The copious home sale contract

If you’ve recently bought or sold a home in Montgomery County MD, you probably recognized that the home sale contract was quite lengthy. In fact, depending on the situation and additional addenda, a contract can be fifty-plus pages. It seems as if that the home sale contract gets fatter as every year passes. It’s no wonder why I am often asked “Why are home sale contracts long winded?”

Why is our home sale contract so long? Our local home sale contract has a number of required addenda and disclosures. There is a simple reason for this, but let’s look at the foundation and need for the contract.

It’s important to mention that property sale contracts around the country are not the same. Every jurisdiction has their own criteria for a home sale contract. A recent client who relocated from New Jersey shared their home sale contract, which was a fraction of the size of our local contract. Likewise, a colleague asserted the same about the property contracts in Arizona, where he was licensed for a number of years.

Property sale contracts go back into antiquity. Most likely, ancient contracts formed a basis of ancient record keeping. These ancient contracts were also “promises” that were enforced in some manner that was keeping with the time. For example, The History Blog (thehistoryblog.com) tells the account of the Mogao Caves which are located in the Gobi Desert and date back to the fourth century. One of the caves held a cache of financial documents from medieval China, including property sale contracts and records!

According to the legal historian A. W. B. Simpson, modern English contract law has roots in the middle ages (A History of the Common Law of Contract: The Rise of the Action of Assumpsit; Clarendon Press; 1987). The contract was founded in the concept of “assumpsit,” which was the basis for resolving “broken promises.” Assumpsit allowed individuals to bring claims of broken promises to local courts. Although the practice was traced back to the thirteenth century, court hearings were routine in the sixteenth century. This model became the basis for enforcing a private contract.

It wasn’t until 1677 when the English Parliament enacted “An Act for the Prevention of Frauds and Perjuries,” known today as the Statute of Frauds. According to Russell Decker, the Parliament enacted the law that required contracts to be written, because parties obliged by a contract were not allowed to provide testimony in court (The Repeal of the Statute of Frauds in England; American Business Law Journal; 1973; 11:1 p55). The written contract was the “witness” to a promise. However, most of the Statute of Frauds was mostly repealed in England in 1954.

The Statute of Frauds is still alive and well in the US and the basis for the real estate contract in Maryland. Statute of Frauds is a subtitle of the Real Property Act of the Code of Maryland. Section 5-104 Executory Contracts states: “No action may be brought on any contract for the sale or disposition of land or of any interest in or concerning land unless the contract on which the action is brought, or some memorandum or note of it, is in writing and signed by the party to be charged or some other person lawfully authorized by him.”

So ok, home sale contracts need to be in writing, but why are our contracts lengthy? The reason is because many of the addenda and disclosures are generated because of statutory requirements to provide specific information in a contract of sale. Besides the expected list of notices and disclosures (such as property condition), there is a compendium of additional required notices and disclosures that is found in Code of Maryland Miscellaneous subtitle of the Real Property Act section 14-117 Contracts for Sale of Property. Additionally, jurisdictions around the state include additional addenda and notices for home sales within the respective county and/or locality. Of course, Montgomery County has added a number of disclosures and notices (such as the Utility Cost and Usage History Form and the Real Property Estimated Tax).

Make sure your agent is knowledgeable about the jurisdiction in which you are buying or selling. As a buyer, you need to make sure you receive all the relevant notices and disclosures. As a seller, you may incur a fine for non-disclosure of certain notices.

Original published at https://dankrell.com/blog/2018/09/20/copious-home-sale-contract/(opens in a new tab)

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

December 26, 2014November 23, 2021

Maryland Lead Program rental property registration

Beginning January 1^st, if you own a rental property located in Maryland that was built before 1978, you must register with the Maryland Department of the Environment (MDE). The new law extends the existing registration requirement for homes used as rental units built before 1950. The registration fee is $30 per unit, and must be renewed annually prior to December 31^st.

