Agenda Item 5A
November 29,2016
Action
MEMORANDUM
November 23,2016
TO:
FROM:
SUBJECT:
County Council
Josh Hamlin, Legislative Attome
Action:
Bill 19-15, Landlord -Tenant Relations - Licensing of Rental
Housing - Landlord-Tenant Obligations
Planning, Housing and Economic Development Committee recommendation (3-0):
Enact Bill 19-15 with amendments.
Bill 19-15, Landlord -Tenant Relations - Licensing of Rental Housing - Landlord-Tenant
Obligations, sponsored by Lead Sponsor Councilmember Eirich and Co-Sponsor Councilmember
Navarro, was introduced on April 21, 2015. A public hearing on the Bill was held on June 18,
2015 and Planning, Housing and Economic DeVelopment Committee worksessions were held on
April 11,2016, June 27, 2016, August 1,2016, September 15, 2016 and October 27, 2016.
Bill 19-15, as introduced, would:
(l)
provide for annual inspection of certain residential rental properties;
(2) require the use of a standard form lease and applicable optional provisions for certain
residential rental properties;
(3) require the publication of certain information related to rental housing;
(4) require the Department of Housing and Community Affairs to review certain rent
increases;
(5) provide for certain remedies to be awarded by the Commission on Landlord-Tenant
Affairs;
(6) provide certain rights to tenants facing rent increases; and
(7) generally amend the law related to landlord-tenant relations.
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Background
Chapter 29 of the County Code governs landlord-tenant relations.
It
establishes the
Commission on Landlord-Tenant Affairs (COLTA) as a mechanism for resolving disputes
between landlords and tenants and provides a process for resolving such complaints. The law also
creates a licensing regime for rental housing, including a requirement that each apartment complex
and persona1living quarters building
l
be inspected by the Department of Housing and Community
Affairs ("DHCA") at least once every three years. Chapter 29 also imposes certain requirements
on landlords and tenants, and includes a number of requirements for leasing practices and the
contents of all rental housing leases in the County. Other key components of the County's
landlord-tenant law are the annual collection by DHCA of extensive data related to rental housing
in the County and the requirement that the County Executive issue voluntary rent increase
guidelines each year.
Bill 19-15 was introduced to address some of the issues raised in the 20 I 0 Report of the
County Tenant Work Group (TWGi). The Bill would make several changes to the landlord-tenant
law, principally aimed at enhancing the existing rights of tenants and improving the quality of
rental housing through increased inspections. The amendments fit generally into three categories:
(1)
leases and landlord-tenant obligations; (2) licensing and data collection; and (3) rent
adj ustments.
The Bill was scheduled for a PHED Committee worksession on July 27, 2015, but the
worksession was postponed at the request of the sponsor. Councilmember EIrich circulated a
revised draft of Bill 19-15 for consideration by the Committee in conjunction with the introduced
Bill. The revised draft included several changes to existing provisions of the introduced Bill
related to leases, inspections, and the voluntary rent guidelines.·
It
also included two entirely new
provisions requiring landlords to provide meeting space for tenant. associations and to provide
information on utility billing in units without individual meters.
Leases and Landlord-Tenant Obligations
Bill 19-15 would require that the Director of DHCA publish and provide upon request to
landlords and tenants:
(1)
a standard form lease and model optional provisions;
and
(2) a
land1ord­
tenant handbook. These documents would have to be available in English, Spanish, French,
Chinese, Korean, Vietnamese, and other languages, as needed. The Bill would require the use of
the form lease and any appropriate model optional provisions for all leases of rental housing in the
County, and would require a landlord to provide a tenant with a copy of the landlord-tenant
handbook or, at the tenant's option, a reference to the handbook maintained on the County website,
at the beginning of the lease term.
County Code
§
29-1 defines "Personal living quarters building" as "any building or portion ofa building that: (a)
contains at least 6 individual living units;
(b)
has cooking facilities that the residents may share; and (c) may also have
shared sanitation facilities." .
2
http://www6.montgomervcountymd.gov/ContentlEXEC/TW
G/pdfltwg report 3-2010 .pdf. Additional information
and discussion of recommendations of the Tenant Work Group can be found in the packet for the PHED Committee
discussion on February 25,2013.
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The Bill would also require leases to contain provisions that would:
(1)
allow a tenant to
rescind a lease within two days after signing the lease; and (2) generally allow a tenant to convert
a one-year lease to a two-year lease within 30 days after signing the lease.
It
would also require
that a landlord offer lease renewals for two-year terms unless the landlord has reasonable cause to
offer a different term. Current law generally requires two-year initial terms, but is silent on
renewals. The Bill would also add a new remedy to those available to COLTA in resolving
landlord-tenant disputes. Upon a finding that a landlord has caused a condition that violates the
terms of a lease (a "defective tenancy"), COLTA would be empowered under the Bill to issue an
order permitting a tenant to correct the condition that constitutes the defective tenancy and abating
the tenant's rent in an amount equal to the reasonable cost incurred by the tenant.
Licensing and Data Publication
Bill 19-15 also makes changes to the inspection component of the existing rental housing
licensing program. The Bill would require annual inspection by DHCA of all rental housing
consisting of two or more dwelling units, including each apartment complex and personal living
quarters building. However, it would permit DHCA to inspect certain properties - those whose
owners have a demonstrated history of compliance with applicable laws - once every three years.
The Bill would also require a landlord found in violation of applicable laws more than twice in
two consecutive years to pay the cost of the next inspection of the property. Also, while current
law requires a landlord to agree to notify any affected tenant whose unit requires inspection, Bill
19-15 would require that the notice be given at least 72 hours in advance of the scheduled
inspection.
The Bill would require the Director of DHCA to publish, unless the publication is
prohibited under State law, the information collected in the rental housing data survey on the
County website, including a table listing all rental housing consisting of two or more dwelling
units and the average rent increase for each unit by the following categories:
1.
2.
3.
4.
100 percent or less of the applicable rent increase guideline;
greater than 100 percent, up to 125 percent of the applicable rent increase guideline;
greater than 125 percent, up to 150 percent of the applicable rent increase guideline; and
greater than 150 percent of the applicable rent increase guideline.
The Bill would require the rent increase guidelines to be based on the increase or decrease in the
Consumer Price Index for all urban consumers (CPI-U), where current law references the
residential rent component of the CPI-U. All rent increases greater than 100 percent of the
applicable rent increase guideline would be reviewed by DHCA under the Bill, to recognize
patterns of increases that particularly harm tenants.
Rent AdJustments
Finally, Bill 19-15 would add protection for tenants facing rent increases. Under the Bill,
a landlord would be required to give a tenant at least three months written notice before imposing
an increase of more than 100 percent of the applicable rent increase guideline. The first of two
new sections added by the Bill to Chapter 29 would permit a tenant to ask the Department to
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confIrm that a rent increase complies with the law. The section would also permit a tenant facing
a rent increase that exceeds the applicable guideline to continue occupancy for up to two months
after the lease expiration on a month-to-month basis at the current pre-increase rent. In this
circumstance, the Bill would require the tenant to give at least 15 days' notice to the landlord
before vacating the premises. The second new section would prohibit "rent surcharges," providing
that a landlord must not charge more than the rent charged for the prior lease term when a tenant
continues occupancy on a month-to-month basis.
Public Hearing and Correspondence
A public hearing on the Bill was held on June 18, and there were 23 speakers. Clarence
Snuggs, Director of DHCA, spoke on behalf of the County Executive and expressed general
support for the Bill, but identifIed several problematic provisions (©39). SpecifIcally, Director
Snuggs identifIed the Bill's annual inspection requirement, standardized lease and addenda
requirements, tenant lease conversion option, and continued occupancy provisions as areas of
concern for the Executive. State Senator Jamie Raskin spoke in support of the Bill (©40), saying
that it "effectively advances the security and well-being of hundreds of thousands of Montgomery
County residents in their homes."
Nicola Whiteman of the Apartment and Office Building Association of Metropolitan
Washington (AOBA) spoke in opposition to the Bill (©41-52). In AOBA's view, "Bill 19-15
advances unnecessary, duplicative proposals which are codifIed in current law and/or being
implemented by the Department of Housing and Community Affairs." AOBA stated particular
objection to the prospect of a required standard lease, highlighting landlords' need for flexibility
in lease content. Mitchell Farrah ofthe Washington Metropolitan Chapter Community Association
Institute (WMCCAI) also spoke in opposition to the Bill, raising particular concerns about the
standard lease requirement and a perceived imbalance in landlord and tenant culpability for
violations, and speaking generally against limitations on rent increases (©53-55).
The majority ofthe speakers at the public hearing spoke in support ofthe Bill and ofthese,
both tenants and tenant-advocates were well-represented. The primary concern conveyed by
tenants was that of unfettered rent increases, and they expressed hope that Bill 19-15 would
alleviate this concern (see ©56 and ©58). Advocates spoke more generally ofthe need for housing
stability for renters (see ©59 and ©63). Zorayda Moreira-Smith of CASA offered testimony in
support of the Bill, and requested that the Council ensure that the various notices required under
Chapter 29 be provided in multiple languages, and consider ensuring that required two-year leases
be under the same terms as one year leases (©64-65).
The Montgomery County Renters Alliance submitted a letter dated July 23, 2015
specifically addressing the Fiscal Impact Statement (©66), pointing out that the statement contains
nearly two pages warning of impacts of rent control, which is not a component of Bill 19-15. The
Housing Opportunities Commission of Montgomery County (HOC) submitted a letter dated July
23, 2015, outlining HOC's concerns about the impacts of the Bill (©67-69).
In
the letter, HOC
indicates that the three month notice for rent increases would pose problems, as could the provision
making certain landlords responsible for the cost of inspections. HOC also expressed concern
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about the standard form lease requirement and questioned the value of shifting the basis for the
voluntary rent guidelines to the CPI-U as a whole (rather than the residential rent component).
PHED Worksessions
The PHED Committee convened panels of stakeholders for worksessions on the Bill on
April 11, June 27, and August 1. Panelists at these worksessions included: Clarence Snuggs,
Director, Department of Housing and Community Affairs; Stacy Spann, Executive Director,
Shauna Sorrells, Director of Legislative and Public Affairs, and Kayrine Brown, Chief Investment
and Real Estate Officer, all of the Housing Opportunjties Commission; Robert Goldman,
Executive Director, Montgomery Housing Partnership; David Hillman, Chief Executive Officer,
Southern Management Corporation; Madiaw Diop, TenantiMontgomery Housing Partnership
Board Member; and Matt Losak, Executive Director, Montgomery County Renters Alliance. The
Bill's sponsor, Councilmember Eirich, also attended all of the worksessions. The Committee and
panelists discussed all of the proposed changes to the law included in the introduced Bill. In
addition to these three worksessions, the Committee also held worksessions on September 15 and
October 27.
During the ftrst three worksessions, the Committee reached general consensus on a number
of issues presented by the introduced Bill. At the fourth worksession, the Committee reconsidered
the Bill's standard form lease requirement, and recommended deleting this requirement. The
Committee recommended an amendment to require that each lease for rental housing located in
the County contain a plain language summary of tenant rights and responsibilities in a form
approved by executive regulation. The Committee also recommended an amendment to the Bill to
require landlords of buildings constructed before July 1, 1978 to provide the same information
regarding the calculation of gas and energy billing as is required under State regulation for newer
buildings. At the ftfth and [mal worksession, the Committee discussed and resolved the following
matters:
(1)
the provision of free meeting space to tenant organizations; (2) the addition of a
"repair-and-deduct" provision, allowing a tenant to make certain repairs and deduct the cost of the
repairs from the tenant's rent under certain circumstances; (3) the introduced Bill's prohibition on
landlords charging higher rent to tenants opting to go month-to-month ("rent surcharges"); and (4)
the frequency ofDHCA inspections of rental housing.
Committee-Recommended Bill
The PHED Committee recommends enactment of Bill 19-15 with amendments. Several
of the provisions in the introduced Bill were retained, and there were also some substantial
amendments. All of the Committee-recommended Bill's changes to
existing
law are summarized
below:
• Require the Director to publish and maintain on the County website, in multiple languages,
a model lease which may be used in each written lease for rental housing located in the
County (©2, lines 8-18).
• Require the Director to publish and maintain on the County
website~
in a printable format
and multiple languages, the Landlord-Tenant handbook (©2, lines 19-27).
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• Require translation of the standard form lease and Landlord-Tenant Handbook into six
identified languages and others as deemed necessary by the Director (©2, lines 17-18; 25).
• Require that the Landlord-Tenant Handbook be reviewed at least biennially (©2, line 26).
• Require DHCA to report annually to the Council and Executive on the status of the
inspection program (©3, lines 28-45).
• Require DHCA to inspect "problem" properties annually, while retaining a triennial
inspection schedule for all properties (©3-5, lines 48-88).
• Require a landlord to give 72 hours' notice to tenants of scheduled inspections when
inspections are part ofDHCA's regular inspection program (©5, lines 96-98).
• Require a landlord of a property on an annual inspection schedule to provide quarterly
updates to the Director listing tenants' maintenance requests (©5, lines 99-101).
• Authorize the Director to order a landlord to correct a violation of applicable law in a
specified period of time and, if the landlord does not correct the violation in the specified
period, authorize the tenant to correct the violation and deduct the reasonable cost from the
tenant's rent (©5-6, lines 103-111).
