Sale by Landlord
The Renters' Rights and Stabilization Act of 2024 establishes procedures that allow tenants to negotiate the purchase of their rental property before it is offered for sale to the public or a third party.
Tenant’s Exclusive Negotiation Period
Before offering a residential rental property for sale, the property owner must notify the tenant in writing of their right to submit an offer to purchase the property. The notice must follow the form specified by the Department of Housing and Community Development and:
- be delivered by First Class mail with a certificate of mailing, or a delivery service providing delivery tracking and confirmation;
- contain the terms that the owner would agree to incorporate in a contract of sale with the tenant;
- indicate that the notice is an offer to purchase and is not intended as a binding contract of sale; and
- indicate the deadline for the tenant to submit an offer to purchase, including the duration of the tenant’s exclusive negotiation period.
The property owner must also send a copy of the notice to the Office of Tenant and Landlord Affairs (OTLA).
Once notified of their right to purchase the property, an exclusive negotiation period allows the tenant to negotiate exclusively with the owner. During the exclusive negotiation period, a tenant may submit an offer to purchase the property or affirmatively decline the offer. If the tenant declines to make an offer or does not respond, the owner can proceed to sell the property publicly.
If the tenant is interested in purchasing the property, they have 30 days to submit an offer. If the tenant submits an offer, the owner must:
- Accept the offer, if the offer contains the same or more favorable material terms as those contained in the notice, or
- Submit a counteroffer, if the tenant’s offer contains terms that deviate from the terms of the notice.
If the owner submits a counteroffer, the tenant must respond to counteroffer within 5 days. The tenant may accept or reject the counteroffer. If the tenant does not respond within 5 days, the counteroffer is considered rejected, and the owner must notify OTLA.
If multiple tenants submit offers, the owner can choose the most favorable one without liability to other tenants. The negotiation must be done in good faith, following standard real estate practices, and cannot impose unreasonable restrictions like financing limitations or inspection rights.
Read the Law: Md. Code, Real Property § 8-119
Right of First Refusal
Before a residential rental property can be sold, any tenant or group of tenants of the property have the right of first refusal to purchase the property. The right of first refusal means that the tenant or group of tenants has the chance to purchase the property before the owner can sell it to someone else. This right applies if the owner accepts a third-party offer that is 10% lower than the price offered to the tenant in any previous notice, offer, or counteroffer during the exclusive negotiation period or if the owner receives an unsolicited offer without having listed the property for sale.
If the owner receives an offer to purchase the property from a third party under either of these circumstances, the owner is prohibited from accepting the offer until:
- the owner provides written notice to the tenant of the tenant’s right of first refusal and
- the tenant has an opportunity to exercise the right of first refusal within 30 days after receipt of the notice.
Once notified, tenants can match the third-party offer before the sale proceeds. If the tenant matches the offer, the owner must accept it. If multiple tenants submit offers, the owner can select the most favorable one. If the tenant does not act within the timeframe, their right of first refusal is waived, and the owner can proceed with the sale.
If the owner accepts the tenant’s offer to purchase but the contract is terminated before settlement, the tenant’s right of first refusal is waived and the owner must notify OTLA. If a tenant does not deliver an offer to purchase, the tenant’s right of first refusal is considered waived and the owner may accept the third-party offer.
Read the Law: Md. Code, Real Property § 8-119
Exclusions
A tenant’s rights of an exclusive negotiation period and first refusal do not apply to the following:
- transfer of title to a family member of the owner;
- transfer of title to a business entity wholly owned by the owner;
- transfer of title through a court order (including foreclosure, tax sale, sale by court-appointed trustee, etc.);
- transfer by a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust;
- transfer of title through a will, trust instrument, or inheritance;
- transfer of bare legal title into a revocable trust;
- transfer of title to the State or a local government;
- transfer of title in lieu of foreclosure of a mortgage or deed of trust;
- transfer of title through a court order, receivership, or court-approved settlement;
- transfer of title through a bankruptcy court order or sale by a bankruptcy trustee or debtor in possession;
- gift transfer of title to a tax-exempt nonprofit organization, or
- transfer of title by a public housing authority.
- residential rental property with four or more individual dwelling units
Read the Law: Md. Code, Real Property § 8-119
Penalties and Liability
An owner who violates a tenant’s right of exclusive negotiation period and first refusal can be fined up to $1,000 per violation. After a sale between a tenant and owner is finalized, any liability for failing to comply with these provisions remains with the owner, not the property.
Read the Law: Md. Code, Real Property § 8-119
Purchase of Leased Property
If the landlord sells the property and the purchaser has actual or constructive notice that it is leased to a tenant, the purchaser must honor the provisions of the lease. Where the tenant is in possession of the premises, the purchaser is considered by law to have notice of the lease. The rights and responsibilities of tenant and new owner are the same as existed between tenant and former owner.
Read the Law: Md. Code, Real Property § 8-101
Tax Sale
If the landlord does not pay their property taxes or utility bills, the county can sell the property to recover the money owed. More information on tax sales. After the property is sold, the purchaser (Plaintiff) who bought the property can take possession through a foreclosure process. During the foreclosure process the Plaintiff must send a written notice to tenant.
When the tenant's identity is known to the Plaintiff, the notice must:
- be sent by certified mail, postage prepaid, return receipt requested, and
- contain a copy of the complaint.
When the tenant's identity is not known to the Plaintiff, the notice must:
- be sent to each separately leased area of the property by first-class mail, postage prepaid, addressed to "occupant," and
- the envelope must be prominently marked on the outside with the phrase "Notice of Action to Foreclose," and
- contain a copy of the complaint.
The notice must have the following statement in conspicuous boldface type: "If the unpaid taxes, together with costs and expenses, are not paid, the court may enter a judgment foreclosing the right of redemption that would terminate your lease and right to occupy the property. You have the right to pay the unpaid taxes, together with costs and expenses, and avoid lease termination and eviction. A judgment foreclosing the right of redemption could be entered within the next 90 days and at that time you could be evicted or required to vacate the property."
If the Plaintiff files the action before final ratification of the sale, failure of a tenant to receive notice does not invalidate the sale.
After judgment foreclosing the right of redemption is issued, the Plaintiff can take possession of the property. Plaintiff must notify any tenant at least 30 days prior to taking possession of the property. The notice must be in writing.
Read the Law: Md. Code, Tax-Property § 14-836