Agenda Item 8D
March 3, 2015
Action
MEMORANDUM
February 27,2015
TO:
County Council
.
FROM:
Robert
H.
Drummer, Senior Legislalive Attomeyt;j
Licensing of Rental
SUBJECT:
Action:
Bill 44-14, Landlord-Tenant Relations -
Housing Common Ownership Community Fees
Planning, Housing and Economic Development Committee recommendation
(3-0): enact the Bill with amendments.
.
Bill 44-14, Landlord-Tenant Relations
Licensing of Rental Housing
Common
Ownership Community Fees, sponsored by then Council Vice President Leventhal and
Councilmembers Floreen and Branson, was introduced on September 23, 2014. A public hearing
was held on October 21 and a Planning, Housing and Economic Development Committee
worksession was held on February 2.
Background
Bill 44-14 would require an owner of a dwelling unit
in
a common ownership community
to certify payment of common ownership community fees in order to receive a rental housing
license for the unit.
It
would also authorize the Director of Housing and Community Affairs to
deny, suspend, revoke, or refuse to renew a rental housing license for a dwelling unit in a common
ownership community if the owner fails to pay the common ownership community fees due for
the unit. Although the Bill would not replace the need for a common ownership community to use
the Courts to collect unpaid fees, the Bill would add an additional tool to encourage a unit owner
to pay these fees.
Public Hearing
Ilanya Branda, on behalf of the Montgomery Housing Partnership (©9-1O) and John
Driscoll, President of the Montgomery Village Foundation Board of Directors (©11-12) each
supported the Bill, but suggested that an applicant for a rental license be required to submit a letter
from the association stating that fees were paid instead of self-certifying. Ronald Bolt, speaking
for the Washington Metropolitan Chapter for the Community Associations Institute (©13-16) and
Vicki Vergagni, President of the Board of Directors for Glen Way Gardens Condominium (©17­
19) each supported the Bill, but suggested that an association be permitted to get.a rental license
revoked by submitting a statement of lien under the Maryland Contract Lien Law rather than
requiring a Court jUdgment. Alyson Meiselman, President of the Vistas at Washingtonian Woods
Condominium Association (©20) supported the Bill, but wanted more tools to enforce collection
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of unpaid fees. Lawrence Dorney (©21-22) supported the Bill as introduced. Tim Knobloch,
testifying for the Greater Capital Area Association of Realtors (©23-24) opposed the Bill arguing
that the Bill would encourage landlords to rent units without obtaining a license.
February
2 PHED
Worksession
Clarence Snuggs, DHCA Director, represented the Executive Branch.
Mr.
Snuggs
expressed concern that some owners who receive less rent than their mortgage payment might
choose to permit the unit to go to foreclosure if they
are
forced to pay back association fees to rent
the unit. Foreclosures lead to vacant units because FHA will not guarantee a mortgage loan on a
unit where the association revenue is insufficient to maintain the common areas. The Committee
agreed that foreclosures in common ownership communities cause significant problems for public
health and welfare in the County. Although the Bill would not eliminate this problem, the
Committee felt that
it
would help associations collect more fees. The Committee approved the
following amendments:
1.
permit an association to prove non-payment of fees with a recorded statement of
lien; and
2.
add a sentence limiting the fee an association can charge to certify payment of fees
to $25.
The Committee recommended (3-0) approval of the Bill as amended.
Issues
1.
What is the fiscal and economic impact of the Bill?
OMB estimated that the Bill would have no impact on revenues or expenditures. (©5-8)
DHCA would require a minimal amount of staff time to set up an internal process to record
information on unpaid common ownership association fees as part of their rental license system.
Finance estimated that the Bill would have no effect on the County's economy.
2. Should an association be able to prove unpaid fees by providing a recorded statement of
lien obtained under the Maryland Contract Lien Act?
The Maryland Contract Lien Act, MD Code, Real Property, §§14-201 through 14-206,
permits a common ownership association to obtain a statutory lien against the property for failure
to pay association fees without first obtaining a judgment in court if the association documents
permit it. Under the Maryland Contract Lien Act, the dwelling owner can file suit to contest the
lien after receiving notice from the association. This State law creates a simpler, less costly method
for an association to collect unpaid fees. Several speakers suggested that the Bill be amended to
permit an association to seek to have a rental license revoked or denied by DHCA by submitting a
statement oflien against the property obtained under the Maryland Contract Lien Act. Committee
recommendation (3-0): amend the Bill to permit the use of a statutory lien created under the
Maryland Contract Lien Act. See lines 31-39 at ©3.
3. Should the Bill be amended to limit the amount of fees an association can charge to certify
that association fees have been paid?
The Bill would require an owner to certify that fees have been paid in order to obtain a
rental license.
An
owner would have to obtain from the association a statement of proof of
payment to obtain a rental license. The Bill would not limit the amount of a fee an association
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could charge the owner for a proof of payment.
Committee recommendation (3-0):
amend the
Bill to limit the fee charged by the association to no more
than
$25. See lines 27-30 at ©2-3.
4. Should the Bill be enacted?
Unpaid association fees are a problem for common ownership communities because they
reduce the funds available for the maintenance of common areas. A failure to properly maintain
common areas can result in a loss of property values for all dwelling unit owners. While this Bill
would not guarantee payment of association fees, it is an additional tool that can be used to secure
payment from those owners who choose to rent their units. The Greater Capital Area Association
of Realtors opposed the Bill because, in their opinion, the Bill would encourage dwelling unit
owners to rent the unit without obtaining a license rather than ensuring payment of association
fees. While this is a potential unintended consequence, it is based upon speculation rather than
facts. It is also reasonable to assume that the Bill would result in more payment of fees rather than
owners violating the rental license law.
Committee recommendation (3-0):
enact the Bill with
the amendments described above.