• Require landlords needing extra inspections when violations are not corrected to pay the
cost of the inspections as set in regulation (landlord is responsible for third and subsequent
inspections when notified of a violation that is not corrected before reinspection) (©6, lines
114-118).
• Expand existing circumstances in which a tenant may terminate a lease upon 30 days'
written notice to include:
(1)
when a tenant or the tenant's child is a victim of domestic
violence; (2) when a landlord harasses the tenant or violates the tenant's privacy rights; (3)
when the tenant or tenant's spouse is 62 years of age or older and can no longer live
independently and must move to a nursing home or other senior citizen housing; and (4)
when the tenant is incarcerated or declared mentally incompetent (©6-7, lines 125-139).
• Require that each lease for rental housing located in the County generally permit a tenant
to convert a one-year lease to a two-year lease within 30 days after signing the lease (©7,
lines 147-149).
• Require lease to include notice that DHCA is available to assist with questions about any
addenda to the lease, and notice that the tenant is entitled to a hard copy of the Landlord­
Tenant Handbook and that the Handbook is available on the County website (©7, lines
150-157).
• Require each lease to permit the tenant to correct violations of applicable law
in
the unit as
authorized by the Director under §29-22(t) (©158-160).
• Require each lease to contain a plain language summary oftenant rights and responsibilities
in a form established by regulation (©7-8, lines 161-171).
• Require a landlord to offer a two-year term at each lease renewal, subject to the same
exceptions as the initial lease term ("reasonable cause") (©8, lines 174-176; ©9, lines 193­
194).
• Require that a landlord, at the beginning of a lease term, must provide each tenant with a
hard copy of the Landlord-Tenant Handbook (printed by the landlord), unless the tenant
signs a
statem~nt
declining the Handbook upon referral to the electronic version maintained
on the County website (©9, lines 209-213).
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• Require a landlord to give a tenant 60 days' notice of the landlord's intent to tenninate
tenancy at the lease expiration, unless the tenant is in breach of the lease (©9, lines 214­
217).
• Require a landlord to provide a tenant in a unit in a building constructed before July 1,
1978 with infonnation related to electric and gas billing that is required for newer buildings
under State regulation (©1O, lines 225-230).
• Require a landlord to post a sign, in a fonn approved by the Director and in multiple
languages, with infonnation about filing a complaint and the retaliatory practices
prohibited under this Chapter (©10, lines 231-237).
• Require a landlord of a building or complex with meeting space to make that space
available without a fee for a tenant organization, or a group of tenants seeking to fonn a
tenant organization, to discuss landlord-tenant issues, for the first meeting of each month
(©11, lines 253-256).
• Authorize COLTA, upon finding the landlord
has
caused a defective tenancy, to issue an
order pennitting a tenant to correct the condition that constitutes the defective tenancy and
abating the tenant's rent in an amount equal to the reasonable cost incurred by the tenant
(©11, lines 270-272).
• Require that rental housing data be collected by DHCA annually (©12, lines 286-287), and
include each rental facility's zip code (©12, line 295).
• Require the Director to publish the data collected, unless otherwise prohibited by law, by
unit type and building, but not at the individual unit level, consistent with current DHCA
practice ©13, lines 313-325).
• Provide for the establishment by regulation of a basis for the voluntary rent guidelines, as
an alternative to the residential rent component of the CPI-U, that better reflects the costs
of rental housing in the County (©14, lines 338-339).
• Require a landlord to give a tenant 90 days' notice prior to
any
rent increase, regardless of
whether the increase exceeds the applicable voluntary rent guideline (©14, line 349).
• Require, in an uncodified section, DHCA to conduct a two-year intensive inspection
program, inspecting a sample of each multifamily rental property for which a certificate of
occupancy was issued before January 1, 2015 (©15-16, lines 384-392).
• Provide that the requirement that each lease include a plain language summary of rights
and responsibilities applies to leases entered into or renewed after the effective date of the
regulation establishing the fonn of the summary (©16, lines 393-397).
Issues/Committee Recommendations
1.
Committee-Recommended Provisions Retained from the Introduced Bill
Over the first three worksessions, the Committee reached consensus on a number of
provisions that are not substantively changed from the introduced
Bill.
These include provisions
to:
.• require the Director to publish and maintain on the County website, in multiple languages,
a model lease which may be used in each written lease for rental housing located in the
County (©2, lines 8-18).
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• require the Director to publish and maintain on the County website, in a printable format
and multiple languages, the Landlord-Tenant handbook (©2, lines 19-27).
• require translation of the standard form lease and Landlord-Tenant Handbook into six
identified languages and others as deemed necessary by the Director (©2, lines 17-18; 25).
• require that the Landlord-Tenant Handbook be reviewed at least biennially (©2, line 26).
• require a landlord to give 72 hours' notice to tenants of scheduled inspections when
inspections are part ofDHCA's regular inspection program (©5, lines 96-98).
• require landlords needing extra inspections when violations are not corrected to pay the
cost ofthe inspections as set in regulation (landlord is responsible for third and subsequent
inspections when notified ofa violation that is not corrected before reinspection) (©6, lines
114-118).
• require that each lease for rental housing located in the County generally permit a tenant to
convert a one-year lease to a two-year lease within 30 days after signing the lease (©7,
lines 147-149).
• require a landlord to offer a two-year term at each lease renewal, subject to the same
exceptions as the initial lease term ("reasonable cause") (©8, lines 174-176; ©9, lines 193­
194).
• require that a landlord, at the beginning of a lease term, must provide each tenant with a
hard copy of the Landlord-Tenant Handbook (printed by the landlord), unless the tenant
signs a statement declining the Handbook upon referral to the electronic version maintained
on the County website (©9, lines 209-213).
• authorize COLTA, upon fmding the landlord has caused a <1:efective tenancy, to issue an
order permitting a tenant to correct the condition that constitutes the defective tenancy and
abating the tenant's rent in an amount equal to the reasonable cost incurred by the tenant
(©11, lines 270-272).
• require that rental housing data be collected by DHCA annually (©12, lines 286-287), and
include each rental facility's zip code (©12, line 295).
2.
Committee-Recommended Additions to the Introduced
Bill
The Committee considered, and recommended additions to the Bill, the following
provisions to that were suggested by Councilmember EIrich during the worksessions. These
additions include:
• require lease to include notice that DHCA is available to assist with questions about any
addenda to the lease, and notice that the tenant is entitled to a hard copy of the Landlord­
Tenant Handbook and that the Handbook is available on the County website (©7, lines
150-157).
• require a landlord to give a tenant 60 days' notice of the landlord's intent to terminate
tenancy at the lease expiration, unless the tenant is in breach of the lease (©9, lines 214­
217).
• require a landlord of a building or complex with meeting space to make that space available
without a fee for a tenant organization, or a group of tenants seeking to form a tenant
organization, to discuss landlord-tenant issues, for the first meeting of each month (©11,
lines 253-256).
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• Provide for the establishment by regulation of a basis for the voluntary rent guidelines, as
an alternative to the residential rent component of the CPI-D, that better reflects the costs
of rental housing in the County (©14, lines 338-339).
3.
Committee-Recommended Deletions from the Introduced Bill
After extensive conversations with the panelists over the first three worksessions, the
Committee reached consensus on the deletion of certain provisions in the introduced Bill. These
deletions include:
• deleting the introduced Bill's provision allowing a tenant
to
rescind a lease within two days
after signing (©7, lines 145-146).
• deleting the introduced Bill's removal of reference to the
residential rent component
of the
Consumer Price Index for the purpose of calculating changes in the voluntary rent
guidelines (©14, line 335)
• deleting the provision in the introduced Bill requiring the Department to review all
re~t
increases that are more than 100 percent of the applicable rent increase guideline (©14,
lines 343-346).
• deleting the requirement that DHCA publish data collected in the rental housing survey
with all properties sorted by the amount of rent increases relative to the guidelines (©13,
lines 317-325).
• deleting the introduced Bill's proposed new Section 29-55, which would have allowed a
tenant to ask the Department to confIrm that an increase complies with the law and continue
occupancy for up to two months after the expiration of the lease term at the pre-increase
. rent (©15, lines 370-378).3
4.
Committee Amendments to Key Provisions of the Bill
The Committee devoted a substantial amount of time to the most contentious components
of the Bill. The Committee's consideration of these issues and recommendations are discussed in
detail below:
Standard Form Lease
The TWG Report called for the "provision of a standard lease format." The Report notes
that while the County currently has a model lease available, it is not required to be used, and "is
. often not easily understood by the public." As introduced, Bill 19-15 would require the use of a
standard lease, drafted in clear language, in each written lease for rental housing
in
the County.
It
would also require DHCA to make available model optional provisions that must be used where
applicable. The standard lease and model optional provisions would have
to
be available in
English, Spanish, French, Chinese, Korean, Vietnamese, and other languages as needed.
3
The Office ofthe County Attorney indicated that the introduced Bill's provision
that
would have provided a tenant
with a right to continue occupancy for up to two months after a lease expires at the pre-increase rent would be in
conflict with the State law giving a landlord a right not to renew a lease upon its expiration.
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Currently, DHCA offers model leases in English and Spanish (see ©82-92). In addition,
Section 29-27 of the County Code (©93-95) requires that all leases for rental housing contain (or
not contain) several specific provisions and meet other specific requirements. At the April 11
worksession, the Committee heard from stakeholders about the rationale for a standard lease
requirement, and the problems it would likely create.
As
expressed in the TWG Report, which
recommended a standard lease requirement, leases "are complex legal documents" and even the
existing model lease "is not easily understood by the general public." Matt Losak shared the story
of a tenant who was unaware of a lease provision and ran into trouble with his landlord.
DHCA raised concerns about the burden of making the standard lease available in many
different languages, though the revised FIS does not seem to show a significant fiscal impact (see
©97-105). DHCA also indicated that it does review leases, since the law already requires that a
copy of each written lease form used by a landlord must be filed with the Director.
It
was not clear
whether DHCA reviews these leases proactively, or only when requested to do so by a tenant.
Questions were also raised about potential problems with direct translation of terms, and
enforceability of leases in multiple languages.
Mr.
Spann indicated that HOC has certain clauses
that must be incorporated in leases, and that financing partners often must approve leases. Mr.
Hillman added that Fannie Mae and Freddie Mac would be unlikely to approve a County standard
lease.
In considering what action to take on this issue, the Committee considered the problem that
a standardized lease is would purportedly solve. The TWG Report seemed to focus on the lack of
clarity to tenants of their rights and obligations. At the April 11 worksession,
Mr.
Hillman
indicated that in his experience, lease problems boil down to:
(1)
how much rent is and when it is
due; and (2) what a tenant can or cannot do in an apartment. Both suggest that assisting tenants in
clearly understanding their rights and obligations under the lease, would be valuable.
A number of potential problems with a standard lease requirement were identified at the
April 11 worksession. Also, the likelihood of the inclusion of a number of addenda to address
matters not covered in any standard lease would lengthen an already lengthy document, and could
undermine any intended clarity embodied in a standard lease. Also potentially undermining the
attempt at clarity is the probability that most tenants do not read through an entire lease document,
whether it is written clearly or not.
At the June 27 worksession, Council staff suggested that an alternative means could be
used to assist tenants in understanding their rights and obligations under a lease, with possibly
greater effect than requiring a standard lease form. A "lease summary sheet," similar in form, if
not substance, to a HUD-l settlement statement, could clearly state a tenant's rights and
obligations, in a concise format more likely to be read than even a clearly written lease. Such a
summary could include, term of lease, amount of rent, responsibility for utilities, and tenant
obligations under the lease. However, the landlord-panelists seemed to indicate that a required
standard form lease would be workable after all. The Committee, at that work session, reached
consensus, in the apparent absence of objection from the panelists, to retain the Bill's proposed
requirement that a standard form lease be used in all written leases for rental housing in the County.
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However, at the conclusion of the August 1 worksession, Committee Chair Floreen expressed a
desire to revisit the issue at a future worksession.
Subsequently, in a letter dated September 2, 2016 (©112-115), attorney Douglas M.
Bregman, who previously served on a Statewide commission tasked with creating a standard form
lease for use throughout Maryland, identified problems with implementing a standard lease
requirement.
Mr.
Bregman indicated that a standard lease requirement is not feasible "due to the
ever changing nature of landlord-tenant law." He pointed out-that a standard lease requirement
would not be applicable in all municipalities, which could cause confusion for tenants.
Mr.
Bregman also suggested that requiring a standard lease may not achieve the goal of increasing
tenants' understanding of their rights and responsibilities under the lease.
At its September 15, 2016 worksession, the Committee recommended deleting the required
use of a standard form lease, and instead requiring a summary oftenants' rights and responsibilities
in a form established by method (2) regulation. The summary would be required as part of each
lease in Sec. 29-27, and would set forth, at a minimum: (1) the term of the lease; (2) the amount
of the rent; (3) the date on which the rent is due; (4) the tenant's responsibility, if any, for utility
costs; (5) a list of additional tenant rights and responsibilities under the lease; and (6) information
about services available to tenants from the Department and the Commission.
Committee recommendation
(3-0):
• Delete:
the introduced Bill's standard form lease requirement (©6, line 121).
• Delete:
references in the introduced Bill to "optional model provisions" (addenda) in
reference to the standard form lease requirements (©2, lines 12-15; ©6, lines 121-122).
• Add:
requirement that each lease for rental housing located in the County contain a plain
language summary of tenant rights and responsibilities in a form approved by executive
regulation (©7-8, lines 161-171).