Since the registration of rental properties built before 1978 began July 1^st, many landlords and property managers have been planning to be in compliance by the New Year. However, many home owners, whose selling strategy includes a simultaneous rental listing, may not be aware of the new law; which could not only affect a potential lease, but may also incur potential penalties and/or liability for non-compliance. The coinciding listing strategy is an artifact from the market following the housing downturn; when many listed homes that did not sell were extemporaneously rented as a means to ride out the market, with the intention to sell at a later time when prices increased. For many home sellers today, a simultaneous rental listing is part of a selling strategy as a means to allow them to move (either by selling the home or by renting it to a tenant).

It is not uncommon that some of these sale/rental home listings are vacant. If you find yourself in this category, consider that you’re required to have the property registered with the MDE and lead inspected by an MDE accredited inspector before your tenant moves in. If the inspection requires any remediation to meet Program requirements, all work must be performed by a MDE accredited contractor.

If you’ve never registered with MDE Lead Poisoning Prevention Program, you need to contact the Rental Registry Division (410-537-4199) to be assigned a “tracking number.” A list of accredited inspectors and accredited contractors can be found on the “Lead Poisoning Prevention Program” website (www.mde.state.md.us/lead). Registration likely began early so as not to create bottlenecks and delays; however, if there is a chance your home could become a rental sometime during the New Year, you might consider not waiting until the last minute.

A July 1^st MDE press release (news.maryland.gov/mde) emphasized that, “Exposure to lead is the most significant and widespread environmental hazard for children in Maryland. Children are at the greatest risk from birth to age 6, while their neurological systems are developing. Exposure to lead can cause long-term neurological damage that may be associated with learning and behavioral problems and with decreased intelligence.” And although lead poisoning cases decreased about 98% since the enactment of Maryland’s 1994 Lead Risk Reduction in Housing Act, a significant number of new lead poisoning cases were linked to homes built before 1978. The MDE cited a 2011 study, which found an 80% “likelihood” of lead paint in properties built between 1950 and 1960. The MDE also cited data analysis that almost half of the confirmed cases of initial lead poisoning reports from the last two years in Maryland counties outside of Baltimore City, “involved children living in post-1949 rental housing.” The MDE states, “Failure to register, certify or follow approved lead-safe work practices may subject property owners to thousands of dollars in fines and potential lawsuits.”

Details about the lead registration requirements and further information about the MDE Lead Poisoning Prevention Program can be obtained from the website (https://mde.maryland.gov/programs/LAND/LeadPoisoningPrevention/Pages/LeadRegistration.aspx).

Original at https://dankrell.com/blog/2014/12/26/maryland-lead-program-rental-property-registration/

May 24, 2013June 30, 2019

New smoke detector technology in the home

Among some of the new disclosure requirements for home sellers here in Maryland include those regarding smoke detectors. Currently, home sellers are required to disclose whether or not smoke detectors “provide an alarm in the event of a power outage.” However, there are new disclosure and updating requirements.

Effective July 1^st, home sellers will be required to disclose to home buyers if installed smoke detectors exceed ten years of age, and if installed smoke have a sealed 10-year battery. Approved by the Governor on May 16^th, HB 1413/SB 969 was described by the Maryland Association of Realtors® Government Affairs Committee as having to provide such disclosure on an updated Maryland Property Condition Disclosure Form. The summary also describes requirements for home owners, whose systems malfunction when tested or who have smoke detectors and battery operated systems older than ten years of age, to update older smoke detectors to new sealed battery systems. Additionally, hardwired systems are required to be updated every ten years or at time of malfunction. Additionally, landlords of one and two unit dwellings are required to upgrade to the new sealed battery systems when there is a change of occupancy or if current smoke detectors malfunction; in the case of buildings that contain more than two units, the legislation states that responsibility falls on the occupants to test and notify the landlord to replace smoke detectors (mdrealtor.org).