This packet contains:
Bill 44-14
Legislative Request Report
Fiscal and Economic Impact statement
Testimony
Ilanya Branda, Montgomery Housing Partnership
John Driscoll
Ron Bolt
Vicki Vergagni
Alyson Meiselman
Lawrence Dorney
Tim Knobloch
Circle
#
1
4
5
9
11
13
17
20
21
23
F;\LAw\BILLS\1444 Licensing OfRentai Housing Common Ownership Community Fees\Action Memo.Docx
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Bill No.
44-14
Conceming: Landlord-Tenant Relations
- Licensing of Rental· Housing ­
Common Ownership Community
Fees
Revised: February 24, 2015 Draft No.
L
Introduced:
September 23,2014
Expires:
March 23,2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
-.:..::.No;:.:n~e'__~~---_
Ch. _ _, Laws of Mont. Co. _ _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Vice President Leventhal and Councilmembers Floreen and Branson
AN
ACT
to:
(1)
(2)
(3)
require an owner of a dwelling unit in a common ownership community to certify
payment of common ownership community fees in order to receive a rental housing
license for the unit;
authorize the Director of Housing and Community Affairs
to
deny, suspend, revoke,
or refuse to renew a rental housing license for a dwelling unit in a common
ownership community if the owner fails to pay the common ownership community
fees due for the unit; and
generally amend the laws governing the licensing of rental housing,
By amending
Montgomery County Code
Chapter 29, Landlord-Tenant Relations
Sections 29-1 and 29-19
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets))
* * *
Heading or defined term.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unqffected by hill.
The County Council for Montgomery County, Maryland approves the following Act:
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Bill
No.
44-14
1
Sec. 1. Sections 29-1 and 29-19 are amended as follows:
29-1. Definitions.
2
3
4
5
In
this Chapter, the following words and phrases have the following
meanings:
* *
Common ownership community:
(a)
*
6
7
8
a development subject to a declaration enforced by a homeowners'
association, as those terms are used in State law;
9
10
(b)
(c)
a condominium, as that term is used in State law; and
a cooperative housing project, as that term is used in State law.
11
12
Common ownership community fees
means fees charged
authorized to impose
~
1n:
the entity
~
fee on the owner or occupant of
~
housing unit in
13
common ownership community for services or the benefit of common areas in
the community.
14
15
* *
29-19. Licensing procedures.
(a)
*
16
17
To obtain a rental housing license, the prospective operator must apply
on a form furnished by the Director and must pay the required fee. If the
Director notifies the applicant of any violation of law within 30 days,
the Director may issue a temporary license for a period of time the
Director
finds
necessary to achieve compliance with all applicable laws.
18
19
20
21
22
23
24
* *
(e)
*
Common ownership communityfees.
ill
The Director must not issue or renew
~
rental housing license for
~
25
26
dwelling unit in
~
common ownership community unless the
owner certifies that the common ownership community fees for
the dwelling unit are no more than 30 days past due.
-2
f;\law\bills\1444 licensing of rental housing - common ownership community fees\bill
~
27
If a
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BILL
No. 44-14
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
Approved:
common ownership community decides to charge a fee to certify
that the common ownership fees for a dwelling unit have been
paid. the fee must
be
no more than $25.
ill
The
Director may deny, suspend, revoke, or refuse to renew
!!
housing rental license for
!!
dwelling unit in
!!
common ownership
community if the governing body of
!!
common ownership
community submits proof of
[[ill!
unsatisfied final judgment
against the owner for]] unpaid common ownership community
fees for the dwelling unit through:
(A)
a recorded statement of lien obtained under the Maryland
Contract Lien Act: or
!!U
ill
an unsatisfied judgment against the owner.
Each licensee must give the Department a current address for the receipt
of mail. If the Department sends first class or certified mail to the
licensee at the designated address and the mail is returned as
undeliverable, the Department may treat the mail as having been
received.
Craig
L.
Rice, President, County Council
Date
47
48
Approved:
Isiah Leggett, County Executive
Date
- 3­
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LEGISLATIVE REQUEST REPORT
Bill 44-14
Landlord-Tenant Relations
-
Licensing ofRental Housing
-
Common Ownership Community Fees
DESCRIPTION:
Bill 44-14 would require an owner of a dwelling unit in a common
ownership community to certify payment of common ownership
community fees in order to receive a rental housing license for the
unit.
It
would also authorize the Director of Housing and
Community Affairs to deny, suspend, revoke, or refuse to renew a
rental housing license for a dwelling unit in a common ownership
community if the owner fails to pay the common ownership
community fees due for the unit.
Common ownership communities are having problems collecting
association dues from dwelling unit owners who rent their unit.
The goal is to increase the payment of association dues to common
ownership communities.
Consumer Protection, CCOC, Housing and Community Affairs
To
be
requested.
To be requested.
To be requested.
To be researched.
Robert H. Drummer, Senior Legislative Attorney, 240-777-7895
To be researched.
PROBLEM:
GOALS
AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICAnON
WITHIN
MUNICIPALITIES:
PENALTIES:
Loss of rental license.
F:\LAw\BILLS\I444 Licensing Of Rental Housing - Common Ownership Community Fees\LRR.Doc
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ROCKVILLE, MARYLAi'lD
MEMORANDUM
October 24, 2014
TO:
FROM:
~(t
Craig Rice, President, County Council
Jennifer A. Hughes, Director, Office ofManagement
Joseph F. Beach., Director, Department of Finance
FEIS for Council Bill 44-14 Landlord Tenant
Housing· Common Ownership Fees .
SUBJECT:
RelatiollS~
of Rental
Please find attached the fiscal and economic impact statements for the above­
referenced legislation.