• Add:
provision that the requirement that each lease include a plain language summary of
rights and responsibilities applies to leases entered into or renewed after the effective date
of the regulation establishing the form of the summary (©16, lines 393-397).
Inspections
The TWG Report identified the concern that "some apartment complexes have ongoing
maintenance problems," and recommended that "buildings with ongoing maintenance problems
should be moved to an annual inspection cycle, and that owners of buildings with repeat violations
should pay for the increased inspection schedule." The 2009 Rental Satisfaction Survey also
provided a glimpse into tenants' views as to the condition of their units, among other things.4 As
noted above, the current law requires inspection of each licensed apartment complex and personal
living quarters building at least once every three years. As introduced, Bill 19-15 would have
The Rental Satisfaction Survey compiled responses of 588 tenants in the County, and is organized into the following
sections:
(1)
Rental Information; (2) Rental Unit and Landlord Satisfaction; (3) Tenant-Landlord Rights
&
Responsibilities; (4) Issues Affecting Tenants; and (5) Demographic Information. While somewhat dated, it does
supply a useful perspective on a number of issues that Bill 19-15 seeks to address.
4
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required annual inspection of
all
rental housing consisting oftwo or more dwelling units, including
each apartment complex and personal living quarters building.
DHCA's current inspection process is described in the Fiscal Impact Statement. The
Department currently inspects approximately 5,700 of the approximately 67,250 licensed
multifamily units in the County each year. A higher percentage of units to be inspected are
assigned to properties with a history of noncompliance. Approximately 80 percent of properties
. have 10 percent oftheir units inspected every three years, five percent ofproperties have 50 percent
of their units inspected, and 15 percent of properties have all of their units inspected (see © 18).
Under Bill 19-15, the starting point for inspections would be the entire stock of approximately
67,250 units, with the Director empowered to reduce the frequency of inspections (to triennially)
for properties of landlords with a demonstrated history of compliance with applicable laws. The
analysis in the FEIS concludes that it is likely that the number of units moved to triennial
inspections would be minimal (see ©19-21). OMB concludes that moving to an annual inspection
schedule for all units would require the addition of 97 additional FTEs in DHCA, at an annual cost
of $8,155,631, with an initial operating expense for vehicles, tablets, and phones of $2,110,596.
Councilmember Eirich proposed to change the Bill's inspection requirements to remove
the language requiring the inspection of all units, but retain the annual inspection schedule. The
effect of this change would allow DHCA to retain the discretion it currently has in deciding which
units to inspect, but would require the inspections to be done each year rather than every three
years. This change would significantly reduce the Bill's fiscal impact, but the Bill would still
require roughly three times the number of inspections required under existing law. OMB provided
a revised Fiscal Impact statement estimating the fiscal impact ofthis inspection requirement (©97­
105).5 OMB estimates that this schedule would require the addition of 19 FTEs in DHCA, at an
annual cost of$1,685,880, with initial operating expenses of $504,027.
At the April 11 worksession, the Committee heard from stakeholders concerning this
proposal. The Committee heard that many tenants' fear of retaliation by their landlords makes
them reluctant to complain about problems in their unit. Under existing law, the Director
may
inspect upon a complaint or request from a landlord, but also has the discretion to inspect properties
more frequently than the current triennial inspections; §29-22(b) provides that "the Director may
inspect any other rental housing if the Director receives a complaint or a request from a landlord
or tenant
or believes that the rental housing does not comply with all applicable laws."
(emphasis
supplied) While the discretion to inspect more frequently exists in the existing law, there is not a
mandate that properties with chronic violations be subject to increased inspections.
Given the discretion that the Director already has, the issue is as much one of resource
allocation as of mandated County-wide inspections. At the September 15 worksession, DHCA
Director Snuggs discussed the way that the Department exercises the broad discretion it has under
existing law, but did not offer any proposal for mandatory increased inspections. The Committee,
at its October 27 worksession, discussed how best to focus existing resources on identifying and
resolving issues at "problem" properties. This discussion was shaped by three proposals.
5
A revised Economic Impact statement on Bill 19-15 was also provided, on June 24, 2016. See
©
106-111.
12
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Eirich "Surge" approach:
At the September 15 worksession, Councilmember EIrich proposed an inspection "surge"
that would result in all apartment units being inspected in a two-year period.
6
Councilmember
EIrich set forth the rationale and process for his proposal in a memorandum to the County
Executive on October 10 (see ©116-119). The surge would establish a baseline assessment of the
state of rental housing in the County, and would provide the basis for determining which buildings
or complexes should be subject to more frequent inspections.
Hucker Amendments:
On October 24, Councilmember Hucker circulated a memorandum and
draft
proposed
amendments to the Bill's provisions on inspections (©l20-l25). Councilmember Hucker's
proposal was intended to focus increased inspections on properties with more serious or more
numerous violations" and would implement a tiered inspection schedule. Under this proposal, the '
existing triennial schedule would remain the default, but properties with serious health or safety
violations - identified in the proposed amendment to include certain rodent or insect infestations,
mold, and lack of working utilities - would be inspected annually. Properties with an average of
more than two violations (of any sort) per unit inspected would also be subject to annual
inspections. Biennial inspections would be mandated for properties with an average of at least one
violation (of any sort) per unit inspected.
In addition to targeted increased inspections, Councilmember Hucker's proposal would
require DHCA to submit to the Executive and Council an annual report. The report would identify
properties inspected in the past year and to be inspected in the coming year, list violations found
and corrected, and give the status of any incomplete inspections. While information regarding code
violations is available and updated on a consistent basis on the County's DataMontgomery
website,
7
this information is not limited to rental properties, and it is not easily sortable to so limit
it. Also, under Councilmember Hucker's proposal, landlords subject to annual inspections under
the proposal would be required to provide DHCA with quarterly reports on tenant complaints.
Councilmember Hucker, in his proposal sought provide increased efficiency over an
across-the-board increase in inspections Countywide. The Committee heard from Director Snuggs
that the increased-inspection provisions proposed by Councilmember Hucker would, despite being
targeted toward properties with specific types and quantity of violations, effectively impose a
Countywide biennial or annual inspection schedule. DHCA offered its own proposal to more
effectively target "problem" properties.
DHCA Proposal:
At the October 27 worksession, DHCA presented a proposal for "Focused Housing Code
Enforcement" (©l26-127). Under this proposal, DHCA would inspect "a sample of every
multifamily property over two years to achieve a baseline." Properties inspected under this
6
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13
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program would be prioritized so that properties with serious or more numerous violations, and
properties over 50 years old would be inspected earlier in the cycle. After the two-year program
of more intensive inspections (approximately double the number of inspections per year as under
the current regime), DHCA would return to triennial inspections for "healthy properties," and "use
analytics to determine 'unhealthy' properties, which would be inspected annually at a higher
sampling rate
(i.
e.,
100%). DHCA has also submitted a list of "proposed factors to be considered
to Identify Multi-Family Properties Subject to Annual 100% Housing Code Inspections" (©128).
DHCA's proposal included a cost estimate of $1.0 million (see ©126-127).
The Committee opted to combine the essence of Councilmember Hucker's proposal to
focus inspections on "problem" properties and require annual reports to the Council and Executive
of the status of the inspection program with DHCA's proposed two-year intensive inspection
program. These changes are reflected at ©3, lines 28-45, ©3-5, lines 48-88, and ©15-16, lines
384-392.
Committee recommendation (3-0):
• Delete: all provisions related to mandatory annual inspection of all rental housing units
(©3-4, lines 48-60).
• Add: requirement that DHCA report annually to the Council and Executive on the status
of the inspection program (©3, lines 28-45).
• Add: requirement that DHCA annually inspect properties determined to be "troubled
properties, under a procedure established by method (2) regulation,
8
while retaining a
triennial inspection schedule for all properties (©3-5, lines 48-88).
• Add: requirement that a landlord of a property on an annual inspection schedule provide
quarterly updates to the Director listing tenants' maintenance requests (©5, lines 99-101).
• Add: requirement that DHCA conduct a two-year intensive inspection program, inspecting
a sample of each multifamily rental property for which a certificate of occupancy was
issued before January 1,2015 (©15-16, lines 384-392).
Utility Billing Disclosure
Councilmember Eirich proposed to require a landlord to provide tenants with certain
information to give them an understanding ofhow their electric and gas utility costs are calculated.
State regulation already requires certain disclosures to tenants related to gas and electric energy
billing. COMAR 20.26.03.02 requires a landlord to "disclose in writing to a current or prospective
occupant all material aspects of the energy allocation system including, but not limited to:
(1) The measurement unit recorded by the measuring device;
(2) The method for converting measurement units into the approximate energy use and
the energy costs;
(3) The method for calculating the per unit charge for energy consumed;
(4) How questions and complaints of an occupant concerning bills will be answered by
the owner; and
(5) A statement that the energy allocation system:
8
DHCA has indicated its view that flexibility in the procedure for determining "troubled properties" is important,
and has suggested that establishing the procedure in the annual report would be more desirable to the Department.
14
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(a)
(b)
Approximates the amount of gas or electricity consumed in the dwelling
unit by use of an energy allocation or conversion formula, and
Does not measure the actual use of gas or electricity.,,9
Additionally, COMAR 20.26.03.03 requires "an owner who has previously determined the
approximate energy usage for a dwelling unit by the use of an energy allocation system, including
use of a system before the promulgation of the regulations, [to] disclose to a current or prospective
occupant:
(1) The highest monthly energy cost billed to the same dwelling unit in a month the
dwelling unit was leased during the preceding 12 months;
(2)
The lowest monthly energy cost billed to the same dwelling unit in a month the
dwelling unit was leased during the preceding 12 months;
(3)
The average monthly energy cost billed to the same dwelling unit for the preceding
12 months including only months the dwelling unit was leased for the entire month;
and
(4) The average monthly energy costs billed to similar sized leased dwelling units in
the preceding 12 months."
Subsection B of the regulation further provides that "ifthe owner has not previously used an energy
allocation system within the apartment house:
(1) The owner shall disclose estimated energy costs in the following priority based on:
(a) Actual billing to similar sized dwelling units in other apartment houses
within the same apartment house complex,
(b) The actual operating experience of the vendor for similar sized dwelling
units in other apartment house complexes of comparable age, size,
equipment, and geographic location, or
(c) A square footage allocation derived from gas or electric bills received by
the owner from the utility with a reasonable allowance for common usage
and, if necessary, seasonally adjusted;
(2) The owner shall provide the estimated energy costs required in §B(1) in terms of
an average monthly bill, the highest monthly bill, and the lowest monthly bill."lo
At the August 1 worksession, the applicability of the State requirements was discussed,
and the Committee was informed that the COMAR provisions do not apply to units in buildings
constructed before July
1, 1978.
The Committee directed staff to draft language that would
reconcile the proposed provisions with the COMAR provisions, so that all tenants whose units are
not individually metered will receive the same information as to how their electric and gas bills
are calculated. The Committee recommended adding this language to the Bill at its September 15
worksession.
Committee recommendation
(3-0):
9
http://www.dsd.state.md.us/comar/comarhtmIl20/20.26.03.02.htm
10
lillP..;!/www.dsd.state.md.u§/comar/comarhtmUJO/2Q.:.26.03.03.ptlI1
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• Add
requirement that a landlord provide a tenant in a unit in a building constructed before
July 1, 1978 with information related to electric and gas billing that is required for newer
buildings under State regulation (©10, lines 225-237).
Rent Surcharge Prohibition
As introduced, Bill 19-15 would have prohibited rent "surcharges" by prohibiting a
landlord from charging more
than
the rent charged for the prior lease term when a tenant continues
occupancy on a month-to-month basis. After discussion at its August 1, worksession, the
Committee recommended (as was proposed by Councilmember EIrich) that this be changed to a
prohibition on charging more than the rent
offered/or a new term.
This provision would not (and
probably could not, under State law) require a landlord to allow a tenant to continue after the
expiration of a term on a month-to-month basis. However, it would restrict rent increases in the
event that the landlord does allow a tenant to continue occupancy month..,to-month.
At its September 15 worksession, the Committee revisited this issue after hearing from
landlords that such a prohibition would not allow them to incentivize longer term leases, which
are often necessary to secure financing from lenders who want to see a stable cashflow. This
discussion also included discussion of the County law provisions that allow a tenant to terminate
a lease under certain circumstances that are beyond the tenant's control. The Committee discussed
the possibility of expanding the circumstances in which a tenant may terminate a lease to include
medical necessity as well as perhaps including some circumstances over which the tenant does
have control, such as voluntary change of employment.
Tenant's Right to Terminate a Lease Under EXisting Law
Current County law permits a tenant to break a lease under a fairly narrow set of
circumstances. Section 29-27(s) requires all leases in the County to "allow the tenant to terminate
the lease upon 30 days' written notice to the landlord due to an involuntary change of employment
from the Washington metropolitan area, death of major wage earner, unemployment, or other
reasonable cause beyond the tenant's control. This section does provide that "the lease may provide
that in the event of termination under this provision, the tenant is liable for a reasonable termination
charge not to exceed the lower of one month's rent or actual damages sustained by the landlord."
At the September 15 worksession, Committee members discussed the possibility of expanding
these circumstances to allow tenants to terminate leases for causes that are in the tenant's control.
In addition to the specific circumstances identified in County law, under Maryland law, a
tenant who vacates before the end of the tenant's lease term due to certain medical conditions is
not liable for more than two months' rent after the date on which the tenant vacates the leased
premises.
