Yesterday, the Howard County Association of Realtors held their 2012 Legislative Update at the Slayton House. Many local officials were on hand to answer some tough questions. A special session is eminent with the many unresolved issues. Those issues include the Mortgage Interest Deduction, Tax on Property Management Services, Real Estate Brokerage Reform, Real Estate Agency Legislation and more.
Below please find the outstanding issues provided by the Maryland Association on Realtors. Highlighted links provide details on each Bill and actions by both House and Senate.
2012 Legislative Priorities
Mortgage Interest Deduction
MAR opposed any reduction in the mortgage interest deduction (MID). Under the Governor’s Budget Reconciliation Bill, itemized deductions would have been reduced by 10-20 percent for tax filers with an adjusted gross income exceeding $100,000. The mortgage interest deduction and the deductibility of state and local property taxes account for almost 70% of the itemized tax deductions taken by Maryland filers.
STATUS: Itemized deductions, including MID and property taxes, were not changed in the budget reconciliation bill. However, because the Legislature adjourned without passing a revenue measure for the budget, it is likely that a special session will be called before July 1st to complete action on a revenue bill. While unlikely, it is possible that the proposal to reduce deductions could be revived.
Tax on Property Management Services
Legislation was introduced to place a sales tax on property management and a number of other services. MAR opposed this legislation.
STATUS: This legislation did not pass.
Real Estate Brokerage Reform
Legislation making far reaching changes to real estate practice in Maryland was also considered this year. The legislation would have eliminated exclusive right to sell contracts in Maryland (the basis for the MLS), and would have limited brokerage agreements to 90 days, among other provisions. MAR opposed this legislation.
STATUS: This legislation did not pass.
Real Estate Agency Legislation
Legislation was introduced to clarify and redefine some of the agency categories now used in Maryland, and change some of the disclosure language in the agency disclosure form. MAR did not support this legislation.
STATUS: This legislation did not pass.
Sustainable Growth
The Governor proposed legislation to restrict new subdivision development on septic systems throughout Maryland. The legislation would have given the Maryland Department of Environment (MDE) and the Maryland Department of Planning (MDP) authority to approve creation of zoning overlays where septic subdivisions could and could not be developed. Although it became clear that there were not enough votes to defeat the bill, MAR joined a coalition of concerned groups to remove state approval for the local growth tiers.
STATUS: State approval authority was removed from the bill. As passed, the legislation will require local governments to define and develop growth tiers that will direct where major subdivisions using septic systems may be located.
Septic System Grants and Bay Restoration Fund
Under the Bay Restoration Fund, MDE provides 100% cost-differential grants for homeowners with failing systems living in Maryland’s Critical Area. The grants cover the cost of Best Available Technology (BAT) systems that have enhanced nitrogen removal technology. Authority for the 100% grants terminates at the end of 2012, and MAR sought legislation to continue the grant program with a more generous grant formula than MDE now provides. In addition, legislation was introduced to increase the Bay Fund fees. MAR opposed a consumption based fee, and preferred the recommendation of the Task Force to simply double the fee.
STATUS: Mandatory septic grant legislation did not pass. The Bay Restoration Fee was doubled from $30 a year to $60 a year (without a consumption based formula).
PlanMaryland
The Maryland Department of Planning (MDP) submitted a statewide development plan called PlanMaryland before the Legislature convened in January. MAR had submitted two comment letters expressing concern that PlanMaryland could override local planning decisions by allowing the state to deny permits and funding to local development projects. Other groups, including the Maryland Association of Counties (MACO), shared those concerns.
STATUS: MAR supported a MACO drafted bill to clarify that PlanMaryland cannot be used to deny permits and statutorily required funding to local governments. The legislation passed.
Stormwater Management Fee
Legislation was introduced to require local county governments to impose a stormwater management fee on all residential and commercial property. MAR opposed the bill, because counties already have authority to impose stormwater fees, and because many counties were already considering such actions given stormwater requirements imposed by the Environmental Protection Agency.
STATUS: Legislation passed requiring the ten Maryland counties subject to EPA stormwater requirements to impose a stormwater fee. The legislation gives local government discretion in creating the fee.
Real Estate Commission Regulatory Authority
Every ten years, the Real Estate Commission’s (REC) operations are reviewed and a written report is issued. The report is the basis for legislation which extends the REC’s regulatory authority. Without passage, the REC would no longer be able to function and issue real estate licenses. MAR supported reauthorization of the Real Estate Commission, but requested that the guarantee fund cap remain at $25,000.
STATUS: The REC’s reauthorization passed with an increase in the guarantee fund cap to $50,000. The Legislature increased the cap because it has been over 20 years since any change was made.
Real Estate Commission Continuing Education
The Real Estate Commission requested legislation to allow legal and legislative update classes more flexibility in the material presented to licensees, including court cases and legal trends. MAR supported the bill, which also allows electronic transmission of continuing education class certificates.
STATUS: This legislation passed.
Lead Paint
Just before the Legislature convened, the Maryland Court of Appeals overturned the property owner liability protections in the Reduction of Lead Risk in Housing law. As a result, property owners and property managers were subject to uncapped liability for any injuries resulting from elevated blood lead levels. Numerous bills were introduced to address this problem. In addition, a Lead Work Group met over the summer to examine whether sellers of owner-occupied housing should be required to conduct lead dust tests. Although the work group did not recommend point of sale dust tests for owner-occupied property, legislation was introduced which would have required such tests.
STATUS: Legislation passed creating liability protections for property owners; increasing the registration fees from $15-$30 for rental properties; requiring 1950-1978 rental properties to participate in the Lead Poisoning Prevention Program (by 2015); and giving MDE authority to mandate clearance tests for any properties subject to the EPA Renovation, Repair and Painting (RRP) Rule. Mandatory dust tests for owner occupied property sales did not pass.
Homestead Tax Disclosure Real Estate
Legislation was introduced that required real estate agents and brokers to disclose the Homestead Tax Credit to homebuyers for each property subject to the credit. The legislation also included a penalty for property owners who wrongly claimed the credit.
STATUS: Legislation passed with a penalty for homeowners who willfully misrepresent facts in order to claim the credit. The legislation does not require real estate agents to disclose the credit.
Foreclosures
A Task Force met last summer to discuss several issues related to foreclosures, including changes to the mediation program, property registration, and the creation of a safe harbor for licensed real estate agents who assist clients applying for short sale approvals. Legislation was introduced to require only mediation changes and the property registry.
STATUS: Legislation passed that creates a process to allow pre-foreclosure mediation, and a statewide registry of foreclosed properties.
Ground Rents
The Maryland Court of Appeals also ruled that a state law penalizing ground rent owners was unconstitutional. That law required ground rent owners to register the ground rent with the State Department of Assessments and Taxation (SDAT) or forfeit fee simple title. The Legislature considered legislation to create a more appropriate penalty for failing to register a ground rent with SDAT.
STATUS: Legislation passed that penalizes ground rent owners who fail to register a ground rent by prohibiting them from filing a lien or collecting rent.
Interest Rate on Security Deposits
Currently, property owners are required to return a security deposit to a tenant with at least a 3% annual interest rate. Unfortunately, most savings and checking accounts are well below 3% and have been for a long time. MAR supported legislation to require a security deposit to be returned to a tenant with the higher of a 1.5% flat rate, or a rate comparable to the U.S. Treasury Daily Yield Curve Rate as measured by the first of the year.
STATUS: This legislation did not pass.