JAH:fz
cc: Bonnie Kirkland, Assistant Chief Administrative Officer
Lisa Austin, Offices ofthe County Executive
Joy
Nurmi, Special Assistant
to the
County Executive
Patrick Lacefield, Director, Public Infonnation Office
Joseph F. Beach, Director, Department of Finance '
Eric Friedman, Director, Office ofConsumer Protection
David Platt. Department of Finance
!
Helen Vallone, Office of Management and Budget .
Alex Espinosa, Office of Management and Budget
Felicia Zhang, Office of Management and Budget
Naeem Mia, Office of Management and Budget
®
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Fiscal Impact Statement
Bill 44-14
&
Landlord Tenant Relations - Licensing ofRentallIousing - Common
Ownership
F~
] . Legislation Summary
The purpose of this legislation is to ensure that the owner !landlord of a dwelling unit in a
common ownership community are current in paying the common ownership community
fees. This
bill
would prohibit the o\\"ner!landlord of a dwelling unit
from
receiving
a
rental housing license from the Department of Housing
and
Community Affairs (DHCA)
if the owner/landlord fails
to
pay the common qv.nership community fessthat are due.
2.
An
e~1imate
of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source of infonnation, assutnptions, and methodologies
used..
No impact
011
revenues or expenditures.
3. Revenue and expenditure estimates coveringadeast the next 6 fiscal years.
No impact on revenues or expenditures.
4.
An
actuarial analysis through the entire amortization period for each regulation that
would affect retiree pension or group insuranceicosts.
Not Applicable;
5, Later actions that may affect future revenue and expenditures if the regulation authorizes
future spending.
Not Applicable.
6.
An
estimate of the staff time needed
to
implement the regulation.
DHCA would require a minimal amount of statftime to devise and implement an intemal
process regarding their rental housing license procedures to reflect information regarding
a unit owner's/landlord's failure
to
pay common ownership community dues.
7.
An
explanation of how the addition of new staff responsibilities would affect other duties,
DHCA believes that these additional steps in the rental housing licensing procedure
would be incorporated and made part of their routine license issuing process.
8.
An
estimate of costs when an additional appropriation is needed.
Not Applicable.
9. A description of any variable that c.Quld affect revenue and cost estimates.
Not Applicable.
10. Ranges of revenue or expenditures that are uncertain or difficult
to
project.
Not Applicable.
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11.
If
a regulation is likely
to
have no fiscal impact, why
that
is the case.
Not Applicable.
12. Other
fIScal
impacts or comments.
None
13. The
folloVVing contributed to and concurred
Vvith
this analysis
Timothy Goetzinger, Department of Housing
and
Conununity Affairs
Eric Friedman, Directnr, Office ofConsumer Protection
Helen P. Vallone, Senior Management
and
Budget Specialist, Office
ofManagement
and Budget
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Economic Impact Statement
Bill 44-14, Landlord-Tenant Relations - Licensing of Rental Housing
Common Ownership COJllmunity Fees
Background:
This legislation would require an owner of a dwelling
iunit
in a common ownership community
io certify payment of common o\\'Ilership fees
in
order
to
receive a rental housing license for the
unit. This
legislation would authorize the
Director
of Housing and Community Affairs to deny.
su~1>CDd,
revoke, or refuse
to
renew a rental housing license for a dwelling unit in a common
ovmership community if the owner
tails
to
pay
the
common ownership community fees due for
the
unit.
.
1.
The
sources of information, assumptions, and methodologies used.
Office of Consumer Protection
Department of Housing and Community Affairs
Office of Management and B.udget
The methodology used by
the
Department of Finance was a query to the Department of
Housing and Commwlity Affairs (DHCA) on how many owners of
a
dwelling unit were
delinquent for noi paying common ownership community fees. According to DHCA, the
Department
has
110
data on the number ofdelinquencies and that any applicant for a license
or renewal will update his or her certification
suchlthat
they will get a license.
2. A description of any
variable that
could
affect
the economic impact estimates.
The economic variable that could affect the economic impact estimates is the number of
delinquent property O\\'Ilers. However, DHCAmaintains
that
there
is
no economic impact of
Bill 44-14.
3.
The
Bm's
positive
or
negative effect,
if any on employment,
IDvestment, incomes,
and
property
values in
the County.
spending~
saving,
Because there are currently no known delinquencies,
am
44-14
will
likely have no economic
impact on employment, spending, saving, invesunent, incomes, and property values in the
County
4.
If
a
Bm
is
likely
to have no economic impact,
why
is
that the ease?
Please see paragraph #3
5. The
following contributed to or concurred with
this
analysis:
David Platt
and Rob
Hagedoom, Finance.
J~,
Director
Department of Finance
~'1-h
Page 1 of 1
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MHP
*<
#j4Sj
t
"
'"""..,..,...
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12200 Tech
Road.
Suite 250, Sil'\le( Spring, Maryland 20904-.1983
Phone: 30:1.-622-2400
Fax:
301-622-2800
www.MI-lPartners.org
October 21,2014
The Honorable Craig Rice
President
Montgomery County Council
100 Maryland Avenue
Rockville, MD 20850
Dear Council President
Rice:
On behalf of Montgomery Housing Partnership
(MHP),
please allow me to take the opportunity to share
some thoughts on the Bills 44-14 and 45-14. MHP fully supports the Council's critically needed focus on the
struggles and issues facing many ofour County's common o'WIlership communities. Bills 44-14 and 45-14
are both important first steps to begin to provide additional support and security for our common o'WIlership
communities.
Many of you are familiar with MHP's role within the County as a developer of affordable rental multi-family
communities, but might not be as familiar with some ofneighborhood work. Neighborhood revitalization is a
cornerstone ofMHP's mission. MHP has been working in various communities throughout the County for
over twenty years. These include the greater Glemont area, Long Branch, Germantown, and Gaithersburg.