II
In order to qualify for the limitation of liability, the tenant must provide to the landlord,
before the tenant vacates the leased premises, a written certification from a physician that the
patient has a medical condition that: (1) substantially restricts the physical mobility of the patient
within, or from entering and exiting, the leased premises; or (2) requires the patient to move to a
home, facility, or institution to obtain a higher level of care than can be provided at the leased
premIses.
II
Maryland Real Property Code, §8-212.2
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Finally, in certain instances, members of the armed services may terminate a residential
lease under federal law. The Servicemembers Civil Relief Act (SCRA)12 allows individuals to
break. a lease when they go onto active duty if the lease was entered into before going onto active
duty. Additionally, the act allows a servicemember to terminate a residential lease entered into
while in the military if the member receives permanent change of station (peS) orders, or orders
to deploy for a period of not less than 90 days.
Other jurisdictions provide tenants with different degrees oflatitude for terminating leases,
but staff was not able to identify any jurisdictions that permit a tenant to terminate a lease for a
reason that is under the tenant's control. The reason for this is probably that doing so would
materially affect the tenant's obligations under the lease that landlords would no longer be able to
rely upon a tenant's payment of rent for the term of the lease. Other jurisdictions do, however,
provide for additional circumstances in which a tenant may terminate a lease. These include:
(1)
when a tenant or the tenant's child is a victim of domestic violence; (2) if a landlord harasses the
tenant or violates the tenant's privacy rights; (3) if the tenant or tenant's spouse is 62 years of age
or older and can no longer live independently and must move to a nursing home or other senior
citizen housing; and (4) if the tenant is incarcerated or declared mentally incompetent. The
Committee recommended adding all of these circumstances to those identified in County law by
simply adding them to §29-27(s). (See ©6-7, lines 125-139)
Month-to-Month Leases Generally
The Committee considered the benefits and drawbacks to tenants of month-to-month
leases. Some renters prefer shorter-term leases for the flexibility they provide to act on
opportunities, including moving for work, family, travel or a better apartment down the street.
However, as the Committee heard, landlords (and apparently their lenders) prefer longer-term
leases because of the predictability of cash-flow that they provide. Below is a summary of the
benefits and drawbacks of month-to-month leases.
• Month-to-month leases offer more flexibility.
A
tenant on a month-to-month lease has the
flexibility to move without having to find a sub letter or paying to break. the lease. For
tenants looking for a new job or those with a temporary job, a month-to-month lease is
desirable.
• There is no charge for breaking a month-to-month lease. Under a 12-month lease, a tenant
is responsible for those 12 months of rent payments
13 -
whether or not the tenant still lives
in the ap¥1:ment. If a tenant anticipates having to move before a one- or two-year lease
term is up, a month-to-month lease, even at a higher monthly rent, may end up being less
expensive in the long
run.
• A
month-to-month lease can often be converted to a long-term lease. If a tenant begins a
month-to-month lease but decides to commit to a longer term, the tenant can often convert
50 U.S.C. app. §§501-597b. For specific provisions regarding termination of residential leases, see 50 U.S.C. app.
§535.
13
A landlord does have a duty under State law to mitigate damages in the event that a tenant leaves before the end of
a lease term, so a tenant who terminates tenancy early may not, in fact, be responsible for all remaining months ofrent
ifthe unit is rented to a new tenant during the term. See Maryland Real Property Code, §8-207.
12
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the lease into a one- or two-year lease without any adverse effects, because of landlords'
general interest in longer term leases.
However, there are some drawbacks for tenants with short-term apartment leases. Most notable
are the considerations of cost and stability:
• Month-to-month leases are typically more expensive. Property managers charge more for
a short-term lease, so tenants end up paying more for the benefits described above.
Charging a month-to-month tenant more than a tenant who has signed a longer term lease
makes sense from landlords' perspective, as they feel more secure with a longer rental
commitment.
In
exchange for a tenant's written promise to rent for a year or longer,
landlords are usually more willing to give a more competitive rental rate. When a monthly
tenant decides to vacate after a couple of months, a landlord will incur additional "move
out" expenses, in addition to possibly losing rental income until the unit has been rented
by a new tenant. The landlord may have advertising expenses, cleaning expenses and
perhaps repair expenses if the short-term tenant has caused damage to the unit that is
unrecoverable. There is also the potential loss of monthly revenue if the landlord cannot
fill the unit quickly.
• Short-term leases are unstable. The flexibility that renting month-to-month gives a tenant
also applies to the landlord. Neither is locked into a long-term contract, so there's nothing
preventing the landlord from raising the rent (subject to the law's notice provisions) or
terminating a lease against the tenant's wishes.
Excessive Rent Increases When a Tenant Goes Month-to-Month
There is anecdotal evidence that landlord's sometimes charge dramatically higher rent
when
all
existing tenant seeks to remain in a unit, but rent on a month-to-month basis. Council
staffhas seen a renewal offer that offers rents at different amounts that are inversely related to the
length of the term. In this offer, a tenant may sign a two-year lease at a relatively modest increase
over the prior term's rent. However, this increase over prior rent grows as the new term length
shortens, so that if the tenant wished to go on a month-to-month lease, the increase would be
roughly 90% over the prior term. The extent to which this practice exists among County landlords
is not known.
After consideration of the issue, the Committee recommended deleting the introduced
Bill's prohibition on rent surcharges, but expanding the circumstances beyond the tenant's control
under which a tenant can terminate a lease.
Committee recommendation (3-0):
• Add: to the circumstances in which a tenant may terminate a lease upon 30 days' written
notice: (1) when a tenant or the tenant's child is a victim of domestic violence; (2) when a
landlord harasses the tenant or violates the tenant's privacy rights; (3) when the tenant or
tenant's spouse is 62 years of age or older and can no longer live independently and must
move to a nursing home or other senior citizen housing; and (4) when the tenant is
incarcerated or declared mentally incompetent (©6-7, lines 125-139).
18
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• Delete
the introduced Bill's prohibition of rent surcharges to provide that a landlord may
not charge a tenant more than the rent offered at renewal when a tenant continues on a
month-to-month basis (©15, lines 379-382)
Repair and Deduct Remedy for Tenants
At the August 1 and September 15 worksessions, the Committee discussed the provision of the
introduced Bill that would authorize COLTA to issue an order upon finding the landlord has caused
a defective tenancy, to issue an order permitting a tenant to correct the condition that constitutes
the defective tenancy and abating the tenant's rent in an amount equal to the reasonable cost
incurred by the tenant. Council staff pointed out that existing Section 29_47
14
allows the
Commission to award, among other things:
• Return of all or part of any rent already paid to the landlord after the landlord was notified
of the condition;
• An award of damages sustained by the tenant as a result of the defective tenancy, limited
to the actual damage or loss incurred by the tenant; the award must not exceed $2,500 per
affected dwelling unit; and
• A reasonable expenditure to obtain temporary substitute rental housing in the area.
Also, under Section 29-10(b)(3), the Commission on Landlord-Tenant Affairs may "enforce
this Chapter through any appropriate means, including ordering repairs by a landlord or tenant."
In addition to these County law remedies, State law
l5
provides for payment of rent into escrow
when serious and substantial defects and conditions occur.
It
also allows the Court to terminate
the lease, order that the amount of the rent due be reduced, or order the landlord to correct the
conditions.
At the August 1 worksession, the Committee heard concerns from landlords that allowing
tenants to make repairs could lead
to
substandard work and expose landlords to legal liability.
Councilmember EIrich indicated that the intent of the provision was to address situations where a
leaking pipe presents an immediate risk of flooding, or when an air conditioning unit malfunctions
during a heatwave.
It
became clear to the Committee during the worksession that the COLTA
process takes over two months, and would not empower a tenant to make repairs to alleviate
conditions needing immediate attention.
At the September 15, worksession, the Committee heard that County Code
§26-15
provides
a process for resolving "severe conditions" arising from violations of County Housing and
Building Maintenance Standards and the County Fire, Electric, and Building Codes. Subsection
Staff has included all of subsection 29-47(b) in the Committee rewrite for clarity as to the breadth of COLTA's
authority to award relief upon a fmding of a defective tenancy caused by a landlord
15
Maryland Real Property Code
(RP)
§8-211,
Repair ofdangerous defects; rent escrow.
"Serious defects" include:
(I) Lack of heat, light, electricity, or hot or cold running water, except where the tenant is responsible for the payment
of the utilities and the lack thereof is the direct result of the tenant's failure to pay the charges; (2) Lack of adequate
sewage disposal facilities; (3) Infestation ofrodents in two or more dwelling units; (4) The existence of any structural
defect which presents a serious and substantial threat to the physical safety of the occupants; or (5) The existence of
any condition which presents a health or fire hazard to the dwelling unit.
14
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26-15(a) provides that "[i]fthe enforcing agency finds that immediate action is needed to protect
the public health and safety as a result of a violation of this Chapter, Chapter 22, Chapter 8, or .
Chapter 17, the enforcing agency may, without notice, conference, or hearing, order the owner to
correct or abate the violation." The subsection continues "[i]fthe owner does not abate or correct
the violation as directed ... the enforcing agency may take any action reasonably necessary to
abate or correct the condition or may contract to have the necessary action taken." Under this
section, the owner is liable to the County for all reasonable and necessary costs the County incurs
in addressing the condition, and the County may place a lien on the property, collecting the debt
as ordinary taxes are collected. However, DHCA informed the Committee that it does not typically
engage in making interior repairs authorized in the law.
Repair and Deduct Laws Generally
Most states have adopted some form of "repair ·and deduct" remedy for tenants when
landlords do not make certain repairs in a timely manner. In order to protect landlords, the use of
"repair and deduct" is often narrowed by several limitations. The most common limitations include
requirements that: (1) the landlord be notified ofthe problem in writing and be afforded a specified
amount of time to correct the problem; (2) the repair be necessary and the cost be reasonable; (3)
the cost of making the repair is capped; (4) the tenant is only permitted to invoke the remedy a
limited number of times; and (5) the tenant must pay rent into an escrow account established by a
court. These limitations provide significant protection for landlords, because landlords are
provided notice and a chance to correct the issue(s). If a landlord fails to address the problem(s),
then the tenant is limited to making only necessary repairs at a reasonable cost.
As the name implies, this option allows a renter to pay for a repair and then deduct the cost
of that repair from the tenant's rent the following month. The "repair and deduct" remedy is well­
suited for relatively inexpensive repairs related to essential services when a renter encounters an
unresponsive landlord.
Maryland Rent Escrow Law
Under Maryland law, ifa landlord fails to repair "serious and substantial defects" in a rental
unit, a tenant has the right to pay rent into an escrow account established at the local district court.
16
This "rent escrow" law prescribes specific conditions under which rent may be placed in escrow.
A tenant must give the landlord written notice by certified mail and reasonable time
17
to make the
repairs before the tenant may bring a rent escrow action, and an escrow account can only be set up
by the court. Rent escrow is not provided for defects that just make the apartment or home less
attractive or comfortable, such as small cracks in the floors, walls or ceiling.
"Serious and substantial defects" covered by the law include, but are not limited to:
• Lack of heat, light, electricity or water, unless the tenant is responsible for the utilities and
the utilities were shut off because the tenant did not pay the bill.
• Lack of adequate sewage disposal; rodent infestation in two or more units.
RP §8-211.
17
RP §8-211(h) provides that "there is a rebuttable presumption that period
in
excess of30 days from receipt of
notice is unreasonable."
16
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• Lead paint hazards that the landlord has failed to reduce.
• The existence of any structural defect that presents a serious threat to the tenant's physical
safety.
• The existence of any condition that presents a serious fire or health hazard.
A tenant may also withhold rent without establishing an escrow account, but must still
notify the landlord by certified mail of the problems in the unit and of the tenant's refusal to pay
the rent. However, in this circumstance, the landlord may take the tenant to court and try to evict
the tenant for nonpayment of rent. A tenant may tell the court the reasons for withholding rent,
i.
e.,
the landlord's failure to make necessary repairs. If the court agrees that the condition of the
unit poses a serious threat to the tenant's life, health or safety, the court will require the tenant at
that time to make rent payments into an escrow account until the dispute is resolved.
A tenant's only other alternative under State law is to report the landlord to DHCA. If,
upon inspection, DHCA cites the landlord for violations, repairs will have to be made. County
Code §26-15 provides a process for resolving "severe conditions" arising from violations of
County Housing and Building Maintenance Standards and the County Fire, Electric, and Building
Codes. Subsection 26-15(a) provides that "[i]fthe enforcing agency finds that immediate action is
needed to protect the public health and safety as a result of a violation of this Chapter, Chapter 22,
Chapter 8, or Chapter 17, the enforcing agency may, without notice, conference, or hearing, order
the owner to correct or abate the violation." The subsection continues "[i]f the owner'does not
abate or correct the violation as directed ... the enforcing agency may take any action reasonably
necessary to abate or correct the condition or may contract to have the necessary action taken."
Under this section, the owner is liable to the County for all reasonable and necessary costs the
County incurs in addressing the condition, and the County may place a lien on the property,
collecting the debt as ordinary taxes are collected.
The Committee considered a staff recommendation that would have required all leases to
permit a tenant to "repair-and-deduct" subject to several limitations, but preferred a suggestion
from Councilmember EIrich that such repairs be authorized by the Director ofDHCA (or his or
her designee) after the Director or designee gives the landlord notice of a violation of applicable
law and orders correction of the violation within a specified period of time, and the landlord does
not make the correction.
