Maryland’s Tenant Right of First Refusal: A Guide for Landlords

On October 1st 2024, Maryland’s new Tenant Right of First Refusal law went into effect, introducing significant changes for landlords planning to sell their rental properties. This law mandates that tenants be given the opportunity to purchase the property they are renting before it is sold to any other buyer. Understanding these new requirements is essential for landlords to ensure compliance and avoid legal complications.

What Does the Law Require Landlords to Do?

1. Notify the Tenant in Writing
   Before putting the property on the market or negotiating with other buyers, landlords must provide written notice to their tenant(s) of their intent to sell. The notice must include key information, such as:

• The landlord’s intention to sell the property.
• The tenant’s right to make an offer to purchase.
• The timeframe for the tenant to respond.

This notice must be sent via a method that ensures proof of delivery, such as certified mail.

2. Provide a 30-Day Exclusive Negotiation Period
   Tenants have an exclusive 30-day period to negotiate and submit an offer to purchase the property. During this time, landlords are prohibited from entering into discussions or agreements with other potential buyers. The tenant’s offer does not need to match the landlord’s initial asking price but must be made in good faith.
3. Offer a Right to Match Lower Third-Party Offers
   If the tenant declines to purchase the property during the exclusive negotiation period, and the landlord subsequently receives an offer from a third party that is at least 10% lower than the lowest price offered to the tenant, the landlord must give the tenant the opportunity to match that offer. Tenants then have an additional opportunity to purchase the property under the same terms offered by the third party.
4. Maintain Documentation
   Landlords are required to keep detailed records of all communications with tenants regarding the sale of the property. This includes copies of the written notice, proof of delivery, and any offers or counteroffers exchanged during the process.

Penalties for Non-Compliance

Failing to comply with the Tenant Right of First Refusal law can result in legal challenges and delays in the sale of the property. Tenants may have the right to seek remedies through the courts, which could include forcing the landlord to honor the right of first refusal or compensating the tenant for damages.

Best Practices for Landlords

To ensure a smooth property sale, landlords should:

• Consult with legal and real estate professionals to draft compliant notices.
• Clearly outline the terms of sale in the initial notice to tenants.
• Keep an open line of communication with tenants throughout the process.
• Familiarize themselves with all aspects of the law to avoid inadvertent violations.

While the Tenant Right of First Refusal adds new steps to the property sale process, it also provides a structured and transparent framework. If you have questions or need help with the new law, reach out to an attorney at Federal Title & Escrow Company at attorneys@federaltitle.com.