On
behalf of the County, we have tackled such issues as: vacant and distressed property, small business
development, crime and safety, health and wen-being, and environmental stewardship. In 2011, MHP
worked with home O'WIler associations (HOAs) in Gennanto'WIl dealing with high rates offoreclosures and
the inability to collect dues and assessments. MHP worked closely with Cinnamon Run, a 600 plus unit
association on conducting a capital reserve study and providing technical assistance and support to establish
a financial planning strategy for the future. With 25 other HOAs in the area, MHP conducted a best practices
report, including site surveys, neighborhood profiles, and individual meetings with HOA representation. We
worked with the associations and the County to ensure both sides understand their maintenance
responsibilities. Additionally, in 2004, we worked with the Ken-Gar, Bailey's Court, and Badger Drives
HOAs to undertake a similar analysis, which included surveying the residents and analyzing market and
demographic data
MHP is also an owner ofmany individual units scattered throughout the County. We purchase most ofthese
units within ownership communities to create the opportunity for affordable rental housing where it was
previously not available. Recently. we have
begun
to purchase units for very different reasons - to support
sellers who can't find buyers. Buyers can't purchase
in
those communities. Why? Because too many ofour
communities, at least 250 out of 400 who at one point had FHA certification have allowed their FHA
certification to lapse, or been rejected. Without FHA certification many first time homebuyers are unable to
find alternative financing to support purchases within these communities, leaving sellers without buyers and
(f)
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creating additional problems
within
the community. There are three main factors
that
contribute to FHA
certification eligibility - delinquency rates, investor rates, and existing concentration of FHA loans.
These bills begin to address two of the main reasons why our communities have lost their FHA certification
- education and delinquency rates. Bill 45-14 goes to the heart ofthe education issues. We have very vested,
passionate residents who are willing to dedicate their time and energy to support their community
associations. However, their professional skills don't always align with the necessary skills to successfully
support and manage their association. We need to ensure all boards have the skills to understand and craft a
budget, to select and manage their management company, to understand how and when to apply for FHA
financing, and to deal with residents who are delinquent, among others areas. Providing such training is the
first step in developing resident leaders who will serve to mitigate the challenges their community may
encounter.
The second bill, Bi1144-14, begins to get to the heart of some ofthe issues the communities are facing today.
The high
rate
of delinquencies among our common ownership communities
are
preventing proper upkeep
and maintenance, limiting our communities' ability to put money aware for a rainy day, and are preventing
many communities from obtaining FHA financing,
as
outlined above. We fully support preventing owners
from renting out their units, when they are not properly supporting their community. We would like to
suggest one tweak: - instead of allowing owners to self-certify that their payments are up to date we would
recommend that rental license applicants furnish a letter from their board or management company certifying
that
they are up to
date
with all fees and assessments.
I
thank
the Council for working to support our common ownership communities. We need to ensure that our
communities are on solid financial footings, that they have the tools and knowledge to support themselves,
and are positioned for turnover. We must also recognize
that
some of these challenges potentially require
changes on a State and/or Federal level. For example, per State legislation when a bank has foreclosed on a
unit in a common ownership community the bank is only responsible for $1,000 or four months of fees, even
ifthe owner had been delinquent for years.
Thank you for taking the time to consider these thoughts and for always keeping the needs of Montgomery
County citizens at the forefront of your mind. We look forward to the opportunities to continue to work with
the County ensuring all our residents live in quality communities.
I
welcome the opportunity to discuss this issue with you further. Please feel free to reach me at
rgoldman@mhpartners.org or 301-812-4114.
Sincerely,
Robert
A.
Goldman, ESQ.
President
Montgomery Housing Partnership
Bills 44-14 and 45-14
2
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\
Testimony before the Montgomery County Council
By John Driscoll, President, Montgomery Village Foundation Board of Directors
October 21,2014
Bill 44-14
Landlord-Tenant Relations - Licensing of Rental Housing - Common Ownership Fees
Good evening, I am John Driscoll, President of the Montgomery Village Foundation
Board of Directors. We support this bill which would require owners of rental properties
in our community to certify to the County that they have paid their common ownership
community fees in order to receive a rental housing license.
By way of background, the MVF Board of Directors are elected and represent over
40,000 residents. We are a large-scale community association in which every
homeowner is required to pay MVF assessments. In addition, every homeowner pays a
homes corporation or condominium association assessment to support their individual
budgets. Approximately 25 percent of our homeowners rent their properties, and each
year, we cooperate with the Montgomery County Department of Housing and
Community Affairs by sending them a list of rental properties within Montgomery Village,
based on billing addresses to the Foundation. This list does not include the four multi­
family apartment complexes, which also pay MVF assessments based on our governing
documents.
We greatly appreciate the Council's intent to help associations receive the common
ownership community fees, which are necessary to carry out the communities'
operating and capital needs. Given the recent years of economic downturn and slow
recovery, including increased bankruptcies and foreclosures, this new requirement for
landlords might provide needed assistance to associations where delinquencies have
grown.
The bill might be more effective if it required more of an owner applying for a rental
license than mere self-certification that they are current in their assessment. As it is
written, self-certification would only be challenged in the event that an association
brought contrary information to DHCA in the form of a judgment.
We believe that more
assessm~nts
will be paid if the owner is required to submit, along
with his rental license application or renewal, a copy of his account statement showing
that his balance is current. A current account statement can easily be obtained by any
owner from his HOA or condo association.
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In our view, this process would give owners an incentive to pay assessments, and
would be more effective in obtaining assessments than relying on associations to
identify delinquent owners to DHAC, as is proposed in the bill.
We would also point out that the County can satisfy its requirements to provide due
process for applicants at the point of granting a license with far less effort than it would
have to expend in order to revoke a license.
Thank you for the opportunity to testify.
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\?>
October 2, 2014
Montgomery County Council
c/o
Mr.