Committee recommendation
(3-0):
• Add:
language authorizing the Director to order a landlord to correct a violation of
applicable law in a specified period of time and, if the landlord does not correct the
violation in the specified period, authorize the tenant to correct the violation and deduct the
reasonable cost from the tenant's rent (©5-6, lines 103-111).
• Add:
requirement that each lease permit the tenant to correct violations of applicable law
in the unit as authorized by the Director under the above provision (©7, lines 158-160).
21
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This packet contains:
Bill 19-15
Legislative Request Report
Applicability of Chapter 29 in Municipalities
Fiscal and Economic Impact Statement
Councilmember EIrich Memorandum
Tenant Work Group Report Executive Summary
Selected Public Hearing Testimony
Clarence Snuggs
Sen. Jamie Raskin
Nicola Whiteman, AOBA
Mitchell Farrah, WMCCAI
James C. Perry
Jheanelle Wilkins
Matt Losak, Montgomery County Renters Alliance
Julie Ortman-Fouse
Zorayda Moreira-Smith
Renters Alliance Letter, July 23,2015
HOC Letter, July 23,2015
Rental Satisfaction Survey
County Model Lease
County Code, § 29-27
TWG Report - Issue III: Communication and Information
Revised Fiscal Impact statement
Revised Economic Impact statement
Bregman letter, September 2,2016
Councilmember EIrich memorandum - October 10, 2016
Councilmember Hucker memorandum and amendments
DHCA Proposal- Focused Housing Code Enforcement
DHCA
-=
"Proposed Factors ..."
Circle
#
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Bill No.
19-15
Concerning: Landlord -Tenant Relations
- licensing of Rental Housing ­
Landlord-Tenant Obligations
Revised:
09/15/2015
Draft No.
-.1Q.
Introduced:
April 21. 2015
Expires:
October 21. 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: ......:..:N=on=e'---_ _ _ _ __
ChI _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember Eirich
Co-Sponsor: Councilmembers Navarro and Hucker
AN
ACT to:
(1) provide for annual inspection of certain residential rental properties;
(2) require the use of a standard form lease and applicable optional provisions for certain
residential rental properties;
(3) require the publication of certain information related to rental housing;
(4) require the Department ofHousing and Community Affairs to review certain rent
mcreases;
(5) provide for certain remedies to be awarded by the Commission on Landlord-Tenant
Affairs;
(6) provide certain rights to tenants facing rent increases; and
(7) generally amend the law related to landlord-tenant relations.
By amending
Montgomery County Code
Chapter 29, Landlord- Tenant Relations
Sections 29-6, 29-22,29-27,29-28, 29-30. 29-31, 29-33. 29-47, 29-51, 29-53, and 29-54
By adding
Montgomery County Code
Chapter 29, Landlord - Tenant Relations
[[Sections]] Section 29-55 [[and 29-56]]
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 unaffected by bill.
The County Council for Montgomery County, Maryland approves the following Act.'
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BILL
No. 19-15
1
Sec.
1.
Sections 29-6, 29-22, 29-27, 29-28, 29-30, 29-31, 29-33,29-47,29-51,
29-53, and 29-54 are amended and [[Sections]] Section 29-55 [[and 29-56 are]] is
added as follows:
29-6. Duties of Director.
In addition to any other power, duty, or responsibility assigned in this Chapter,
the Director has the following duties:
2
3
4
5
6
7
*
ill
*
*
8
9
10
11
12
13
14
15
16
17
18
19
20
The Director must publish and [[provide on request to landlords and
tenants]] maintain on the County website
~
[[standard form]] model lease,
drafted in clear language understandable to persons without legal training
[~
which
must be used in each written lease for rental housing located in
the Countyll.
[~Director
must publish and provide on request to
landlords and tenants model optional provisions, drafted in clear language
understandable to persons without legal training, which may be used in
~
lease for rental housing located in the County.]] The Director must make
the [[standard form]] model lease [[and optional provisions]] available in
English, Spanish, French, Chinese, Korean, Vietnamese, and other
languages, as [[needed]] determined necessary by the Director.
(g)
The Director must publish [[and provide on request to landlords
and
tenants,]] and maintain on the County website, in a printable format.
~
21
Landlord-Tenant Handbook to serve as
~
practical guide for landlords and
tenants summarizing their respective rights and responsibilities. The
Director must make the Landlord-Tenant Handbook available in English,
Spanish, French, Chinese, Korean, Vietnamese, and other languages, as
[[needed]] determined necessary by the Director. The Director must
review the handbook at least [[biannually]] biennially and revise it as
necessary.
22
23
24
25
26
27
(i)
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BILL
No. 19-15
28
29
30
au
The Director must report on rental housing inspections to the Executive
and the Council. by September 1 of each year. The report must include:
31
32
33
34
35
36
37
38
39
40
ill
ill
the address of each property inspected during the prior fiscal year:
the address of each property that has been inspected or is scheduled
to be inspected on an annual or triennial basis during the current
fiscal year:
ill
for each property inspected:
(A)
a summary of violations by:
ill
(in
(iii)
number found:
number corrected: and
type of violation: and
!W
~
the status of any incomplete inspections
for each property required to have a corrective action plan under
Section 29-22 in the prior fiscal year or during the current fiscal
year. a list of:
(A)
41
42
43
44
45
46
violations found;
violations corrected: and
the status ofthe corrective action plan.
!W
(Q
*
29-22.
Inspection of rental housing.
(a)
*
*
47
48
49
50
[The] Except as provided in this Section, the Director must inspect
[[ill1
rental housing consisting oftwo or more dwelling units, including]] each
apartment complex and personal living quarters building licensed as
rental housing". at least once [every three years] [[each year]] within each
three-year period to determine if it complies with all applicable laws.
[The Director may inspect an apartment complex or personal living
quarters building more often than the triennial inspection.] The Director
51
52
53
54
G
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BILL No. 19-15
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56
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may inspect an apartment complex or personal living quarters building
more often than the triennial inspection.
(b)
[[If
the Director fmds that
~
landlord of licensed rental housing has
~
demonstrated history of compliance with applicable laws over the most
recent three years, the Director may thereafter inspect the licensed rental
housing once every three years.]] The Director must inspect. at least once
each year. any rental housing which. after inspection. the Director:
ill
finds in violation of any applicable law that adversely affects the
immediate health and safety ofthe tenants, including:
(A)
rodent or insect infestation affecting 20% or more units in a
building;
tID
(Q
extensive and visible mold growth on interior walls or
surfaces exposed to the occupied space;
windows that do not permit a safe means of egress:
pervasive and recurring water leaks the result in chronic
dampness, mold growth. or personal property damage in
more than one unit: or
illl
72
73
74
75
76
77
78
79
80
81
82
!m
lack of one or more working utilities that is not shut off due
to tenant non-paYment. including:
ill
(ii)
(iii)
(iv)
natural gas;
electricity;
water: or
sewage disposal: or
ill
determines to be a troubled property, under a procedure established
by method (2) regulation that:
ill
ill
classifies violation types by severity: and
rates properties by:
ill
~se~v~e~n~~~~~~~~
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BILL
No.
19-15
83
84
85
86
87
(in
quantity ofviolations.
W
The Director must require a corrective action plan for any property
subject to annual inspections under subsection
(b).
A property required to
develop and implement a corrective action plan must be inspected at least
once each year until the Director determines that the corrective action
plan has been successfully completed.
88
89
90
91
92
93
94
95
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101
102
103
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107
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109
UU
The Director may inspect any other rental housing ifthe Director receives
a complaint or a request from a landlord or tenant or believes that the
rental housing does not comply with all applicable laws.
[(c)][[@]]W
As a condition of receiving a license under this Chapter, a
landlord must agree to:
(1)
allow access to the Department for any inspection required under
this Chapter or Chapter
26;
[[and]]
(2)
notify any affected tenant whose unit requires inspection at least
72 hours in advance of [[the]]
~
scheduled inspection under
subsection Ca) of this Section[[.]]; and
ill
when subject to annual inspections under subsection Cb), provide
quarterly updates to the Director listing all maintenance requests
received by the landlord from tenants.
[(d)] [[ill]]ill
If an inspection indicates that any rental housing does not
comply with all applicable laws, the Director [[may]] must notify the
landlord in writing and order correction of each violation within a
specified period of time. If the landlord does not correct the violation in
the specified period oftime, the Director may:
ill
authorize a tenant to:
(8l
have the violation corrected by a licensed contractor
selected from a list maintained by the Director: and
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BILL
No.
19-15
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all
deduct the reasonable cost ofthe repair. up to the amount of
one month's rent. from the tenant's rent: or
ill
[[ill]](g)
revoke the license or take other remedial action under Section 29­
25.
A
landlord of licensed rental housing [[found
!ill]
notified after
initial inspection of a violation of applicable laws [[more than twice in
two consecutive years]] must
Jlgy
the cost ofthe [[next inspection]] third.
and subsequent inspections. as [[determined
Qy
the Director]] established
in regulation, ifthe violation is not corrected by the second inspection.
*
29-27. Contents oflease.
*
*
[Each]
[[A
landlord must use the standard form lease]] [[and any appropriate
model optional provisions]] [[furnished
Qy
the Director for each]] Each lease for rental
housing located in the County [[.:. Each lease]] must:
123
124
*
(s)
landlord due
to~
*
*
125
126
Allow the tenant to terminate the lease upon 30 days' written notice to the
127
128
ill
ill
ill
ill
ill
(Q)
an involuntary change of employment from the Washington
metropolitan
area[[,]]~
129
130
131
132
133
134
135
136
the death of major wage
earner[[,]]~
unemployment[[,]]~
the tenant or the tenant's child being a victim ofdomestic violence:
a landlord harassing the tenant or violating the tenant's privacy
rights:
the tenant or tenant's spouse being:
CA)
62 years of age or older:
no longer live independently: and
all
G
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BILL
No. 19-15
137
138
139
(k1
needing to move to a nursing home or other senior citizen
housing;
ill
(B)
the tenant being incarcerated or declared mentally incompetent; or
other reasonable cause beyond the tenant's control.
140
141
142
143
144
145
146
147
148
149
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152
153
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164
The lease may provide that in the event of termination under this
provision, the tenant is liable for a reasonable termination charge not to
exceed the lower of one month's rent or actual damages sustained by the
landlord.
(t)
[[Allow the tenant to rescind the lease within two days after signing the
lease.
(ill]] Allow the tenant to convert
~
one-year lease to
~
two-year lease within 30
days after signing the lease, unless the one-year lease was offered
Qy
the
landlord consistent with subsection 29-28(c).
[[(y}]](ill
Notify the tenant
that~
general information and assistance
Department
regardin~
(A)
questions about any addenda to the lease; and
evictions [[are available from the Department.]]; and
IS
ill
available from the
em
£2l
the tenant is entitled to a hard copy of the Landlord-Tenant
Handbook as required under subsection 29-28(f) and that the
Landlord-Tenant Handbook is available on the County website.
(i}
Permit the tenant to correct violations of applicable law in the unit and
deduct the reasonable cost of the repairs from the tenant's rent as
authorized by the Director under subsection 29-22(f).
[[(i}]](w)
Contain a plain language summary of tenant rights and
responsibilities. in a form established by the Executive by method (2)
regulation that includes. at a minimum:
ill
the term ofthe lease:
'0
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BILL
No. 19-15
165
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
!ll
ill
ill
ill
the amount ofthe rent
the date on which the rent is due:
the tenant's responsibility. if any. for utility costs:
a list ofadditional tenant rights and responsibilities under the lease;
and
LQ) .
infonnation about servIces available to tenants from the
Department and the Commission.
29-28. Leasing requirements generally.
*
(c)
*
*
The landlord must offer each lease for an initial tenn of [2] two years,.
and
~
two year tenn at each renewal, unless the landlord has reasonable
cause to offer a different [initial] tenn.
*
(2)
*
*
As used in this subsection, reasonable cause means a situation in
which a [[2-]] two year lease would create undue hardship or
expense for a landlord. Reasonable cause includes the sale of a
dwelling unit if settlement if likely to occur within [[2]] two years,
a bona fide contract to sell the dwelling unit within [[2]] two years,
or a planned conversion to a condominium or cooperative within
[[2]] two years. If the landlord claims reasonable cause exists
under this subsection, the landlord must attach to the lease a
statement explaining the reasonable cause and advising the
prospective tenant of the tenant's right to challenge the cause by
filing a complaint with the Department.
184
185
186
187
188
189
190
191
(3)
The landlord must include the following statement in each lease,
or as an addendum to an oral lease, and assure that it is signed and
dated by the parties:
o
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BILL
No. 19-15
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193
194
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198
199
200
201
202
203
204
205
206
207
208
209
210
Montgomery County law requires each landlord to offer each
prospective tenant a lease for an initial term of
[2]
two
~
two year term at each renewal, unless the
years~
and
landlord has reasonable
cause to do otherwise. The tenant may accept or reject this offer.
Before signing this lease, the tenant confIrms that (initial and date
one option):
(A)
The landlord offered me a
[2]
two-year lease term and I
accepted it.
(B)
The landlord offered me a
[2]
two-year lease term but I
rejected it.
(C)
The landlord gave me a statement:
(i)
explaining why the landlord had reasonable cause not
to offer me a
[2]
two-year lease term; and
(ii)
telling me that I can challenge the landlord's action
by filing a complaint with the Montgomery County
Department of Housing and Community Affairs.