Although smoke detectors have been around for some time now, the technology is changing and is the main focus of the Maryland Smoke Alarm Technology Task Force Final Report (available at the Montgomery County Fire and Rescue Service website; montgomerycountymd.gov). The Task Force was requested by the Maryland Fire Marshall to review smoke alarm data to determine strategies to reduce fire related deaths as well as identifying technology to improve smoke detectors.

One of the top recommendations made by the Task Force was to have battery operated smoke detectors “be the type that contains a long life sealed battery as its power source.” Other recommendations include: the requirement for all State jurisdiction to adopt the International Residential Code (IRC) requirement to update smoke detectors whenever applications for permits are submitted; the requirement of installation of smoke detectors in all bedrooms and every level of existing homes; and the requirement for home sellers to provide smoke detectors that meet the building code.

Even though the smoke detector has been a regular feature of the home for many years, most home owners don’t understand the technology. There are currently two fundamental types of smoke detectors, the ionization type and the photoelectric type: The ionization smoke detector contains a very small quantity of radioactive material inside a component known as a sensing chamber, and “provides a somewhat faster response to high-energy or open flaming fires, due to the fact that these types of fires generally produce smaller aerosols.” While photoelectric type “responds faster to the aerosols generated by low-energy or smoldering fires, since these types of fire tend to produce larger particles.” While many experts recommend that homes have both types of detectors, new technology smoke detectors will combine both types of detectors (from the Maryland Smoke Alarm Technology Task Force Final Report).

In addition to properly installed smoke detectors, experts recommend to plan and practice escape routes to reduce the time needed to escape a burning home.

By Dan Krell
Copyright © 2013

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

September 20, 2012

Need to know when buying a new home that is built in Maryland

by Dan Krell © 2012
DanKrell.com

In today’s housing market, chances are that you may looking to buy a new home rather than a resale;

be prepared and know what you can reasonably expect from the home builder, as well as understanding how to resolve problems with the builder. Whether or not you have a licensed real estate agent representing you in the transaction; the Maryland Office of the Attorney General Consumer Protection Division provides consumers guidance, pertinent information and other resources to dealing with a home builder and buying a new home built in Maryland.

Unfortunately, many home buyers believe they do not need representation when buying a new home. Because the new home builder reps are often friendly, helpful and may appear to be on your side in the transaction; it is understandable how a home buyer may misconstrue the home builder’s sales persons’ loyalties. However, home buyers must recognize that the builder’s sales people represent the home builder.

Before engaging a home builder and their sales people, you should check out whether or not the home builder is registered with the Home Builder Registration Unit. Additionally, unless the home builder hires a licensed real estate agent to represent them, the home builder’s sales reps must also be registered with the Home Builder Registration Unit.

Before entering into a contract with a home builder,

you might consider reading the consumer information booklet that home builders are required to provide consumers before entering into a new home sales contract. The booklet is provided by the Home Builder Registration Unit of the Maryland OAG Consumer Protection Division and discusses: choosing a builder, the contract, how your deposit is protected, custom home contracts, construction of your home, and resolving problems.

The Maryland OAG Consumer Protection Division oversees a Home Builder Guaranty Fund “that allows consumers to seek compensation for losses resulting from an act or omission by a registered builder who constructs a new home for a consumer.” You may seek compensation from the guaranty fund if your home builder is registered with the Home Builder Registration Unit and you entered into a contract for a new home built in Maryland after January 1, 2009.

Payments from the Home Builder Guaranty Fund are to cover actual loss that result from “an act or omission by a registered builder as determined by the Consumer Protection Division or a court of competent jurisdiction…” The Guaranty Fund is not meant to cover such items as: attorney fees, punitive damages, interest, court costs, personal injury, or subsequent damages. The “actual loss” that is covered refers to “the costs of restoration, repair, replacement or completion that results from the incomplete construction of a new home, a breach of an express or implied warranty, or a failure of the builder to meet certain construction standards or guidelines.”

