PHED Item 1
October
27,2016
Worksession 5
MEMORANDUM
October
25,2016
TO:
FROM:
SUBJECT:
Planning, Housing, and Economic Development Committee
Josh
Hamlin,
Legislative
Attome~
Worksession 5:
Bill
19-15,
Landlord -Tenant Relations - Licensing of Rental
Housing - Landlord-Tenant Obligations
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,
and September
15,2016.
Councilmember EIrich,
h~ad
sponsor of the Bill, has submitted a memorandum discussing the objectives and provisions of
the Bill
(©31-32).
Bill
19-15,
as introduced, would:
(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 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 personal living 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 2010 Report of the
County Tenant Work Group (TWG)2). 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
adjustments.
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 ofDHCA publish and provide upon request to
landlords and tenants: (1) a standard form lease and model optional provisions; and
(2)
a landlord­
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- I defInes "Personal living quarters building" as "any building or portion of a 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.montgomerycountymd.gov/Content/EXEC/TWG/pdfi'twg report 3-201 O.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 tenns unless the landlord has reasonable cause to
offer a different tenn. Current law generally requires two-year initial tenns, 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
tenns of a lease (a "defective tenancy"), COLTA would be empowered under the Bill 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.
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 pennit 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 infonnation 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 perrilit a tenant to ask the Department to
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confinn that a rent increase complies with the law. The section would also pennit 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 tenn when a tenant
continues occupancy on a month-to-month basis.
June 18, 2015 Public Hearing and Correspondence
3
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. 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, 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. 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 of the 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.
The majority of the speakers at the public hearing spoke in support ofthe Bill and of these,
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. Advocates spoke more generally of the need for housing stability for
renters. 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 tenns as one
year leases.
The Montgomery County Renters Alliance submitted a letter dated July 23, 2015
specifically addressing the Fiscal Impact Statement, pointing out that the statement contains nearly
two pages warning ofimpacts ofrent control, which is not a component ofBill 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. 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 about the standard
3
Copies of referenced public hearing testimony has been included
in
prior packets, but is omitted from this packet.
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form lease requirement and questioned the value shifting the basis for the voluntary rent guidelines
to the CPI-U as a whole (rather than the residential rent component).
Prior PHED Worksessions
The PRED 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, ChiefInvestment
and Real Estate Officer, all of the Housing Opportunities 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, as well
as a revised draft of the Bill submitted by Councilmember EIrich.
During the first three worksessions, the Committee reached general consensus on a number
of issues presented by the introduced Bill and revised draft. At the fourth worksession, the
Committee reconsidered the Bill's standard fonn 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 recommended an
amendment to the Bill to require landlords of buildings constructed before July 1, 1978 to provide
the same infonnation regarding the calculation of gas and energy billing as is required under State
regulation for newer buildings. The Committee also discussed, but did not resolve, the following
matters:
(1)
the provision of free meeting space to tenant organizations; (2) the possibility of
adding additional "repair-and-deduct" provisions; (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.
Items resolved at prior Committee worksessions
As described above, the Committee reached tentative agreement on retaining, modifying,
deleting, or adding to many of the provisions in the introduced Bill. These are described 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).
• Delete references in the introduced Bill to "optional model provisions" (addenda) in
reference to the standard fonn lease requirements (©2, lines 11-15; ©4, lines 61-62).
• 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).
• Clarify that translation of the standard fonn lease and Landlord-Tenant Handbook into
additional languages beyond the six identified languages is as deemed necessary by the
Director (©2, lines 17-18; 25);
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• Require that the Landlord-Tenant Handbook be reviewed at least biennially, rather
biannually as provided in the introduced Bill (©2, line 26).
• Clarify that the introduced Bill's required 72 hour notice to tenants of scheduled
inspections applies only to inspections as part ofDHCA's regular inspection program (©3,
lines 49-50).
• Modify the introduced Bill's provisions making landlords responsible for subsequent
inspections when violations are not corrected to clarify the process (landlord is responsible
for third and subsequent inspections when notified of a violation that is not corrected before
reinspection) and require the amount of the charge to be set by regulation (©3-4, lines 54­
58).
• Delete the introduced Bill's standard form lease requirement and instead 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 (©4, lines 61-63;
©4-5, lines 78-88).
• Delete the introduced Bill's provision allowing a tenant to rescind a lease within two days
after signing (©4, lines 65-66).
• Generally allow the tenant to convert a one-year lease to a two-year lease within 30 days
after signing the lease (©4, lines 67-69).
• Expand the "tenant notification" requirements of a 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 (©4, lines 70-77).
• 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") (©5, lines 91-93; ©5, lines 109­
111).
• 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 (©6, lines 126-130).
• 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 ofthe lease
(©6, lines 131­
134).
• Require a landlord to 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 (©7, lines 142-147).