*
ill
with
~ ~
*
*
At the beginning of
~
lease term, each landlord must provide each ,tenant
of the Landlord-Tenant Handbook [[furnished
.by
the
211
212
213
214
215
216
217
218
219
Director,]] unless the tenant
~ ~
statement declining
~
hard
gmy
and
accepting referral. to the Landlord-Tenant Handbook maintained on the
County website.
W
Unless the tenant is in breach ofthe lease. if a landlord does not intend to
offer an existing tenant a renewed lease term. the landlord must give the
tenant 60 days' notice of the landlord's intent to terminate tenancy at the
lease expiration.
*
29-30. Obligations
of landlords.
*
*
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BILL No. 19-15
220
221
222
223
224
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
(a)
Each landlord must reasonably provide for the maintenance ofthe health,
safety, and welfare of all tenants and all individuals properly on the
premises of rental housing. As part of this general obligation, each
landlord must:
*
ill
*
*
For each unit in a building constructed before July I. 1978. and for
which units are not individually metered. provide the tenant with
all information required under the Public Utilities Article of the
Maryland Code and applicable COMAR provisions governing:
CA)
electric and gas submeters: and
energy allocation systems.
(3)
LID
Display in in the lobby. vestibule. rental office. or other prominent
public place on the premises. a sign in a form approved by the
Director that includes information in English. Spanish. French.
Chinese. Korean. Vietnamese. and other languages as determined
necessary by the Director. about:
CA)
filing a complaint under this Chapter: and
the retaliatory practices prohibited under this Chapter.
(3)
*
29-31. Landlord notice requirements.
*
*
(a)
Each landlord of an apartment complex in the County must:
(1)
post
[of]
a durable notice in an accessible, conspicuous and
convenient place in each building to which the notice applies, or
(2)
distribute
[of]
the notice directly to all tenants.
The notice must contain the name or title and telephone number of at least
one responsible representative of the building management who may be
reached at all times in an emergency.
*
@
*
*
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BILL
No. 19-15
248
249
250
251
252
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
29-33. Rights of tenants generally.
*
(b)
*
*
Tenants and tenant organizations have the right of free assembly in the
meeting rooms and other areas suitable for meetings within rental housing
during reasonable hours and upon reasonable notice to the landlord to
conduct tenant organization meetings. A landlord must not charge a
tenant organization or a group of tenants seeking to form a tenant
organization a fee for the first meeting of each month held to discuss
landlord-tenant issues. but [[The]] the landlord may charge a reasonable
fee for [[the use]] other uses ofthe meeting rooms or common
areas[[,]]~
[[but the]] The charge must not exceed the regular schedule of fees for
the facility to other groups. The landlord may also impose reasonable
terms and conditions on the use of the meeting rooms or common areas
if those terms and conditions do not undermine the purposes of this
Section.
*
*
(b)
*
*
*
*
29-47. Commission action when violation found.
If the Commission or panel finds that a landlord has caused a defective
tenancy, it may award each party to the complaint one or more of the
following remedies:
*
(7)
An order permitting
*
~
*
tenant to correct the condition that
constitutes the defective tenancy and abating the tenant's rent in an
amount equal to the reasonable cost incurred
Qy
the tenant;
00
After a retaliatory or illegal eviction as defined in Section 29-32,
reasonable attorney's fees incurred by the affected tenant in
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BILL
No.
19-15
275
276
277
defense of the retaliatory or illegal eviction. The award must not
exceed $1,000.00.
*
29-51. Rental housing data collection.
(a)
*
*
278
279
280
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
301
302
The County Executive must establish procedures to collect and analyze
housing data for rental dwelling units in the County, and must make
every effort to centralize the data collection functions to minimize the
burden for landlords.
(b)
The reporting process is mandatory for landlords of licensed rental
housing, including new dwelling units as they come on the market and
all vacant units.
(c)
The data [collection frequency] must be [on an annual basis] collected
annually.
(d)
The Director must use a survey form for collecting data designed to
minimize the repeated reporting of unchanged information, while
maintaining an accurate data base.
(e)
The housing data collected must be used to [ascertain] measure the
supply and availability of rental housing, as well as other operating
characteristics. Each landlord must provide the following [information
as requested by] to the County:
(I)
(2)
(3)
(4)
(5)
The location of [the] each rental
Structure type;
Year built;
Distribution of units by standard bedroom sizes;
The number of units by bedroom size that were re-rented during
the month;
(6)
(7)
The number of vacant days applicable to those units;
The rent charged
for~h
rental unit;
facility~
including the zip code;
\.2.:J
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BILL No. 19-15
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304
305
306
307
308
309
310
311
312
313
(8)
(9)
The rent charged for each re-rented unit before vacancy; and
The new turnover rent charged for each re-rented unit.
*
*
*
(i)
The Director is primarily responsible for controlling rental housing data
surveys for the County. The Director must share this information with
other governmental agencies that need it without invading individual
privacy.
In
this regard, the Director must coordinate survey activities
with other County departments, and make available to the departments
the results of all surveys in accordance with [executive] applicable
procedure.
U)
The Director must publish, unless the publication is prohibited under
State law, the information collected in the rental housing data survey
on the County website, including
~
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
table listing all rental housing
consisting oftwo or more dwelling units [[and the average rent increase
for each unit]] by unit type and building type.
[[Qy
the following
categories:
ill
ill
ill
ill
(k)
100 percent or less of the applicable rent increase guideline;
greater than 100 percent,
ill2
to 125 percent of the applicable rent
increase guideline;
greater than 125 percent,
ill2
to 150 percent of the applicable rent
increase guideline; and
greater than 150 percent of the applicable rent Increase
guideline.]]
Any landlord who violates any provision of this Section is liable for
payment of a civil penalty in an amount not to exceed $1,000 for each
violation.
29-53. Voluntary rent guidelines; review of rent increases.
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BILL
No.
19-15
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331
332
333
334
335
336
337
338
339
340
341
342
343
344
345
346
347
348
349
350
351
352
353
354
355
356
(a)
The County Executive must issue annual voluntary rent increase
guidelines. not later than March 1 of each year. The Executive must
publish the guidelines in the County Register and on the County
website.
(b)
The guidelines must be based on the increase or decrease in the
[residential rent component of the] residential rent component of the
Consumer Price Index for all urban consumers for the Washington­
Baltimore metropolitan area, or any successor index, for the preceding
calendar year. unless an alternative standard better reflecting the costs
of rental housing in the County is established by regulation.
(
c)
The Department should encourage landlords to hold rent increases at
the lowest level possible.
The Department may review any rent
increase that appears to be excessive and encourage the landlord to
reduce, modify, or postpone the increase. [[The Department must
review all rent increases that are more than 100 percent of the
applicable rent' increase guideline issued under
sub~ection
(ill to
recognize patterns of increases that particularly harm tenants.]]
29-54. Rent adjustments; notice requirements.
(a)
A landlord must not increase the rent until [[atleasttwo]] [2] [[months]]
90 days after the landlord gives the tenant written notice ofthe increase.
[[A landlord must give the tenant at least three months written notice
before an increase of more than 100 percent of the rent increase
guidelines.]] A landlord must not impose more than one rent increase
on a tenant in any 12-month period. Each written rent increase notice
must contain the following information:
(1)
The amount of monthly rent immediately preceding the effective
date of the proposed increase (old rent), the amount of monthly
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BILL No.
19-15
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358
359
360
361
362
363
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365
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367
368
369
370
371
372
373
374
375
376
377
378
379
380
381
382
383
384
rent proposed immediately after the rent increase takes effect
(new rent), and the percentage increase of monthly rent.
(2)
(3)
The effective date of the proposed increase.
The applicable rent increase guideline issued under Section 29­
53.
( 4)
A notice that the tenant may ask the Department to review any
rent increase that the tenant considers excessive.
(5)
Other information that the landlord deems useful in explaining
the rent increase.
An
otherwise valid notice of a rent increase is not invalid because the
notice contained an incorrect rent increase guideline number if the
landlord reasonably believed that the number was correct.
*
*
*
~
[[29-55.]] [[Rights of tenants facing rent increases.
.cru
®
A tenant may ask the Department to confirm that
complies with this Article.
rent increase
When
~
rent increase exceeds the applicable guideline,
~
tenant:
ill
may continue occupancy for
!ill
to two months after the lease
term expires on
~
month-to-month basis at the current pre­
increase rent; and
ill
must give at least.li days' notice to the landlord before vacating
the premises.
29-56.]] [[Rent surcharges prohibited.
A landlord must not charge more than the rent]] [[charged]] [[offered for the]]
[[prior]] [[renewed lease term when
month basis.]]
[Sec. 29-55] [[Sec. 29-57]] Sec. 29-55 - 29-65.
ram.
f:\law\bills\1519 landlord - tenant relations\bill 1C.docx
~
tenant continues occupancy on
~
month-to­
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BILL
No. 19-15
385
386
387
388
389
390
391
392
393
394
395
396
397
W
The Director must. by July
1.
2019. inspect a sample of each
multifamily rental property for which a certificate of occupancy was
issued before January
1.
2015.
Oil
The Director must provide to the Council. by January IS. 2017. a plan
to inspect rental housing under subsection Ca) that includes:
ill
a means of prioritizing inspections:
standardized inspections for all units: and
an estimate of the cost for conducting the inspections.
ill
m
Sec. 3. Transition.
The [[standard form lease]] plain language summary required under Section
29-27. as amended in Section 1. must be [[used for]] included with all leases entered
into or renewed after the effective date of the regulation establishing the [[standard
form lease]] form of the plain language summary.
Approved:
398
399
Nancy F1oreen, President, County Council
Date
400
Approved:
401
Isiah Leggett, County Executive
Date
402
This is a correct copy ofCouncil action.
403
Linda M. Lauer, Clerk ofthe Council
Date
f:\law\bills\1519 landlord - tenant relations\bill1 O.doC)(
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LEGISLATIVE REQUEST REPORT
Bill 19-15
Landlord
­
Tenant Relations
-
Licensing ofRental Housing
-
Landlord-Tenant Obligations
DESCRIPTION:
Bill 19-15 would make several changes to the County's landlord­
tenant law, principally aimed at enhancing the existing rights of
tenants. The amendments fit generally into three categories:
(1)
leases
and landlord-tenant obligations; (2) licensing and data collection; and
(3) rent adjustments.
Tenants often face uncertainties as to their responsibilities and rights
under rental housing leases, and often struggle with rent increases that
are above the voluntary guidelines established under the current law;
the current programs for inspection of rental housing and publication
of rental housing data are inadequate.
Improve access to quality rental housing and ensure a better
understanding of landlord and tenant obligations under leases; protect
tenants facing large rent increases.
Department of Housing and Community Affairs
To be requested.
To be requested.
To be requested.
To be researched.
Josh Hamlin, Legislative Attorney, 240-777-7892
To be researched.
PROBLEM:
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
Class A violation
F:\LAW\BILLS\1519 Landlord - Tenant Relations\LEGlSLAT1VE REQUEST REPORT.Docx
f:\law\bills\ 1519 landlord - tenant relations\legislative
request report.docx
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APPLICABILITY OF CHAPTER 29, Landlord-Tenant Relations to Municipalities
Source: Montgomery County Code, Appendix F.
County Laws Applicable to Municipalities
Town of Barnesville
Town of Brookville
Chevy Chase Village
Chevy Chase View
Chevy Chase Sec. 3
Town of Chevy Chase
Chevy Chase Sec. 5
City of Gaithersburg
Town of Garrett Park
Town of Glen Echo
Town of Kensington
Town of Laytonsville
Village of Martin's Addition
Village of North Chevy Chase
Town of Poolesville
City of Rockville
Town of Somerset
City of Takoma Park
Town of Washington Grove
no
yes
no
yes
yes
yes
yes
no
no
yes
yes
no
yes
yes
no
no
yes
no
yes
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ROCKVILLE, MARYLAND
MEMORANDUM
June 19,2015
TO:
FROM:
George Leventhal, President, County Council
~
Jelmifer A. Hughes, Director, Office of Management .
get
~o~
Joseph F. Beach,
Dire~torl DepartmentofFinance~l:-S
FEIS for Bill
19-15
Landlord - Tenant Relations- Licensing of
R~tal
Housing
SUBJECT:
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 of the County Executive
Joy Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Joseph F. Beach, Director, Department of Finance
Clarence
J.
Snuggs, Director, Department of Ronsing and Community Affairs
Alex Espinosa, Office of Management and Budget
Jenny Bryant, 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
BiIl19-15
Landlord-Tenant Relations - Licensing of Rental Housing - Landlord Tenant Obligations
1. Legislative Summary
Bill 19-15 provides for annual inspection of certain residential rental properties, requires
the usc of a standard form lease, requires publication ofcertain information related to
rental housing, requires DHCA to review rent increa<)es, provides for remedies to be
awarded by the Commission on Landlord - Tenant Affairs, provides certain rights to
tenants
facing
rent increases, and generally amends the law related to landlord-tenant
relations.
2.
An
estimate 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 information, assumptions, and methodologies used.
Tbere is no estimated change in County revenues due to Bil119-15. While the bill would
require reimbursement of inspection C{}sts under certain circumstances, that is too
speculative to estimate.
Bill 19-15 impacts expenditures in three areas: Code Enforcement, publication ofthe
Landlord Tenant Handbook, and Licensing and Registration (see below).