Craig Rice, President
100 Maryland Avenue
Rockville, Maryland 20850
Re:
Bill 44-14, L3ndIord-Tenant Relations - Licensing of Rental Housing­
Common Ownership Community Fees
(Hearing: October 14, 2014, 7:30 p.m.)
Dear Council members:
I
serve as co-chair of the Maryland Legislative Committee of the Washington
Metropolitan Chapter Community Associations Institute ("WMCCAI"). WMCCAl is a
50l(c)(6) organization that serves the educational, business and networking needs of the
community association industry in Maryland, Virginia, and the District of Columbia. Members
include professional managers and community association volunteer leaders from condominium,
cooperative and homeowners associations as well as those who provide products and services to
associations. I am writing to provide the Chapter's comments on the referenced Bill.
The Chapter supports the Bill, with amendments allowing revocation of licenses if liens
are recorded and/or a
final
judgment has been entered with respect to a covenant or bylaw
violation.
In this economic downturn, the nonpayment of
assessment~
has been a serious
proble~
for community associations in the County. Assessments are necessary to perform basic
operations, such as trash removal, street repairs, landscaping, snow removal, and to provide other
property maintenance and community services. Although landlords/investor-owners receive the
community benefits (which may even include the payment of utilities), and rent from their
tenants, some investor-owners fail to timely pay assessments, requiring community associations
to institute costly legal actions.
As
an attorney representing community associations, I find that
the proposed certification requirement, as a requisite for rental licensing by investor-owners,
would be important enforcement tool for community associations.
7600 Leesburg Pike
Suite 100 West
Falls Church, VA 22043
703.750.3644
MAIN
703.941.1740 FAX
www.caidc.org
Building Better Communities
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Comparison to Other Counties
We note that Bill 44-11 is similar to laws recently enacted
in
Howard and Prince
George's Counties. Pursuant to Howard County law, an application for a residential landlord
license must include, "Certification from the [applicant] that homeowner association or common
ownership community fees for the dwelling unit are not more than 30 days past due" (Section
14.901 (d)) and a license may be issued unless a community association submits "proof of a final
adjudication against the homeowner for unpaid fees relating to the unit" (Section 14.901 (e)).
The law in Prince George's County, however, provides much greater enforcement
capability for community associations. Pursuant to Prince George's County law, as part of an
application for a residential rental license, a landlord must certify "that the dwelling unit does not
have a lien placed upon
it
by a Common Ownership Community for non-payment of Common
Ownership Community Fees and that the dwelling unit does not violate the covenants or bylaws
of the Common Ownership Community" (Section l3-183(b) (emphasis added)). Also, during
the tenn of the license, the license may be revoked if a community association submits evidence
of a fmal adjudication that ''use of the dwelling unit as a rental violates the covenants or bylaws
that govern the unit" (Section 13-1 83(c) (emphasis added)).
Recording of Liens
Being able to demonstrate that assessments are delinquent as reflected in a recorded lien
(per Prince George's County law), rather
than
a "fmaljudgment" (as proposed in Bill 44-14), is
very important. Legal actions to purse delinquent assessments can be very costly and, under
current court roles, not all of an association's collection costs may be awarded. This is especially
true for homeowners associations where annual assessments are typically lower. Courts
generally award attorneys' fees in an amount equal to 15% of the principal debt (see,
e.g.,
Maryland Rule 3-741). A homeowners association that imposes,
e.g.,
an annual assessment"of
$300.00, would therefore recover only $135.00 in attorneys' fees in a lawsuit for 3 years of
assessments, even though the lawsuit costs the association much more. As a result, a community
association may elect to pursue collection through the lien process, as authorized by the
Maryland Contract Lien Act (Real Property Article, Section 14-201,
et seq.).
Liens should not require "final adjudication" before they can serve as the basis for license
denial or revocation because the Maryland legislature, through the Maryland Contract Lien Act,
has allowed liens to be recorded without costly litigation. (The Act does allow a debtor to
institute a court challenge to the claimed lien, provided the provisions of the Act are followed.)
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Unless amended in a similar fashion to Prince George's County law, Bill 44-14 would
require community associations to undertake litigation in order to take advantage of its
provisions. .Bill 44-14 would better serve community associations
in
the County if it allowed
enforcement through the Maryland Contract Lien Act as well.
Covenant and Bylaw Violations
Subjecting the rental license to conformance to covenants and bylaw proVISIOns,
including rental restrictions, is also important. Just as landlords may have less incentive to
timely pay assessments, they may also have less incentive to adequately maintain their property,
or abide by rental restrictions. If a community association must take covenant or bylaw
enforcement action to compel abatement of violations, such circumstances should
be
an
additional basis for license denial or revocation. Although contempt or other legal proceedings
could be initiated, having the additional, less-costly, option of seeking license suspension or
revocation would be useful. Here, we agree that requiring a "fInal adjudication" would be
appropriate. "Final adjudication" should be defIned to confIrm it includes orders of a hearing
panel
of the Commission on Common Ownership Communities.
Accordingly, the Chapter supports the
Bill
but respectfully requests that the Council
consider amending the
Bill
to include provisions allowing revocation of licenses if liens are
recorded and a fInal judgment has been entered with respect to a covenant or bylaw violation.
SpecifIcally, we suggest the attached language shown in bold underline,
be
included.
Thank
you for your consideration.
Sincerely,
Enclosure
cc: Matt Rankin, Executive Director, WMCCAI (via email)
Ruth Katz, Esq., Co-Chair, Maryland Legislative Committee (via email)
Peter Drymalski, Esq., Staff, CCOC (via email)
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Bill 44-11
Landlord-Tenant Relations - Licensing of Rental Housing ­
Common Ownership Community Fees
Amendments proposed by
Maryland Legislative Committee
Washington Metropolitan Chapter Community Associations Institute
(1)
The Director must not issue or renew a rental housing license for a dwelling unit in a
common ownership community unless the owner certifies that.:J1l the common ownership
community fees for the dwelling unit are no more
than
30 days past due; and
(m
there has
been no final adjudication that a covenant or bylaw violation exists concerning the
dwelling unit and such violation has not been abated.