• Require a landlord to post a sign, in a form approved by the Director and in multiple
languages, with information about filing a complaint and the retaliatory practices
prohibited under this Chapter (©7, lines 148-154).
• Require a landlord of a building or complex with meeting space to make that space
available without a fee for a tenant organization to discuss landlord-tenant issues, for the
first meeting of each month (©8, lines 174-178) - See
discussion below.
• Authorize COLTA, upon fmding 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
(©9, lines 217-219) - See
discussion below.
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• Require that rental housing data be collected by DHCA annually (©1O, lines 233-234), and
include each rental facility's zip code (©1O, line 242).
• 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. This is consistent with current
DHCA practice ©11, lines 260-272).
• Retain reference to the residential rent component of the Consumer Price Index for the
purpose of calculating changes in the voluntary rent guidelines (©12, line 282), but provide
for the establishment, by regulation, of an alternative standard better reflecting the costs of
rental housing in the County (©12, lines 285-286).
• Delete the provision in the introduced Bill requiring the Department to review all rent
increases that are more than 100 percent of the applicable rent increase guideline (©12,
lines 290-293).
• 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 (©12, lines 295-299).
• Delete entirely the introduced Bill's 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 (©13, lines 317-325).
• Modify 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 (© 13, lines 326-329). - See discussion below.
• 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
law. (©13-14, lines 331-335).
Issues for Committee Discussion at this W orksession
There are four outstanding issues remaining for resolution from the last worksession:
(l)
the proposed requirement that landlords provide meeting space without charge to tenant
organizations; (2) the possibility of expanding the "repair-and-deduct provision that would
authorize COLTA to issue orders permitting tenants to make repairs and abate their rent by their
reasonable expense in making'those repairs; (3) whether to retain or modify the introduced Bill's
prohibition on rent surcharges or, alternatively, expand the circumstances in which a tenant may
terminate a lease; and (4) the question of whether to mandate more frequent DHCA inspections of
rental housing.
1.
Requirement that a landlord provide free space for a tenant organization.
Bill 19-15 would amend existing law concerning the provision of meeting space to tenants
by landlords. Currently, Section 29-33(b) provides that "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." The law permits a landlord to "charge a reasonable fee for the use of the
meeting rooms or common areas, but the charge must not exceed the regular schedule of fees for
the facility to other groups." Bill 19-15 would prohibit a landlord from charging "a tenant
organization a fee for the first meeting of each month held to discuss landlord-tenant issues."
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At the August 1 worksession, panelist David Hillman indicated that this provision would
violate fair housing law. Council staff consulted with attorneys in the County Attorney's office,
and all believe that this provision would not violate the FHA. At the September 15 worksession,
staff recommended further defining ''tenant organization" by reference to the definition of that
tenn in Chapter 53A - Tenant Displacement.
In
that Chapter, ''tenant organization" is defined as
an association of tenants in rental housing that:
(1)
represents tenants of at least 30 percent of the
occupied units in the rental housing; and (2) is certified by the Department according to Executive
regulations.
4
Adding reference this definition would help ensure that a tenant organization is a
bona fide representative of tenants, and would avoid potential confusion as to what groups might
qualify for this benefit.
The Committee'rejected this recommendation as t60 limiting on tenant organizations, both
because of the restrictions on Chapter 53A certification and the fact that it would not provide
tenants seeking to organize, but not yet certified, with free meeting space to do so.
It
was pointed
out that the County has an interest in tenants organizing to resolve matters with landlords. Staff
was directed to reconsider the matter in light of these considerations.
The term ''tenant organization" is used throughout §29-33.
It
is not specifically defined in
Chapter 29, but its meaning can be discerned from the context of the section: a group of tenants
organized to meet and confer with landlords and to engage in other concerted activities for the
purpose of mutual aid and protection oftenants.
5
This meaning is substantially less restrictive than
the Chapter 53A defmition, but arguably does not include a group of tenants trying to establish an
organization. Ifthe Council wishes to ensure that tenants trying to form a tenant organization may
also avail themselves of the provision by the landlord of free meeting space, ©8, lines 174-176
may be amended as follows (language added by this amendment in italics):
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
2.
The provision authorizing COLTA to issue an order allowing a tenant to make repairs
and abate the tenant's rent in an amount equal to the tenant's reasonable cost.
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 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. Council staff pointed out that existing Section 29-47
6
allows the
Commission to award, among other things:
COMCOR 53A.OO.Ol.02 Certification of Tenant Organization
5
See County Code §29-33(a).
'
6
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 finding of a defective tenancy caused by a landlord.
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• 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
7
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 malfimctions
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
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. However, DHCA informed the Committee that it does not typically
engage in making interior repairs authorized in the law.
Councilmember Leventhal indicated a desire for staff to come up with alternative language
that would allow a tenant to make repairs and abate rent for the reasonable expense when a landlord
does not make needed repairs in a timely manner. Essentially, there are two areas of concern: (1)
emergency situations such as that described by Councilmember EIrich; and (2) less critical repairs
that are nonetheless neglected by the landlord.