• Code Enforcement (Section 29-22)
o There are approximately 67,250 multifamily units in Montgomery County
licensed by DHCA. This does not include units in the Cities of Rockville,
Gaithersburg or Takoma Park. These units are inspected either by the local
jurisdiction or via DHCA through a contractual agreement.
() Based on our current sampling technique (consistent with Montgomery
County Code, Chapter 29) to meet the current triennial inspection
requirement, approximately 5,700 units of multi fam.ily housing units are
required to be inspected on an annual basis, Under the current requirem.eI1t
properties with a history of noncompliance are assigned a higher percentage
of units to be inspected. Approximately 80 percent of properties receiving
triennial inspections have 1
o
percent ofunits jnspected' 5 percent of
properties have 50 percent of units inspected, and
15
percent of properties
have 100 percent of the units inspected.
o The proposed bill requires annual inspections of all units. After the most
recent three years of demonstrated compliance, annual inspections may revert
back to being triennially inspected, For purposes ofthis fiscal impact
statement, it is assumed
that
"in-compliance" relates to a property being free
from
any and all violations. Since each unit would be inspected annually,
it
1
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is unlikely a property would be free from any and all violations for all of its
units over three years. Thus, it is more likely that all multifamily properties
would continue to require annual inspections. Therefore, for purposes of this
fiscal impact statement, annual inspections of
all
multifamily units are
assumed.
o The average number of units inspected by a Code Enforcement Inspector is
approximately 740 per year.
The
total number of new units required to be
inspected under Bill 19-15 is 60,612 (67,500 total multi-family units - 6,888
number of units inspt-'Cted in FY14).
o To increase the requirement of multifamily inspections from
the
calculated
minimum of5,700 units to 67,500 units annually, the Department of Housing
and Community Affairs (DHCA) would need a total 01'97 additional FTEs.
• This includes 82 Housing Code Enforcement Inspectors, 8 Program
Manager Irs and 5 Principal Administrative Aides. DHCA would
also need the associated operating expenses associated with vehicles,
tablets, mobile phones and general operating expenses for the Code
Enforcement staff.
• Total annual personnel and operating cost is estimated to be
58,155,631.
• Total one-time costs (for 82 vehicles, tablets and mobile phones) are
estimated to be $2,110,596.
o Total estimated full year Code Enforcement cost is 510,266,227
o DHCA estimates that two IT staff positions are needed to provide technology
operational and maintenance support for the expanded Code Enforcement
activities. The cost is estimated at $.187,670.
o .Below are the detailed assumptions used to fonnulate the cost estimates:
2
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....,...'. " ....
~lrt.lJal
Cp$.t:;.
2~,9qo~OO.:
.
acquisi~ion
'"
1/~lq.~9 '>i~~1
,.,
:".
"..
• •• '
•••••
~.""
~
~,739.00
maintenance
3,943.00 . annual replacement
"'
"h "'"
••••
_,
,
•••••••
,
• • •,
v.
,"
114..(){:) .:
'!l~'!t~ly 0Y~r.hea~
............
?,.Zc??,:~1:) Totaly'e~i,~le
Costs
99.99'
49.99 .
tablet
a~quisition
'tablet
case
,
rnobilephoneac:g~!sition
,m()bi.l~
ph,?ne
~as~.
..
838.97 .
315.00 tablet
servic~ ~$.26.25/m(»).
628.68 .
m().b!le
servicE:!(~5?}9/mo}
943.68
Total
otal One-Time Cost :Total Annual Cost
"
....
•••
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....
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~
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~.~
,
' ••••
," "••
h
.."
••• ,
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25,138:9.1
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. .
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.
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•.• ·,'·.•
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,
..
••
*Salaryrosts
areass~rnedat
minim/Jrrl
Jo'~
thegrode
Jevel~
U5pefCfnt,
flat.
~nsurance
rate,
and atotal of
15. 7
perre~tforretitement
9nd FICA costs
.
---"General DE" inciudes office supplies, ITsupplies/licenses,
printing,
produ..1'fion, mailing and
other
mise DE items
• •••
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••
,
,
,
•••••••
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•••••••••
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• Landlord Tenant Handbook Publication (Sections 29-6(f) and 29-28(f))
1. These sections require providing a Landlord Tenant handbook
to
every
tenant.
2. There are approximately 97,500 rental units including multifamily, single
family, condominium and accessory apartments. The actual number of
tenants
is
unknown so the cost to provide tenant handbooks
is
based on the
number of rental units.
3.
The average cost to produce one book is
S1.00
and
$1.15
to distribute by
mail.
4. Total one-time cost
is
approximately $209,625 to provide one handbook per
rental unit.
5. Based on the DRCA 2014 Rental Housing Survey, there
is
approximately a
23.4 percent rental unit turnover rate annually. Therefore, the ongoing cost to
provide Landlord Tenant Handbooks for the 22,815 units (97,500
x
23.4%)
represented as turnover
is
$49,052 including the cost to distribute the
handbook.
• Licensing and Registration IT Improvement.;; (Section
29-31G))
o 'The
Licensing and Registration section would
be
required to add certain
reports to its l-'Urrent IT system and perform data analysis for each of the
67,500 multifanlily units on
an
annual basis.
o
Licensing staff would be responsible to review multifamily unit rent increases
greater
than
specified amounts/percentages and recognize patterns of
increa')es that may particularly harm tenants.
o
This would require updates to the current database, new reporting
capabilities, and staff time to prepare and analyze these reports.
o In
the
year
that
the
bill is
implemented,
DHCA estimates
it
will take
approximately
180 hours of licensing and
registration
staff time (180 hrs. x
$45
=
$8,100) and 30 hours of IT staff time (30 hrs. x $63
=
$ ],890). Total
implementation cost is estimated at $9,900.
o Once the bill is implemented, DHCA expects that there will be less time
required by program staffbut more time required by IT staff
to
maintain and
update the database.
It
is estimated that
it
\vill take approximately 110 hours
oflicensing and registration stafftime (1 10 hrs. x $45
=
$4,950) and 90 hours
of IT staff time (90 hrs. x $63
=
$5,670). Therefore, the ongoing staff cost is
estimated at
$10,620.
4
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3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
There is no estimated change
to
County revenues.
One-Time Cost
Vehicles, tablets and mobile phones
Production
and
distribution of the handbook
Staff time to implement reporting and analysis tools
Total One-Time Cost
2,110,596
209,625
9,990
2.330,211
• '"
, . ,
~
~
,,~
, '"
<.
,
:Summary of Expenses
".......... :::
:;S.'".""
.:.... .
Year2~6
191,266,227 ;
...
,1~9/671:):
.....
2~~,6?5~
9,990·
"Jo:ta
1.·,
Code Enforcement
Yo
••"
A', ," . . .
~
, .., . . . . . .
,
·rT
. landlord Tenant
o
licensing and Registration,
••••••
"
•••• " " . , . . .
""r
.Y'
.Total
10,675,512 '
., 40,778,153.. ..,. 51,044,380;
948,350 .
...
l,1.3~/020
·
245,260
454,885 •
59,940 .
49,950 .
52,697,225 .
42,021,713 .
•••
• •••••••
·n
4. An actuarial analysis through the entire amorti7..ation period for each bill that would affect
retiree pension or group insurance costs.
Not Applicable
5. Anestimate of expenditures related to County's infonnation technology (IT) systems,
including Enterprise Resource Planning (ERP) systems.
Bill 19-15 would not impact
the
County's Enterprise IT systems, but
it
would affect
DHCA's IT infrastructure. DHCA's IT systems are programmed in ASP.net. It is
expected that modifications to the current system would be done in-hou.."e and would
110t
require purchasing additional IT hardware or software; however, DHCA anticipates a
need for two additionallT FTEs (see above in #2).
6. Later actions that may affect future revenue and expenditures if the bill authorizes future
spending.
The bill does not authorize future spending.
5
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7. An estimate of the staff time needed to implement the bill.
Additional FTBs are required to implement
bill 19-15.
For the Code Enforcement section
there is a need
to
add
95
FTEs. This includes FTEs for inspectors, program managers
and administrative aides
(sec
above in #2). In the year that the bill is implemented.,
DHCA estimates
it
will take approximately 180 hours of licensing and registration staff
time to perform data analysis for each of the 67,500 multifamily
units,
review
multifamily
unit
rent increases
greater
than specified amounts/percentages and recognize
patterns of increases that may particularly have an impact on tenants; and
30
hours of IT
staff time to update the current database, and develop new reporting capabilities.
Once the bill
is
implemented, DnCA expects that there
'Will
be
Jess time required by
program staffbut more time required by
IT
staff to maintain and update the database.
It
is estimated that it
\>Ii
II take approximately 110 hours of licensing and registration staff'
time and 90 hours ofIT staff time.
8.
An
explanation of how the addition of new staff responsibilities would affect other
duties.
This would affect the Licensing and Registration section. These ta.c:.;ks would require
additional temporary support while current staff performs the necessary analysis.
9.
An
estimate of costs when an additional appropriation is needed.
DnCA would require $10,675,512 for the staffing and associated costs listed above
in
the
fiscal year the bill is enacted for implementation and $8,404,973 per year, each year after
implementation of the bill to cover ongoing costs.
10.
A
description of any variable that could affect revenue and cost estimates.
The fiscal impact statement assumes the
bill
requires annual inspections of all rental
units. The total cost estimate may be different based on. the percentage of units required
to be inspected annually. It also assumes the Ten.ant handbook
'Will
be distributed by mail.
Cost would
be
less if the handbook were distributed electronically_
11. Ranges of revenue or expenditures that are uncertain or difficult
to
project.
Not Applicable
6
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12. If a bill is likely
to
have no fiscal impact, why that is the case.
Not Applicable
13.
Other fiscal impacts or comments.
Not
Applicable
14.
The
follovving contributed to and concurred with this analysis:
Clarence Snuggs, DHCA
Tim
Goetzinger,
DHCA
Francene Hill, DHCA
Rosie McCray-Moody, DHCA
Dan, McHugh, DHCA
Luann Korona, DHCA
Jennifer
Bryant, OMB
7
@
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Economic Impact Statement
Bill 19-15, Landlord - Tenant Relations -
Licensing of
Rental
Housing­
Landlord-Tenant Obligations
Background:
This legislation would:
• Provide fhr annual inspection of certain residential rental properties,
• Require the use of
a
standard form lease and applicable opti()oal pr()vision for
certain residential rental properties,
• Require the publication of certain information related to rental hOlL.<;ing,
• Reqaire
the
Department of Housing and Community Affairs (DHCA) to review
certain rent increases,
• Provide for certain remedies to be awarded by the Commission on Landlord­
Tenant Affairs, and
• Provide certain
rigbts
to tenants facing rent increases.
1.
The
sources
of information, assumptions, and methodologies used.
Sources
of
intclTInation include:
Department of Housing and Community Affairs (DHCA).
Maryland-National Capital Park and Planning Commission - Montgomery
Cmmty, MD Planning Department (Planning),
-Metropolitan Regional Iniom1ation System, Inc. (MRIS),
- Greater Capital Area Association of Realtors (GCAAR),
• American Community Survey (ACS), U.S. Census Bureau,
• Bureau of Labof Statistics (BLS), U.S. Department of Labor,
• National Multifamily Housing Council/National Apartment Association
(NMHCINAA.),
• "Rent
Control: Do
Economists
Agree?" Economic Journal Watch
(EJW),
A
Journal ofthe American Institute for Economic Research,
Volume 6, Number
1, January 2009,
• "Time H:lrRevisionism on Rent Control?"
Journal ofEconomic Perspectives,
Volume 9, Number 1, Winter 1995.
The economic impact statement
\\rill
focus on the portions of Bill
19-15
that directly
impact the economic perfolmance ofthe local rental market such as:
• Additional costs incWTed by the landlord as required under Bill 19-15,
• Permitting temmts to convert a one-year lease to a two-year lease \-."ithin 30
days after signing the lease, and
-
Page 1 of6
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Economic Impact Statement
Bill 19-15,
Landlord - Tenant Relations -Licensing of Rental Housing­
Landlord-Tenant Obligations
• Rent increase guidelines based on th.e increase or decrease in the Consumer
Price Index for all urban consumers (CPI-U) for the Baltimore-Washington
Consolidated Metropolitan Statistical Area (CMSA).
Data provided by NMHC/NAA fClr the Eighth Congressional District (District)
present the economic benefits ufthe apartment industry. 'Those benefits include: .
• There arc
125,100
residents
in
the Di
strict that live in apartments,
• The
apartment industry in the District contributes
$2.7
billion
to
the local
economy, and
• The number ofjobs related to the apartment industry in the District is
approximately 25,100.
Data from DHCA as reported in its siudy entitled
Rental Apartment Vacancy Report
2012
states:
• 'Ihe countywide vacancy rate for all surveyed units (market and subsidized
units) was 3.5 percent
in
20] 2, the latest date for which data are available - a
decrea.'>e of 0.2 percelrtage points from
3,7
percent in 2011 and
a
decrea.<.ic
of
] .8 percentage point'> from 4.3 percent in 2008,
• The vacancy rate in 2012 varied from a high of3.9 percent for efllciency units
to 1.0 percent
fur
4+ bedroom units,
• Inc
countywide vacancy rate for market-rate units wa.,>
3.7
percent in 2012 _
a
....
decrease
of 0.]
percentage point from
3.8
percent in 2011,
• The vacancy rate tor market-rate units varied from a high of
4.0
percent for
efficiency units to 1.7 percent for 4+ bedroom units,
• In 2012, the COlIDtywide turnover rate for market and subsidized unitswa.<.i
31.0 percent-- ] .5 percentage points lower than the 32.5 percent in 2011; and
• The tUn10ver rate for market and subsidized units varied from a high of 35.5
percent for efficiency unit'>
to
a
low of 17.7 percent for 4+ bedroom lmits.