(2) The Director may, at any time, deny, suspend, revoke, or refuse to renew a housing rental
license for a dwelling unit in a common ownership community if the governing body of a
common ownership community submits proof of
(i)
a lien for unpaid common ownership
fees for the dwelling unit, recorded pursuant to the Maryland Contract Lien Act;
(ii)
an
unsatisfied final judgment against the owner for unpaid common ownership fees for the
dwelling unit; or
(iii)
a final adjudication against the owner for an unabated covenant or
bylaw violation concerning the dwelline unit.
"Pinal adjudication" should be defmed to include, "a fmal judement entered by a court of
competent jurisdiction or by a hearing panel of the Commission on Common Ownership
Communities" .
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Testimony for the Montgomery County Council
Tuesday, October 21,2014
Bill 44-14 - Common Ownership Community Unpaid Fees by Landlords - FOR
Bill 45-14 - Common Ownership Community Governing Body Training -- AGAINST
Vicki Vergagni
President, Board of Directors and
On-Site Community Manager
Glen Waye Gardens Condominium
My name is Vicki Vergagni. I represent 214 condominium units in Glen Waye Gardens.
My comments are based on 39 'years of owning and living in a condo:ninium, 14 years of leading
the community as the Board president and serving as its on-site manager, and five years of
serving as a Commissioner on the County's CCOC - with two years as Vice Chair.
First I must thank the Council for looking at two issues of some import to our
communities - a collections tool related to landlords who collect rent but do not pay their
community fees, and the lack of knowledge of elected members of these communities' governing
bodies.
I am here on behalf of a condominium and trust that the Council understands that,
although most condominiums come in the form of apartments, the Apartment and Office
Building Association does not speak for condominium owners who are charged with all of the
responsibilities of
homeo~ership,.
but who under this County government reap very little in
return for the taxes and fees that they pay. Not only are condominiums required to provide free
data collection services for County agencies
(e.g.,
recycling, leased units), they also are required
to purchase more permits than single-family homes, and to pay higher fees than those paid by
single-family homes for the same service - all while being shut out of nearly every well-intended
County rebate program. This occurs because most legislation assumes that all residences are
single-family in nature. But when condominiums are included, County folk do not understand
them operationally so the condominiums cannot apply for and receive the rebates to which they
are entitled
(e.g.,
rain tax, energy efficiency by both unit owners and .)y the association). You
will continue to hear from me as our communities
try
to survive in spite of poor public policy in
more than twenty areas for which the County is responsible.
First I will address Bill 44-14 related to rental licenses. I must speak in favor of this bill
with the modifications suggested by the Washington Metropolitan Chapter of the Community
Associations Institute. However, based on my experience with the County, I am very concerned
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about implementation. Will DHCA be reviewing a landlord's judgments via the Maryland
Judiciary
C~e
Search prior to issuing a license just to keep himlher honest? If the rental unit is
occupied but is not licensed, who will check to see that it is no longer rented - the County, or
will the County require the property managers to contact them re occupancy as they currently do
for "condemned" units? And what will the procedure be to remove the occupants of an
unlicensed rental property? Hopefully there will not be an endless time line for a delinquent
owner to pay up and there will not be yet additional burden on our communities.
Now I will address Bill 45-14 related to mandatory training fer members of our
governing boards. I surveyed both current and former members of my boards, and they strongly
advised against this bill.
I learned a long time ago that I should "not expect from others what I do not expect from
myself. How many Federal, state and local governments require that elected officials be trained
on the subject matter on which they will be making decisions? Montgomery County certainly
does not. y.et, elected officials are considering mandatory training for us whose decisions are far
less comprehensive than theirs?
While theoretically a great concept, this bill will have a chilling impact on recruiting
volunteers for our governing bodies. We already have difficulty finding volunteers to serve on
the Board. And finding volunteers is a repetitive task, as Boards have staggered terms of office
with one or more positions expiring annually. To pass this bill without having firm training
requirements and options is putting the cart before the horse. And how would the law be
enforced? Would the one staff person at the CCOC have to review monthly a list of thousands of
board members that constantly changes- and to then send out reminder notices and/or report
those uneducated folks to a County official? Is the County going to fine the uneducated
individual or the Board that has an uneducated member or two? Would such a law put boards
out of business because the volunteers have n? need for additional mandatory requirements when
they already serve in a politically difficult and thankless environment?
In the alternative, I ::vould suggest that the County encourage companies that provide
officer and director liability insurance to give discounts to "educated" boards. CCOC also could
develop an itemized list of issues about which a Board member should be knowledgeable which
will vary considerably since HOAs are not the same as condominiums which are not the same as
cooperatives. And even each condominium is unlike the next. This list could highlight issues
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for which each community could provide infonnation to its incoming Board members, such as
for what portions of the property is the association responsible for maintenance, repair and
replacemerit. The CCOC also could provide a reference list of education courses and
publications from which Board members could select as they felt the need. And it might be
fairly easy for the CCOC staff person to e-blast all board members with relevant infonnation as it
becomes available.
I look forward to exploring later with each of you Maryland's priority lien bill for
condominiums that requires a lender to foreclose on a property before a community can collect
up to $1,200 in delinquent fees when that delinquency may be $600 monthly with master­
metered utilities included
~ith
delinquent accounts frequently exceeding $20,000 and some up to
$40,000+. Lenders don't foreclose because they will have to pay condominium fees as the
property owner. With the lenders leaving virtually hundreds of vacant, non-paying
condominium units in the County, paying community members picking up all the bills for the
non-paying members. And many communities are nearly insolvent. Property values in these
communities have plummeted and are not recovering -- $60,000 for a spacious two-bedroom in
Gaithersburg in Montgomery County
--
and with one unpaid water/sewer bill, virtually hundreds
of families .will be homeless since their homes will be condemned.
