you may have.

Neil Levy, Esq.

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