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Maryland Real Estate Contracts Updates: The Changes You Need to Know

26 Oct, 2022

Author: Velocity Title’s Co-Founder, G. Russell Donaldson, Esq.

2022 is bringing a lot of changes to the real estate industry and one of them is a new Residential Contract of Sale for Maryland. The full scale of changes is very extensive, but we can still dive into some of the most impactful areas you need to be aware of.

The first thing to note in the new Contract is that it has been organized into seven main subject matter areas:

  • General Contract Provisions
  • Payment of the Purchase Price
  • Property Condition and Inspections
  • Property-Specific Disclosures
  • General Disclosures
  • Transfer of Title and Closing
  • Breach of Contract and Dispute Resolution

(Source: Maryland Realtor ©)

As with the prior contract, each of these major subject matter areas contain a series of paragraphs for relevant provisions. One of the most frequently disputed issues resulting from the prior contract and addenda was the “AS-IS” Addendum.

AS-IS Addendum

The prior As-Is Addendum was confusing and frankly poorly constructed in its language and it led to Buyer Agents often being aggressive in seeking repairs from unsuspecting sellers. Buyers had no contractual rights to seek these repairs but because the language granted them the right to terminate, sellers would often accept the buyers’ demands for repair despite that the parties intended an AS-IS agreement.

The new AS-IS Addendum is much more akin to a “Feasibility Study Addendum” where a buyer may terminate for generally being dissatisfied with the results of an inspection of the property without the need to identify any specific issue of dissatisfaction. Additionally, the new language allows for the parties to knowingly engage in additional negotiations over repairs should the buyer want any.

Post-Settlement Occupancy Agreement

Another important area of change for real estate professionals to be aware of is the Post-Settlement Occupancy Agreement. Many agents commonly refer to this agreement as a “Rent-back Agreement.” I applaud the change here as I have never liked the prior language or its application where a buyer shall remain in the property for a period of time after closing. Using the prior language under Maryland Law the parties were creating a Landlord/Tenant scenario.  In doing so the agreement afforded the parties to certain Landlord/Tenant rights and obligations under Maryland Law. This sometimes resulted in legal disputes where the court would apply Landlord/Tenant law where the parties did not intend there to be a Landlord/Tenant relationship. The new Post-Settlement Occupancy Agreement cures this defect by making clear that there is no Landlord/Tenant relationship but instead the buyer is granting the seller a mere license of occupancy for up to sixty (60) days. The sixty (60) day limit could be extended for cash transactions. However, on transactions requiring financing, most lenders provide that the buyers must take occupancy on an owner-occupied loan within sixty (60) days.

Inclusions/Exclusions and Utilities Addendum

The final issue we should cover is the new Inclusions/Exclusions and Utilities Addendum. The reason is because one of the most frequent points of interest and conflict to buyers and sellers— and one of the areas where agents found themselves responding to a Real Estate Commission Complaint—was with Solar Panels. What most real estate professionals are unaware of is that in many cases attached Solar Panels have been financed by the Solar Panel company. In those cases, the Solar Panel company records a lien against the property. This lien must be closed out and paid off at closing—which in many cases the sellers were unprepared to pay. Additionally, where the panels are leased then the buyers must agree to assume the lease.

The new Addendum now has a specific provision entitled “Leased Items” that include Fuel Tanks, Solar Panels and Other Items. Here the sellers will state their intentions as to terminating the lease or transferring the lease to the buyers.

As stated above there are several additional changes of interest in the new Contract but there is not enough room here to hit them all. For any questions related to the new Maryland Contract feel free to reach out to Velocity Title’s attorney at [email protected] or 301.805.2900.

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