Thank you for the opportunity to speak on these issues of concern.
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Alyson Meiselman, President
Vistas at Washingtonian Woods Condominium Association
913 Hillside Lake Terrace, Unit 410
Gaithersburg, Md. 20878-5250
(301) 412-3133
Testimony before the County Council on Bill #4414, October 21, 2014
The Vistas is comprised of 13 buildings and 152 units on the southwest corner at intersection of Muddy
Branch Road and Great Seneca Highway. The development, within the city limits of Gaithersburg, has
been in existence since 1991. Roughly sixty percent of the units are owner occupied; the balance of forty
percent are rental units, including four percent (six units) controlled by Montgomery County's HOC.
While the City of Gaithersburg requires a "rentallicense" for any dwelling, the ability of the Vistas Board
of Directors, on behalf of all the unit owners, to collect condominium fees from rental unit owners, or
tenants, is problematic. We have pursued collection proceedings in the District and Circuit Courts of
Maryland, received judgments, but, have never been able to actually receive payment. Currently we are
owed in excess of $150,000 in arrearages. The "Iicense" requirement does not seem to be a deterrent to
the scofflaws who purchase units but never intend to pay any condominium fees. The C!lurts, by denying
foreclosures based on arrearages of fees (as compared to the value of the homes), effectively tie our
hands, and allow these owners to avoid our collecting fees that are due.
These arrearages impact our budget management. More importantly, they impact our reserves, which
also have a direct effect on our obtaining FHA approval on funding requests on property sales.
My testimony this evening is to alert you to the fact that unless homeowner and condominium
associations have a statutory right to foreclose on the legal judgments received, the mere fact that the
unit owners fail to obtain a license, or the county not renewing the rental license, ifthere is an arrearage,
is not likely to change the situation with these absentee landlords.
As example, we have three absentee landlords that owe $100,000, and another four tHat owe $50,000.
For some of these units, for which we have alerted the City of
Ga~thersburg,
while the unit owner has no
"rental license," the owners that are remote, living out of the State of Maryland, make themselves
effectively judgment proof and beyond the reach of the City to effectively control the situation of non­
payment. The additional use of bankruptcy by these landlords only exacerbates the problem. We have,
unfortunately, had some file bankruptcy, still not pay condo fees post filing, and, continue to rent their
units, or in a worst case, leave the unit vacant... paying only the property taxes, thus retaining ownership.
On behalf of our condominium association, I encourage both the passage of this bill and further
investigation as to other remedies that will effectuate payment of our association fees.
Thank you.
~~~
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TESTIMONY: BILL 44-14
THIS IS MY TESTIMONY TO THE COUNTY COUNCIL
REGARDING PROPROSED BILL 44-14
I HAVE BEEN A CONDOMINIUM OWNER SINCE 1990.
Dear Council Members:
Thank you for the opportunity to testify. I support proposed Bill 44-14.
If the Council thinks tenants in a condominium are adequately and properly protected, the
Council would be wrong!
I have lived in common owned communities in Montgomery County for 45 years since 1969 to date.
From 1969 to 1990, I was a resident owner in a town house home owners association (21 years).
From 1990 to date, I have been a resident owner of a condominium unit (24 years).
Although I am a long time condominium owner, a longtime resident owner, I am testifying to
represent, protect, and plea for the interests of tenants in a condominium. It should be no surprise
that tenants in a condominium are second class residents in the condominium. Many condominium
owners believe renters lower the quality of life and the resale value of their units. In a fashion, the
Federal Housing Association (FHA) supports this view.
When their Landlords fail to pay the condo's monthly fees, the tenants are subjected to social and
economic scorn as free loaders. Condo owners, including members of the Board, want to deny these
tenants their access to the condo pool, to revoke their rights to park their vehicles at the condo, etc.
all of which violate the tenants' rights under the Landlord-Tenant Administration (LT/A) rules and
regulations. Due to the 2008 crash, I had to advise my Board not to impose such actions on tenants
of delinquent landlords even though the condominium needed those funds.
Passage of Bill 44-14 would provide Boards with the relief to seek economic redress from delinquent
landlords. In addition, it would take the pressure off their tenants. However, consideration of the
tenants' rights after the LT/A suspends the Landlord Rental License must be included in Bill 44-14.
For instance, there is to be no eviction of the tenants after a Landlord Rental License has been
suspended. Measures are to be implemented where the tenant can pay the rent to an appropriate
authority while the landlord remains responsible and liable for the rental unit.
Tenants are good people! An example was the family who lived in the rental unit (unit 201) across
from my condominium unit. The father and mother were immigrants from Guatemala. They had a son
and daughter both born in the U. S. The father was a construction worker who drove the car to work
every day. The mother took the Grosvenor Metro subway to DC where she worked in housekeeping.
The son was a senior in Walter Johnson H.S. and worked part time in the DSW shoe store. The
daughter was a student in Middle School.
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The children were always well dressed. The son wore a white shirt, tie, and either a suit or sports
jacket. The daughter wore a dress or skirt and blouse.
The son dressed that way when he went to school and when he was working at DSW. He also
dressed that way when I saw him leaving from and returning to his unit.
[My parents required my brother, sister and me to dress that way. I was required to dress that way
when I was going to school, going to church, going to visit family and friends, attending civic events,
etc. My parents were immigrants from Ireland: Pop was a porter cleaning toilets in a bank, Mom was
a cleaning woman at l1ight in a bank. We were never latch key kids. There was a 30 minute turnover
meeting between Pop and Mom - 30 minutes after Pop arrived home from work and before Mom left
for work.