Maryland Real Property Code (RP) §8-211,
Repair ofdangerous defects; rent escrow.
"Serious defects" include:
(1)
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 of rodents 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.
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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 oftime 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 permitted to invoke the only 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 prot1ection 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.
8
This "rent escrow" law prescribes specific conditions under which rent may be placed in escrow.
A tenant must give the landlord written notice by
cl~rtified
mail and reasonable time
9
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 defeds 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.
• 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
RP §8-21
1.
9
RP §8-211(h) provides that "there is a rebuttable presumption that period
in
excess 000 days from receipt of
notice is unreasonable."
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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
Maintenanc~
Standards and the County Fire, Electric, and Building
Codes. Subsection 26-15(a) provides that "[i]fthe enforcing agency fmds 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.
Authorizing tenants to make emergency repairs without specific requirements of notice to
the landlord and the allowance of reasonable time to make the repairs would be problematic, and
staff could not identify any other jurisdiction with such a provision. Presumably, in such situations,
a landlord's self-interest should provide necessary incentive to make the repairs, as the property
itself is likely subject to the most risk of damage. However, if the Council wishes to provide
tenants with additional authority to perform repairs when a landlord fails to do so, it could do so
by amending §29-27 to require all leases to permit the tenant to make such repairs under certain
circumstances. Inserting the following language at ©4, line 78 (and relettering the existing
subsection (v) as (w)) would accomplish this.
lO
W
Permit a tenant to repair defects
in
the unit and deduct the reasonable cost
of the repairs from the tenant's rent up to twice in a 12-month period if:
ill
the landlord is obligated to repair the defect under the terms ofthe
lease or applicable law or regulation:
m
(ll
the tenant provides written notice ofthe defect to the landlord:
the landlord does not make the necessary repair within 30 days
after receiving notice:
ill
the tenant or the tenant's family. guests. or pets did not cause the
defect that requires repair;
If the Bill is so amended, staffrecornmends deleting the language at ©9, lines 217-219 which. as discussed above,
would allow COLTA 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.
10
11
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ill
LGl
3.
all repair work perforrm:d complies with any requirements of
applicable code or regulation: and
the cost of the repair does not exceed one month's rent.
The prohibition on "rent surcharges" and the circumstances under which a tenant
may terminate a lease.
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 COlmcilmember EIrich) that this be changed to a
prohibition on charging more than the rent
offeredfor 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 fmancing from lend,ers 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 sedion does provide that ''the lease may provide
that in the event oftermination 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 th(: date on which the tenant vacates the leased
premises.
11
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
11
Maryland Real Property Code, §8-212.2
12
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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.
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 (PCS) 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 so
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 insane. The Council could add
any or all ofthese provisions to the circumstances identified in County law by simply adding them
to §29-27(s).
Month-to-Month Leases Generally
Prior to discussing the specific provisions of the law, some context on the benefits and
drawbacks to tenants of month-to-month leases may help to frame the issue. 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 has heard,
landlords (and 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 subletter 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 apartment. If a tenant anticipates having to move before a one- or two-year lease
12
SO U.S.C. app. §§SOl-S97b. For specific provisions regarding tennination ofresidential leases, see SO U.S.C. app.
§S3S.
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 tenn, so a tenant who tenninates tenancy early may not, in fact, be responsible for all remaining months of rent
if the unit is rented to a new tenant during the tenn. See Maryland Real Property Code, §8-207.
13
13
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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
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 an existing tenant seeks to remain in a unit, but rent on a month-to-month basis. Council
staff has 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.
While the lease termination provisions in County, State, and federal law protect tenants in
a range of unforeseen and unavoidable circumstances, there may be times when an existing tenant
is not financially able to commit to a long-term lease, and needs to relocate to a less expensive
rental property.
It
is possible to address this circumstance by limiting the amount a landlord can
charge a tenant going month-to-month to 10 percent over the rent offered for a longer-term lease,
but only for the first three months that the tenant is on a month-to-month lease. This would protect
those most vulnerable to excessive rent increases for a limited period to allow them to locate to
14
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alternative accommodations,14 but would minimize the impediment to a landlord incentivizing
longer-term leases. This could be done by amending ©13, lines 327-329 as follows:
A landlord must not charge more than 10 percent above the rent [[charged]]
offered for the [[prior]] renewed lease term [[when]] for the first three months that a
tenant continues occupancy on
~
month-to-month basis.
4.
DHCA inspections of rental housing.
Proposed annual 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.IS 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 require
annual inspection of
all
rental housing consisting of two or more dwelling units, incluging 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 FE IS concludes that it is likely that the number of units moved to triennial
inspections would be minimal (see © 18-19). OMB concludes that moving to an annual inspection
schedule for all units would require the addition of97 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.
