A Guide for Landlords: Understanding a Tenant’s Opportunity to Purchase

BY TAYLOR KITZMILLER, ESQ.

The Renters’ Rights and Stabilization Act (HB 693) outlines specific procedures that landlords must follow when they wish to sell a property occupied by tenants. Below is a step-by-step guide for landlords to help ensure compliance under three key scenarios:

Scenario 1: Selling the Property (Pre-Listing)

If the landlord intends to sell the property, they must follow these steps:

1. Provide Written Notice: Notify each tenant of the intent to sell, providing the material terms (price, conditions, etc.) of the sale, using the NOTICE OF INTENT TO SELL AND TENANT’S EXCLUSIVE NEGOTIATION PERIOD form, Appendix A.

2. Submit Notice to Office of Tenant and Landlord Affairs: A copy of the notice must also be submitted to the Office of Tenant and Landlord Affairs (“OTLA”) through the Right of First Refusal Portal.

3. 30-Day Negotiation Period: The tenant has 30 days to submit an offer to purchase the property under the terms outlined in the notice.

4. Counteroffer (if necessary): If the tenant’s offer does not meet the stated terms, the landlord must respond with a counteroffer. The tenant then has 5 days to accept or reject the counteroffer. The landlord should use the COUNTEROFFER form, Appendix B, to outline the terms of the counteroffer.

5. Proceed with Sale: If the tenant declines or does not respond within the 30-day period (or to a counteroffer within 5 days), the landlord is free to sell the property to a third party.

6. Report Outcome: Notify OTLA of whether the tenant exercised their rights.

Scenario 2: Offer After Failed Tenant Negotiation

If the landlord and tenant fail to reach an agreement and a subsequent offer is received from a third party at a price that is at least 10% less than the lowest price previously offered to the tenant:

1. Notify Tenant Again: The landlord must notify OTLA and the tenant of this new offer, giving the tenant another chance to purchase the property at the lower price, using the NOTICE OF INTENT TO SELL AND TENANT’S RIGHT OF FIRST REFUSAL, Appendix C.

2. 30-Day Right of First Refusal: The tenant has 30 days to submit an offer that matches the terms of the third-party offer.

3. Proceed with Sale: If the tenant declines or does not respond within the 30 days, the landlord can proceed with the sale to the third party. If the tenant delivers an offer at the same price as the thirdparty offer, the landlord must accept the offer.

4. Report Outcome: As before, the landlord must inform OTLA of whether the tenant exercised their rights.

Scenario 3: Unsolicited Offer to Purchase

If the landlord receives an unsolicited offer from a third party to purchase the property:

1. Notify Tenant: The landlord must provide notice to the tenant and OTLA about the offer using the NOTICE OF INTENT TO SELL AND TENANT’S RIGHT OF FIRST REFUSAL form (Appendix C).

2. 30-Day Right of First Refusal: The tenant has 30 days to match the third-party offer.

3. Proceed with Sale: If the tenant does not respond or declines to match the offer within 30 days, the sale to the third party can proceed. If the tenant delivers an offer at the same sales price, the landlord must accept the offer.

4. Report Outcome: Notify OTLA of the tenant’s decision. OTLA has created the standardized notice forms (Appendices A, B, and C) that are applicable to each scenario mentioned above. All notices must be sent to the tenant by first-class mail with a certificate of mailing or tracked delivery service. Property owners should use the Right of First Refusal Portal on the Department of Housing and Community Development’s website to access the notices and confirm compliance with the provisions of the Renters’ Rights and Stabilization Act.

Additional Information

• Exemptions to the tenant’s opportunity to purchase include properties with four or more units, transfers to family members or business entities owned by the landlord, and transfers as part of foreclosures, estate administrations, or court orders.

• A “tenant” is an individual who has occupied a residential rental property for at least 6 months and who is a named lessee in the written lease.

• Landlords who fail to follow these procedures can face fines up to $1,000 per violation

Taylor Kitzmiller, Esq. is Associate Counsel at Maryland REALTORS®.