Due to Pop and Mom hard work, privation, and determination, my brother, my sister, and myself
received college diplomas. Mom was very liberal. We kids could do anything we want in our lives after
we received our diplomas. Pop always reminded me (and my brother) that I could become tl1e
President of the United States. Pop explained we were born in this country and so we should dress
like gentlemen.
I was born, literally, and raised in a 'cold water' flat in the slums of East Harlem, NYC.]
I had discussions with the son. After his graduation from Walter Johnson his plans were to work and
attend Montgomery County in Rockville. The Ride On Bus 46 conveniently runs between Grosvenor
Park and Montgomery College - Rockville. I would have been proud to have him as a son.
One day, the father told me he was being evicted by the condominium board for violating the County's
regulation against incest. He was told that the County required a 3 bedroom unit for his unit: one
bedroom for his wife and him, the second bedroom for his teenage daughter, and a third bedroom for
his teenage son. The condominium only has efficiencies,
1
bedroom, and 2 bedrooms units.
I called Michael Denny of the Landlord - Tenant Administration to discuss the matter. Mr. Denny
asked me to describe their unit to him. I told him it was identical to my unit - it had 2 bedrooms, a full
bathroom, a galley kitchen fully equipped, a dining room, and a large living room. Denny asked me
the square footage; I answered
"912
square feet". Denny answered there were no violation of County
regulations, and he never heard of any incest regulation.
When I summoned enough courage, I went to the Site Office and asked the Site Manager what was it
all about. She responded ''They weren't our type of people!" giving me her focused, hard look. I got
the message, and returned to my unit with my tail between my legs.
Once again, If
the Council thinks tenants in a condominium are adequately and properly
protected. the Council would be wrongl
LAWRENCE DORNEY
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TESTIMONY OF
THE GREATER CAPITAL AREA ASSOCIATION OF REALTORS®
BEFORE THE MONTGOMERY COUNTY COUNCIL ON
Bill 44-14,
"Landlord-Tenant Relations-licensing ofRental Housing-Common Ownership
Communities Fees"
Position: Oppose as currently written due
to
uncertainties and unintended consequences
October
21, 2014
Council President Rice and members of the County Council, my name is Tim Knobloch and I am
the 2014 Treasurer for the Greater Capital Area Association of REALTORS® ("GCAAR") - the
voice of Montgomery County and the District of Columbia's more than 9000 REALTORS®,
property managers, title attorneys, and other real estate professionals. GCAAR is also a voice
for many homeowners throughout the entire DC metro region on important property rights and
land use issues. On behalf of GCAAR, this testimony is to voice our opposition on Bill 44-14,
"Landlord-Tenant Relations-Licensing ofRental Housing-Common Ownership Communities
Fees,"
as currently written due to the vast number of uncertainties and unintended consequences
we believe could come from this legislation
GCAAR recognizes the serious problem certain common ownership communities ("COCs")
have with collecting dues from property owners, some of whom rent their units. Such
delinquencies have significantly put the fmanciallivelihood of entire COCs at risk, and warrant
attention from lawmakers. While GCAAR commends the Council's effort to protect the
County's homeowners' and condominium associations, we do not believe Bill 44-14 as currently
drafted will achieve that and will actually harm it.
First and foremost, Bill 44-14 strikes GCAAR as ineffective because it does not address the crux
of the problem: direct enforcement of delinquent dues payment. Instead, it indirectly aims to
increase payments by conditioning the issuance of a rental license for a property in an
association on payment of association dues or fees.
It
is our understanding that, more often than
not, those not paying dues and renting their units are often unlicensed. Bill 44-14 does not
guarantee that those who fail to obtain a rental license will pay their dues so they can rent their
properties: they will simply rent them regardless. Further, how does the County currently
monitor and how will it enforce when landlords are not obtaining rental licenses in these
situations?
Disincentivizing landlords from obtaining a rental license may lead to even worse consequences
because existing law does not allow one to evict a tenant living in an unlicensed unit. This leads
into a realm of dangerous questions. What happens
if
the tenant gets behind on their rent? Then,
what if the landlord can no longer afford their mortgage? What
if
the property goes towards
foreclosure?
In
all of aforementioned scenarios the landlord and COC are in worse of a position
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because they cannot evict tenants in unlicensed units. Being stuck with lancij.ords not paying
dues or a mortgage, along with tenants not paying rent, creates more jeopardy of the entire COCo
GCAAR is also seriously concerned with the costs associated with the legislation.
As
it stands,
acquiring documentation from these homeowners' and condominium associations can already
cost hundreds of dollars.
If
the County puts an additional mandate on anyone trying to get a
rental license (irrespective of whether they are up
to
date or not on their dues), innocent
homeowners will have more burdensome beaurocratic processes every year with very little
guaranty of a community benefit.
Alternatively, GCAAR suggests granting COCs enforcement mechanisms for collecting unpaid
dues in addition
to
their current option of court orders, which are extremely costly and time­
consuming. Such mechanisms should not be tied to whether the delinquent unit owner is renting
their property, as the two are not necessarily linked together. We would
be
happy to work
together with stakeholders in developing more effective legislation towards those ends.
Again, GCAAR acknowledges Bill 44-14' s goal of helping homeowners and condominium
associations collect unpaid dues. Be that as it may, we maintain the proposed Bill would
be
unsuccessful because it could encourage unlicensed rentals, create additional paperwork for well­
meaning landlords, and possibly lead to higher dues for costs of administration, because almost
every Common Ownership Community charges a fee for any paper they generate and we feel
this will be no different. We urge the Council
to
reexamine Bill 44-14's entirely and sincerely
thank
you for consideration of our perspective.