Bill 19-15 also includes language that would require a landlord that is a frequent violator
(more than twice in two consecutive years) to pay the costs of the next inspection. The Bill
currently provides that this cost is "as determined by the Director." Imposing this cost on landlords
In such a situation, a tenant would have six months to relocate - 90 days from notice of the rent increase (as would
be required under this Bill), plus the three months of the month-to-month with a limited increase - before facing an
increase of more than 10% above the rent offered for the new two-year term.
IS
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.
14
15
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could offset the additional cost of inspections somewhat, and the Committee may wish to consider
options in this regard.
Councilmember EIrich proposed to change the Bill's inspection requirements to remove
the language requiring the inspection of all units, but would 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 of the revised draft's
inspection requirement (©33-41).16 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 more one of resource
allocation than of mandated County-wide inspections. In considering this issue, it is also worth
considering that the TWG Report recommendation was that "buildings with ongoing maintenance
problems," not necessarily all buildings, be moved to an annual inspection cycle. 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.
.
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.
17
Councilmember
EIrich set forth the rationale and process for his proposal in a memorandum to the County
Executive on October 10 (see ©48-51). 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.
Under the surge proposal, County-employed inspectors would be supplemented with
contract hires, and over a two-year period, would inspect every apartment unit in the County,
beginning with the oldest buildings and progressing based on age to the newest. Uniform training
A revised Economic Impact statement on Bill 19-15 was provided on June 24, 2016. See ©42-47.
17
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16
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and inspections would be employed, including a standard checklist to allow year-to-year
comparison of inspection results.
The results of the surge would allow the County to determine the number of permanent
inspectors necessary to maintain the appropriate inspection schedule. The surge would also likely
have the effect of generally improving the condition of the County's rental housing stock through
the increased inspections and repairs ordered during that period. Councilmember Eirich proposes
to fund the surge by:
(1)
reclaiming the approximately $1 million of revenue generated from the
per-unit license fees that was not used to fund inspections; and (2) a temporary increase in the
licensing fee during the two years of the surge.
The precise fiscal impact of a surge is hard to determine with precision, but it would appear
that the cost would be less than half ofthe estimated $8 million cost for annual inspections of every
unit. Exempting newer units from the surge would lower the cost, and extending the proposed two­
year timeline to three or four years would spread the expense. DHCA or OMB may be able to
provide some insight on the cost of implementing a surge proposal over two or three years, and
the savings that might be realized by exempting newer properties.
If the Council chooses to implement a "surge" approach to inspecting all rental units, staff
has two specific recommendations:
1. Because the purpose of the surge is to establish a baseline so that the County has a clearer
picture on the extent of the need for more frequent inspections than the current triennial
regime, staff recommends not amending the
existing
law regarding inspections until after
all units have been inspected; and
.
2. As mentioned above, staff believes that exempting newer properties from the surge would
increase efficiency and avoid what should be unnecessary inspections, thereby reducing
the cost of the surge. If properties receiving use and occupancy permits since January 1,
2015 are exempt from the surge, they should be subject to any triennial inspection required
under existing law.
A surge as described in Councilmember Eirich's proposal could be conducted under the
existing law. If the Council desires to legislatively mandate it, it could amend the Bill to include a
new, uncodified, Section 2 that provides:
Sec. 2. Two-year inspection surge.
W
(hl
The Director must. by July
1.
2019. inspect each unit of rental housing
for which a certificate of occupancy was issued before January 1. 2015.
The Director must provide to the Council. by January 15.2017. a plan
to inspect rental housing under subsection Ca) that includes:
ill
ill
a means of prioritizing inspections;
standardized inspections for all units: and
17
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ill
Hucker Amendments
an estimate of the cost for conducting the inspections.
On October 24, Councilmember Hucker circulated a memorandum and draft proposed
amendments to the Bill's provisions on inspections (©52-57). Council member Hucker's proposal
is 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 that identifies properties
inspected in the past year and to be inspected in the coming year, as well as giving the status of
any incomplete inspections. Also, landlords subject to annual inspections under the proposal
would be required to provide DHCA with quarterly reports on tenant complaints.
Councilmember Hucker's proposal should provide increased efficiency over an across-the­
board increase in inspections Countywide. Staff believes that if the Council is going to mandate
increased inspections, these inspections should be required of "problem" properties based on the
severity or number of violations, or some combination.
It
is unclear whether its 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 should be able to inform the Committee as to the practical
impact of the proposal, and may be able to offer advice on how to more effectively target
"problem" properties, if necessary.
This packet contains:
Bill 19-15
Legislative Request Report
Applicability of Chapter 29 in Municipalities
Fiscal and Economic Impact Statement
Councilmeniber Eirich Memorandum
Revised Fiscal Impact statement
Revised Economic Impact statement
Councilmember EIrich memorandum - October 10, 2016
Councilmember Hucker memorandum and amendments
F:\LAW\BILLS\I 5 I 9 Landlord· Tenant Relations\PHED Memo IO.27.2016.Docx
Circle #
1
15
16
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33
42
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Bill No.