DueA
also provided the following infomlation, definitions, and data regarding the
capitalization rates, return on cost, and cost of capital used
by DHeA
and the
industry:
• Capitali:zation ("cap") rates are used by the Maryland State Devartment of
Assessments and Taxation (SDAT) to determine the value of tbe property
by dividing the net income of
a
property by a "cap"
rate,
• Appraisers, lenders, and investors are currently using "cap" rates
for
valuation ofmultifarnily properties in Montgomery County between 4.00
and 6.00 percent.
• Return on cost
(ROC)
is
an
industry standard used
by
lenders
and
investors that is applied to the market value of new constmction projects,
Page
2
of6
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Impact Statement
BiU 19-15, Landlord - Tenant Relations - Licensing of Rental Housing­
Landlord-Tenant Obligations
• Currently the threshold measure for ROC averages betweer16.50 percent
and 8.00 percent,
• Cost of capital or cost of debt or equity is a mea<;ure of profitability
fbr
a
particular rental property,
• Currently, cost of capital sceks a return [Tom 4.50 percent to 5.75
percent
on
a
property,
• Return
011
equity and invcstment debt seeks
a
return from 8.00 percent to
15.00 percent, and
• 1listorically, the threshold measures for the "cap" ratc, ROC, and equity
investm.cnt debt exceed the rate of inflation (please sce paragraph #2).
~:conomic
2. A description of any variable that could affect the economic impact estimates.
The
variables that
could
affect the economic impact estimates are:
• The cost to the landlord for providing a copy of the landlord-tenant h'Uldbook
developed
by DHCA
to
a
tenant,
• The inspcction cost to the landlord ifthcre is a violation of applicable laws
more than t\.vice in two consecutive years,
• The current rental prices
for
multi-family housing,
• The threshold rate fbr the capitalil..ation rate, return on cost, and cost of
capital, and retum on equity and investment debt,
• The percent change in the CPI-U
for
the Washington-Baltimore CMSA,
• The number of the tenants who would convert a one-year lease to a hvo-year
lease within 30 days after signing the lease, and
• Permitting tcnants to extend for up to two months at the original lease amount
when the lease renewal amount exceeds the rental increase guidelines
tInder
Bill 19-15, DHCAwill
develop and distribute a copy of the l<mdlord-tenant
handbook to landlords and require a landlord to provide
a
copy to
a
tenant upon
request :Finance assumes that the cost to the landlord is determincd by "production"
costs and the number of tenants who request a copy. At this time, thosc coSis are
unknown, but those costs will affect the expenses incurred by the landlord and those
costs are assumcd not to be passed on to the tenant.
Bill 19-15 would require the landlord to pay the cosi
of
inspection if the landlord
violated applicable laws for two consecutive years. While such costs
will
vary from
landlord to landlord, it
\Vill
have an effect on the landlord's income ac;suming the
landlord's cost avoidance to complying 'With applicable laws
is less
than
the
cost of
the
inspectiort.
Data provided by
MRIS
and
GCAAR show
that rcntal prices
increased
from
the first
quarter of201
0
to
the
first quarter of 2015
a')
follows:
Page
3
of6
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Economic Impact Statement
Hill 19-1.5, Landlord - Tenant Relations - Licensing of Rental
Housing­
Landlord-Tenant Obligations
Garden (1-4
floors):
!vtid-Rise
(5-8
Hoors):
Hi-Rise
(9+·
floors):
11.90%
34.70%
1.62%
Comparing those percent increases with the increase in the CPI-U of9.01 percent
over the same period, rc.nt llcrea<;cs for both garden
and
mid-rise apartments
exceeded the percent change in the CPI-lJ. Comparing the rent increases with the
increase in the CPT's rental equivalent index of 14.97 percent, the only percent
increase that exceeded that index occurred with mid-rise
units.
However, by setting the proposed guidelines for rent increases to the CPI-U rather
than the CPI rental equivalent would have resulted in a reduction in the rent increases
for the garden and mid-rise units over the 2010 to 2015 period and have a negative
impact on revenues received
by
landlords. While such restrictions would affect
revenues to landlords, tenants would fl"Ceive a positive economic benefit
by
restricting the increase in rental rates. 'Iberefore,such restrictions regarding
allowable rent increases would have
a
zero
sum
impact on the County's economy.
Bill 19-15 would allow a tenant to covert a one-year
lea~e
to a two-year lease v.ithin
30
days after signing the lease. Assuming that the monthly rent for the two-year lease
would then be the same as for the initial one-year lease, the tenant would receive a
positive economic benefit of maintaining the same monthly rent for
a
two-year period
while the landlord would experience a negative economic benefit.
Planning provided data from the 2013 American Community Survey (ACS), U.S.
Census Bureau that show the tenure of households that rent in Montgomery County.
From that data, the percent of rental households who have "moved in 2010
or
later"
was 64.1 percent or an estimated 201,301 residents coulltyvvide. That percent steadily
decreaosed to
0.1
percent for renters who "moved in
1969
or
earlier." Ibere±ore there
are a larger percentage of renters who have recently moved into rental units in the
County and are more likely to convert a one-year lease to a two-year lease.
Finally,
Bill 19-15
allows a tenant to occupy the unit at the current rate for a
maximum of two months after the tenn of the
lease
expires if the rent increa.<;e
exceeds
the
applicable guideline. DJICA will publish the average rent
increa..~e
for
each unit under specific guidelines. If those guidelines are based on inflation, and
since data in #2 indicate that for both garden and mid-rise units the rent increase is
greater than the rate of inl1ation, while it is less than for high-rise
IIDit'),
it is unc.ertain
at
this time, what the economic cost to the landlord and the economic benetit to the
tenant would be.
3. The Bill's positive or negative effect,
if
any on employment, spending, savings,
investment, incomes, and property values
ill
the County.
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.li:conomic Impact Statement
Bill 19-15, Landlord - Tenant Relations - Licensing of Rental Housing ­
Landlord-Tenant Obligations
Bill 19-15 would have
a
negative effect on landlord's bu.<;;iness revenue through
reduced allowable increases
in
monthly rents, additional expenditures incurred by
providing a handhook to tenants
requ(~stjng
it, and costo; for those inspections in
violation of applicable laws. With the restriction on rents and the additional. operating
costo;, those factors may have a negative impact on employment and economic
contributions to the County's economy ao; presented by the data cited by
NMHC/NHA
The most significant impact to the rental housing market in Montgomery County is
the provision to limit rent increases by the rate of inflation. Otherwise known as
rental regulation or rent control, the National Multifamily Hou.<>ing Council (NMHC)
states that
this
provision could have a negative impact
on
new construction of rental
housing, reduce property tax revenues through a reduction in the capitalization rates,
reduce consumer mobility, cause a decline in
the
quality of housing stock, and reduce
maintenance and repair. According to an article from EJW, ihe author states that
"my reviews of the rent-controlliterattlre finds that economic research quite
consistently and predomimtntly frowns
011
rent control." The author's findings
covered both empirical and theoretical research on issues including housing
availability, maintenance, and housing quality.
According to an article in the
Journal ofEconomic Perspec[jves,
the author
states
that
"economists have been virtually unanimous in their opposition to rent control." He
cites a survey conducted by the American Economic Association on its members and
the overwhelming response
(93.5%)
agree with
the
statement that "ceiling on rents
reduces the quantity and quality
of
housing available,;' However,
the
author
proposes a revision to that survey ",.Thich was conducttxi in 1992. He proposes an
alternative economic model for judging
tbe
impacts of rent controls,
and
suggests that
the housing market is imperfectly competitive rather than one that is perfectively
competitive. As
suc~
he suggests that under the "revised' market model "whether
such controls (rents) are harmful or helpful depends on the particular package of
regulations adopted, which is the outcome of the political process." He compares the
current revisionist debate on rent controls to the revisionism "that
has
OCCUlTed
concerning the effects ofthe minimum wage."
Data provided by DIICA
sugge~i
that capping the increao;e in monthly rents to the
conSllmer price index could result
in
keeping those rates below the threshold retum
on cost
fmd
return on capital and below the current capitalization rate for property
assessments. Regarding the effect on returns on cost and capital, capping rental rates
to the rate
of
inflation may have a negative impact on investment
in
new rental
housing construction.
Those potential negative effects on housing supply, the quality of housing stock, and
business income and the threshold
rates
for property values
and
investment could be
partially offset by positive impacts for tenants
by
restricting rent increases.
It
is
unceltain \\-ithout specificity of
data
if
the negative effects experienced by the
Page
5
of6
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Economic Impact Statement
Bill 19-15, Landlord - Tenant {{elations - Licensing of Rental Housing­
Landlord-Tenant Obligations
landlord and the rental market industry are identically offset by the positive economic
benefits to the tenant. If such effects are not identically offset, that is, the costs to the
landlords and rental market industry are greater than the benefits to
the
tenants, there
would be
a
negative impact on property values, business income, investment and
employment in the County. Also,
if
Bill 19-15 discourages investment in new rental
property,
it
could have a negative impact on
the
portion ofrecordation
tax
revenues
that are used to support rental assistance for the same residents affected by this
legislation.
4. If a Bill is likely to have no economic impact,
why
is that the case
The
su~ject
legislation will have an economic impact on the County, however, as
mentioned
in
paragraph
#3,
\\Iithout specific data on
(be
economie impacts
to
landlords and tenants, a quantitative measurement of the impact on savings,
investment, employment and property values is not feasible.
5. The following contributed to or concurred with this analysis:
David
Platt,
Mary
Casciotti, and Rob Hagedoom, Finance; and Lawrence Cager, DHCA.
.-
J:'e
F..
ac11,
Director
Department
of
Finance
~
.7-~
___._v.......".__..............._
..._....._ . .
...........
Page
60f6
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
To: Members of the PRED Committee
From: Councilmember Marc EIrich
July 23,2015
Date:
Bill 19-15, Landlord-Tenant Relations - Licensing of Rental Housing
Re:
I
am writing in advance of committee consideration of my legislation, bill 19-15,
regarding Landlord-tenant issues. After listening to comments from the public and the
Department of Housing and Community Affairs,
I
want to clarify the intent of this
legislation and reiterate that my goal with this legislation is to address some of the
existing problems in rental housing, and
I
believe that many, if not all, of the concerns
expressed can be successfully addressed.
Increased inspection schedules:
The Fiscal and Economic Impact Statement review concludes that this legislation would
require every unit in the county be inspected, which would require hiring 95 new
employees at an annual cost of more than $8 million to inspect every single unit in the
county. That is not my intent, and the legislation as drafted does not require that. Our
current inspection process is too limited and is often complaint driven, which is not
sufficient. In our many interactions with tenants across the county, we have heard from
many who will not file complaints for fear of being labelled a "troublemaker" and facing
retaliation. While retaliation is illegal, landlords could choose not to renew a lease and as
long as they don't offer comments on a tenants behavior, it is not retaliation.
I
also
understand that the current definition of excessive violations may need adjusting, and
I
agree that we may need some rewording.
I
have been talking with people in the county,
and
I
think that many of the issues can be addressed.
I
am confident that we can find a
solution that improves the inspection process and does not require the hiring of anywhere
near 95 new employees.
Addenda to leases:
Upon conversation with Department of Housing and Community Affairs (DHCA),
I
understand the concerns with the legislation as proposed.
I
would instead propose that
any addenda must have specified language explaining to the perspective tenant that
DHCA is available to provide additional information on these issues and provide contact
information for DHCA.
Voluntary Rent Guidelines:
We have met with Montgomery Housing Partnership about their concerns about the
proposed change to the VRG. We have given them some alternatives to review and are
awaiting their comments. Again,
I
think we can find a successful conclusion. While the
Consumer Price Index (CPD may not adequately reflect changes in operating costs,
COUNCIL OFFICE
BUILDING,
ROCKVILLE,
MARYLAND 20850 -
240/777-7966
-
TTY
240/777-7914
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neither does the current reliance on the rental component of the CPI, which merely
reflects the inflation in housing prices and has little to do with the costs of operating a
building.
Continued occupancy beyond the lease date.
We understand that this provision needs to be reworded to be consistent with state law.
I am confident that these and other issues can be addressed in a manner that improves the
current situation for tenants in a fair and reasonable manner.
COUNCIL OFFICE BUILDING, ROCKVILLE, MARYLAND 20850 • 240/777-7966 • TTY 240/777.7914
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Executive Summary
While owning a home has long been seen as an integral part of "The American Dream,"
the reality for thousands of Montgomery County residents is that renting a home is the
most viable - and, in many cases, preferred - option for housing. This is particularly
true for young people living on their own, for individuals and/or families who may be new
to the area or may not have the finances required to purchase a home, and for senior
citizens who have made the transition to rental living, among others who choose to rent.
The Montgomery County Tenants Work Group (TWG) , appointed and first convened in
2008 by County Executive Isiah Leggett, recently completed a thorough review and
analysis of the primary issues impacting renters in the community. In conducting its