Guaranty Fund claims must be made “within 2 years after the consumer discovered or should have discovered the loss or damage or within 2 years after the new home warranty expires, whichever comes first. If the consumer files a claim against the home warranty plan, he or she must file the claim against the Guaranty Fund within 4 months after that claims process is exhausted.”

For further information on the Home Builder Registration Unit, consumer information booklet, and the Home Builder Guaranty Fund – visit the Maryland OAG Consumer Protection Division website on home builders (www.oag.state.md.us/Homebuilder/index.htm).

More news and articles on “the Blog”

This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of September 17, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

November 17, 2011July 25, 2019

Attitudes towards business and the housing market

Everyone seems to be fixated on resolving the housing market through direct intervention. However, it is increasingly apparent that people are forgetting the symbiotic economic system that housing belongs. Even local attitudes towards business may affect local housing markets.

First let’s consider housing data reported for October 2011 by Real Estate Business Intelligence, LLC and Metropolitan Regional Information Systems (MRIS), which indicates that sold prices for homes in Montgomery County decreased 3.2% compared to September 2011 and decreased 6.5% compared to October 2010 (the same time last year). And although sold prices for homes in Loudon and Fairfax counties decreased from October 2011 compared to the previous month, the median sold price for these two Virginia counties increased compared to October 2010 (an increase of 2.5% and 2.3% respectively).

Maybe Donald Trump knows something we don’t; the high profile real estate investor purchased a Loudon County golf course in 2009, and more recently a Charlottesville winery.

Next consider that some high profile companies have been making their preferences clear, as they choose Virginia over Maryland. Anita Kumar reported in her October 27th Washington Post blog (McDonnell, pursuing Lockheed Martin, says Maryland is less friendly to business) that Maryland has lost two defense contractors to Virginia. And recently, Virginia is trying to persuade Lockheed Martin (one of Montgomery County’s largest employers) to move there too; this courtship became widely publicized after a brouhaha erupted when the Montgomery County Council considered passing a resolution asking Congress to cut defense spending in favor of social spending. Additionally, Steve Contorno of the Washington Examiner reported just last week (McDonnell woos Bechtel Corp. away from Maryland; 11/17/2011) that the “International construction and engineering giant Bechtel Corporation” will move its global operations headquarters from Frederick to Reston.

Another consideration is the demographic change in Montgomery County, which may be one of the main reasons for big-box retailer Wal-Mart wanting to expand within the county. Reported by Carol Morello and Ted Mellnik of the Washington Post (Incomes fall in Montgomery and Fairfax counties; September 22, 2011), the once considered “posh” county now has a lower median income than Prince William County, VA, which is home to Potomac Mills Outlet Mall.

As the housing solution continues to elude many, along comes the National Association of Realtors (realtor.org) publicizing a “2011 Five Point Housing Solutions Plan.” The plan is a result of a policy meeting (New Solutions for America’s Housing Crisis ) conducted by the Progressive Policy Institute (progressivepolicy.org) and Economic Policies for the 21st Century (economics21.org).

Looking more like a “five point housing suggestion,” NAR’s plan offers these recommendations: 1) Not to weaken housing any further; 2) Support communities by reducing foreclosures; 3) Open mortgage markets to “foster new demand among responsible homebuyers”; 4) Support for a secondary mortgage market with government participation; and 5) A call for a national housing summit to “articulate a new housing policy.”

Much like a doctor’s patient seeking pain relief caused by a systemic problem, housing relief through direct intervention may only be temporary. Although some have found the solution to a faltering housing market and other economic ailments tied to jobs, others continue to be confounded by the issue.

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

by Dan Krell © 2012 DanKrell.com

In today’s housing market, chances are that you may looking to buy a new home rather than a resale;

Before entering into a contract with a home builder,

For further information on the Home Builder Registration Unit, consumer information booklet, and the Home Builder Guaranty Fund – visit the Maryland OAG Consumer Protection Division website on home builders (www.oag.state.md.us/Homebuilder/index.htm).

by Dan Krell © 2012
DanKrell.com