19-15
Conceming: Landlord -Tenant Relations
- Licensing of Rental Housing ­
Landlord-Tenant Obligations
Draft No.
~
Revised:
09/15/2015
Introduced:
April 21 .2015
Expires:
October 21. 2016
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date: ---'...!.No::<.:n.!.::e'---_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
Lead Sponsor: Councilmember EIrich
Co-Sponsor: Councilmember Navarro
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 of Housing 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,
2
3
4
5
6
7
the Director has the following duties:
*
ill
*
*
8
9
10
11
12
The Director must publish and [[provide on request to landlords and
tenants]] maintain on the County website a [[standard form]] model lease,
drafted in clear language understandable to persons without legal training
[[.1
which must be used in each written lease for rertal housing located in
the
County]]~
[[The 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
13
14
15
16
17
18
19
20
21
tenants,]] and maintain on the County website,
in
a printable format.
~
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 [[Qiannually]] biennially and revise it as
necessary.
22
23
24
25
26
27
28
*
@
*
*
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BILL
No. 19-15
29
29-22. Inspection of rental housing.
(a)
[The] Except as provided in this Section, the Director must inspect all
rental housing consisting of two 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 to determine if
it complies with all applicable laws.
[The Director may inspect an
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
apartment complex or personal living quarters building more often than
the triennial inspection.]
(b)
If the Director finds 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 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)]
@
As a condition ofreceiving 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
47
48
49
50
51
52
(2)
notify any affected tenant whose unit requires inspection at least
72 hours in advance of [[the]]
subsection Ca) ofthis Section.
~
scheduled inspection under
[(d)]
ill
If an inspection indicates that any rental housing does not comply
with all applicable laws, the Director may revoke the license or take other
remedial action under Section 29-25.
53
54
ill
A landlord of licensed rental housing [[found in]] notified after initial
inspection of a violation of applicable laws [[more than twice in two
consecutive years]] must
~
the cost ofthe [[next inspection]] third. and
f:\law\bills\1S19 landlord - tenant relations\bill9.docx
55
56
a
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BILL No. 19-15
57
58
59
subsequent inspections. as [[determined
Qy
the Director]] as set m
regulation, ifthe violation is not corrected by the second inspection.
*
29-27. Contents of lease.
*
*
60
61
[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:
62
63
64
*
(t)
lease.
*
*
65
[[Allow the tenant to rescind the lease within two days after signing the
66
67
68
69
70
71
M1]
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)]](W
Notify the tenant
that~
general information and assistance
Departmentregardin~
IS
ill
available from the
72
73
CA)
questions about any addenda to the lease: and
evictions [[are available from the Department.]]: and
74
75
76
77
78
79
80
81
au
(2l
the tenant IS entitled to a hard copy of the Landlord-Tenant
Handbook as required under subsection 29-28Cf) and that the
Landlord-Tenant Handbook is available on the County website.
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 of the lease;
the amount of the rent;
the date on which the rent is due;
the tenant's responsibility; if any. for utility costs:
82
83
84
G
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BILL
No. 19-15
85
ill
(Ql
a list ofadditional tenant rights and responsibilities under the lease;
and
information about servIces available to tenants from the
Department and the Commission.
86
87
88
89
90
91
29-28. Leasing requirements generally.
*
(c)
*
*
years~
The landlord must offer each lease for an initial term of [2] two
92
93
94
and
~
two year term at each renewal, unless the landlord has reasonable
cause to offer a different [initial] term.
*
(2)
*
*
95
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 iflikely 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.
96
97
98
99
100
101
102
103
104
105
106
(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:
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~
107
108
109
110
111
112
and
landlord has reasonable
cause to do otherwise. The tenant may accept or reject this offer.
@
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BILL
No. 19-15
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
Before signing this lease, the tenant confinns 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
Qy
the
Director,]] unless the tenant
~ ~
statement declining
~
hard
fQPY
and
accepting referral to the Landlord-Tenant Handbook maintained on the
County website.
(gl
Unless the tenant is in breach of the 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.
132
133
134
135
136
137
138
139
140
*
29-30. Obligations of landlords.
(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:
G
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BILL No. 19-15
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
*
ill
*
*
For each unit in a building constructed before July
1.
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.
!Ill
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.
!Ill
*
29-31. Landlord notice requirements.
(a)
*
*
Each landlord of an apartment complex in the County must:
(1)
post
[on
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 ofat least
one responsible representative of the building management who may be
reached at all times in an emergency.
*
29-33. Rights
of tenants
generally.
*
*
(a)
Tenants have the right to self-organization; to form, join, meet, or assist
one another within or without tenant organizations; to meet and confer
through representatives of their own choosing with landlords; to engage
G
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BILL
No.
19-15
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
in other concerted activities for the purpose ofmutual aid and protection;
and to refrain from any such activity.
(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 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 ofthis Section.
(c)
Tenants and resident tenant organizations have the right to distribute
freely and post in centrally located areas of rental housing literature
concemiI?-g landlord-tenant issues ifthe origin ofthe literature is properly
identified.
(d)
Tenant organizations may file complaints under any provision of this
Chapter in a representative capacity on behalf ofthose tenants who have
authorized representation. Nothing in this Chapter permits any tenants'
organization to represent exclusively any tenant or class oftenants unless
specifically authorized to do so.
*
*
*
*
*
29-47. Commission action when violation found.
*
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BILL
No.
19-15
195
196
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
(b)
If the Commission or panel fmds that a landlord has caused a defective
tenancy, it may award each party to the complaint one or more of the
following remedies:
(1)
Immediate termination of the lease, and relief from any future
obligations under the terms of the lease;
(2)
Return ofthe party's security deposit or any part ofthe deposit that
the landlord has wrongfully withheld;
(3)
An award under Section 29-1 O(b) of up to three times the amount
of any security deposit that the landlord has wrongfully withheld.
When making this award, the Commission must consider the
egregiousness ofthe landlord's conduct in wrongfully withholding
all or part of the deposit, whether the landlord acted in good faith,
and any prior history by the landlord of wrongful withholding of
security deposits;
(4)
Return of all or part of any rent already paid to the landlord after
the landlord was notified ofthe condition;
(5)
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.
(6)
A reasonable expenditure to obtain temporary substitute rental
housing in the area.
(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;
.cID
After a retaliatory or illegal eviction as defined in Section 29-32,
reasonable attorney's fees incurred by the affected tenant in
G
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BILL
No. 19-15
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
248
249
defense of the retaliatory or illegal eviction. The award must not
exceed $1,000.00.
*
29-51. Rental housing data collection.
(
a)
*
*
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:
(1)
(2)
(3)
(4)
(5)
The location of [the] each rental facility.1 including the
~
code;
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 each rental unit;
B
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BILL
No.
19-15
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
275
276
(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
~
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
G)
100 percent or less of the applicable rent increase guideline;
greater than 100 percent, !ill to 125 percent of the applicable rent
increase guideline;
greater than 125 percent, !ill to 150 percent ofthe applicable rent
increase guideline; and
greater than 150 percent of the applicable rent mcrease
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
277
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
303
(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 subsection
recognize patterns of increases that particularly harm tenants.]]
29-54. Rent adjustments; notice requirements.
(a)
A landlord must not increase the rent until [[at least two]] [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
ill
to
®
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BILL
No. 19-15
304
305
306
307
308
309
310
311
312
313
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330
331
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]] 29-56 - 29-65.
Sec. 2. Transition.
f:\Iaw\bills\1519 landlord - tenant relations\bill 9.docx
~
tenant continues occupancy on
~
month-to­
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BILL
No. 19-15
332
333
334
335
The [[standard fonn 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
fonn lease]] fonn of the plain language summary.
Approved:
336
337
Nancy Floreen, President, County Council
Date
338
Approved:
339
Isiah Leggett, County Executive
Date
340
341
This is a correct copy o/Council action.
Linda M. Lauer, Clerk ofthe Council
Date
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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 Reiations\LEGISLATlVE 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
~7::-S
~ort.
Joseph F. Beach,
Dire~torj
Department of Finance
FEIS for Bill 19-15 Landlord - Tenant Relations- Licensing of
R~tal
Housing
SUBJECT:
Pleasetind attached the fiscal and economic impact statements for the above­
referenced legislation.
JAHfz
cc: Bonnie Kirkland, Assistant Chief Administrative Officer
Lisa Austill, 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
1.
Snuggs, Director, Department of Housing and Community Affairs
Alex Espinosa, Office of Management aI1d 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
Bill 19-15
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 use of a standard form lease, requires publication ofcertain information related to
rental housing, requires DHCA to review rent increases, 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.
There
lS
no estimated change in County revenues due to Bill
19~15.
\Vhlle the bill would
require reimbursement of inspection costs 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 multifamily housing units are
req.uired to be inspected on an annual basis. Under the current requirement
properties with a history of noncompliance are assigned a higher percentage
of units to be inspected. Approximately 80 percent ofpropertiesreceivillg
triennial inspections have 10 percent of
units
inspected, 5perccnt 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 of this 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 inspected 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 of97 additional FTEs.
• This includes 82 Housing Code Enibrcement Inspectors, 8 Program
Manager II's and 5 Principal Administrative Aides. DHCA would
also need the associated operating expenses associated
V'.ith
vehicles,
tablets, mobile phones and general operating expenses for the Code
Enforcement staff.
• Total aIillual personnel and operating cost is estimated to
be
$8,155,631.
• Total one-time costs (tor 82 vehicles, tablet.:; and mobile phones) are
estimated to be $2,110,596.
o Total estimated full year Code Enforcement cost is $10,266,227
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 $187,670.
o ,Below are the detailed assumptions used to [onnulate the cost estimates:
2
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' •......••...... ?
24,900.00 '.
a~C!lJisi~i!)n.
. ,
0'"
.1.,739.00}:"}3).r!tenance
.
.~,~~q.~O
'fuel
. },943:09"
~n,!lJalrepl<:lce'!l~n!
. .
.
l,14'(){}:I'!I!)n.~~ly o".~T~ea~
'" .....
.
?"Z~.~()() .T0t.aIVE!~ide
Costs.
599.00 '.
89.9~;
table.t
a~quisition
;tablet
case
. f"rl0bile
phon~ ac:q~isition
99.99 .,
49.99 •
,
mo~il~
phC?ne
case .
."
315.00 ta
blet
service
J$,26. 25/mo)
628.68 Il'l0,b,ile
servic~{$5?}9!rl10)
943.68
Total
838.97 .
One-
"fi,!,~
Cost :rotal
Ar1.Il\A~IC:os~
. '. ,
~5/738.97
·
8,~4:9.6~
, .
;G~]~L~i~'PM'~_2~:~::~'m
, .• ,. 'm'"
.... . ,
•• _ , " " " ' "
~
Grade
25 - PMII
. . .
··,:I::fo'r, ,•:..
LE;.~,,,l~~s1iO~"L.}l2,7$t.iL..i,Jl~7g4E2~:T'
.•.'.-
;~;'r
•••
95.()()
0:" ......
m.,.... ..
."T~~!"~.~ost~t.~~~~~~~.,
...
~/~~C?!~~~j
.
.....
..
~
;TOTAL
,.
"'V"V'"
"
T~t.a!.~()st
l.~~!~!O
·.~?FTEs'
.
~r~~5/3~~
..
*Satary{X)sts
are~Urnedat
minimum
If!'~
thegrode
kv~tx ~:25percen~
flat.
~surance
rate,
and atotal of
15.7
pefr!fltforretirement
9nd
RCA
costs
.
•··General
,
Of
n
inciudes
•....
,
.""..
.
office supplies, IT supplies/licenses, printing,
.
produ.:tion,
..
mailing and other mise DE
ftefT's
.
....
..
.
".'
,,".
..
..
..
","
,
..
....
'-
..
........
"
.
....
-..
"..
.
,
.'
'"
,".
'"
'"
",
~
"
,".
,",..
3
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• Landlord Tenant Handbook Publication (Sections 29-6(t) 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
Sl.OO
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 DHCA 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
rr
Improvements (Section 29-310))
o The Licensing and Registration section would be required to add certain
reports to its current IT system and perform data analysis for each of the
67,500 multifamily 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
increases that may particularly harm tenants.
o This would require updates to the current database, new reporting
capabilities, and stafftime 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 statrtime(180 hrs. x
$45
=
$8.1 OO)'and 30 hours of IT stafftime (30 hrs. x $63
=
$1,890). 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 staff but more time required by IT staff
to
maintain and
update the database. It is estimated that it vvill take approximately 110 hours
of licensing and registration staff time (110 hrs. x $45
=
$4,950) and 90 hours
ofIT staff time (90 brs. 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 ofthe handbook
Staff time to implement
reporting
and analysis tools
2,110,596
209,625
9,990
Total One-Time Cost
2.330,211
"
...
'
...
Code Enforcement
,"
..
..
..
......
""
IT
,.
".~
:, ,-
....... .........
.
lq~?66,227
•Landlord Tenant
: Licensing and Registration·
l~~,~?O.:
.
.........
2~9,~25;
,"
;Total
10,675,512 .
...... Sl'fJ44'380.
948,3S0.
.
1/1?8/~20
.
245,260
..
.
4S4,~85
59,940·
49,950 .
42,021,713 .
52,697,225 .
~0,778,153.·
4.
An
actuarial analysis through the entire amorti7.a.tion 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-house and would not
require purchasing additional IT hardware or software; however, DHCA anticipates a
need
for two additional
IT
FTEs (see above in
#2).
6.
Later actions that may affect future revenue and expenditures if the bill authorizes future
spendi.ng.
The bill does not authorize future spending.
5
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7. An estimate of the stafftime needed to implement the bill.
Additional FTEs are required to implement bill 19-15. For the Code Enforcement section
there is a need to add 95 FTEs. Tnis includes FTEs for inspectors, program managers
and administrative aides (see 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
staft'time to update the current database, and develop new reporting capabilities.
Once the bill is implemented, DnCA expects that there
\\Iill
be Jess time required by
program staff but more time required by IT staff to maintain and update the database. It
is estimated that it will take approximately 110 hours of licensing
and
registration staff'
time and 90 hours of IT staff time.
8. An explanation ofhow the addition of new staff responsibilities would affect other
duties.
This would affect the Licensing and Registration section. These tasks would require
additional temporary support while current
stafl
performs the necessary analysis.
9. An estimate ofcosts when an additional appropriation is needed.
DHCA 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 aU rental
units. The total cost estimate may be different based on the percentage of units required
to be inspected annually.
It
also assumes the Tenant handbook
\\Iill
be
distributed by mail.
Cost would
be
less ifthe 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 following 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
~!e
of Management
and Budget
~Ut.'D~--
7
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Economic Impact Statemcnt
Bill
19-15,
Landlord - Tcnant Relations - I.iccnsing of Rental Housing­
Landlord-Tenant Obligations
Background:
'Illis legislation would:
• Provide i<)r annual inspection of certain residential rental properties,
• Require the use of a stancL:'ll'd fonn lea.c:;e and applicable optional proviSjOIl for
certain residential rental properties,
• Require the publication of certain information related to rental housing,
• Require the Department of Housing and Community Affairs (DHeA)
to
review
certain rent increases,
• Provide for certain remedies to be awarded by the Commission on Landlord­
Tenant Affairs, and
• Provide certain rights to tenants facing rent increases.
1. The sources of information, assumptions, and methodologies used.
Sources of information include:
• Department of Housing and Community Affairs (DHCA),
• Maryland-National Capital Park and Planning Commission - Montgomery
County, MD Planning Department (Planning),
• Metropolitan Regional Ini'om1ation System, Inc. (MRIS),
• Greater Capital Area Association of Realtors (GCAAR),
• American Community Survey (ACS),
u.s.
Census Bureau.,
• Bureau of Labor Statistics (BLS),
u.s.
Department of Labor,
• National Multifamily Housing Council/National Apartment Association
(NMHCINAA),
• "Rent Control: Do Ec.onomists Agree?" Economic Journal Watch (EJW),
A
Journal ofthe
American
Institute
ji:Jr
Economic
Research,
Volume 6, Number
1, January 2009,
• "Time f()fRevisionism on Rent ControlT
Journal ofEcoflomic 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 performance of the local rental market such as:
• Additional costs incurred by the landlord as required under Bil119-15;
• Permitting tenants to convert a one-year lease
to
a t\ivo-year lease ,,-...ithin 30
days after signing the lease, and
Page 1 of6
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Impnct Statement
Bm 19-15,
Landlord - Tenant Relations -Licensing of Rental Housing­
Landlord-Tenant Obligations
• Rent increase blUidelines based on tbe increase or decrea.qe in the Consumer
Price Index for all urban consumers (CPI-lJ) for the Baltimore-V'/ashington
Consolidated 1vletropolitan Statistical Area
(CMSA).
Data provided by NMBCfNAA f()r the Eighth Congressional District (District)
present the economic benefits of the apartment industry. TI10se benefits include:
• There are
125,100
residents
in
the
District that live in apartments,
• Ibc apartmeni industry
in
the District contributes $2.7 billion to the local
economy, and
• Ibe number ofjobs related to the apartment industry in the District is
approximately 25,100.
Data from DHCA as reported in its study entitled
Rental Apariment Vacancy Report
2012
states:
• The cOlmtywicie vacancy rate for all surveyed units (market and subsidized
units)
was
3.5 percent in 2012, the latest d.ate for which data are available - a
decrease of 0.2 'percentage points from 3.7 percent in 2011 and
a
decrea<;e of
1.8 percentage point') from 4.3 percent in 2008,
• The vacancy rate
ill
2012 varied from
a
high
of3.9
percent for efficiency units
to 1.0 percent for 4+ bedroom units,
• The countywide vacancy rate
for
market-rate units was 3.7 percent in 2012 -", a
dccrea<;e of 0.1 percentage point from 3.8 percent in 2011,
• The vacancy rate for 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 cOlmtywide turnover rate for market and subsidized units was
31.0 percent-- 1.5 percentage points lower than the 32.5 percent
in
2011, apd
• The tumover 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 units.
DHCA also provided the fOUO\\-1ng infonllation, definitions, and data regarding the
capitalization rates, return
011
cost, and cost of capital
us(;~d
by
DnCA
and
the
industry:
• Capitalization ("cap'') rates are used by the .M.aryland State Department of
Assessments and Taxation (SDAT) to determine the value of the property
by dividing the net income. of a property by a "cap" rate,
• Appraisers, lenders, and investors are currently using "cap" rates for
valuation of multifamily 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
construction projects,
l~conomic
Page 2 of6
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Economic Impact Statement
Bill 19-15, Landlord - Tenant Relations - Licensing of Rental Housing­
Landlord-Tenant Obligations
• Currently the threshold measure for ROC averages betweerl6.50 percent
and 8.00 percent,
• Cost of capital or cost of debt or equity is a mea<;ure of profitability for a
particular rental property,
• CutTently, cost of capital seeks a return fTom 4.50 percent to 5.75 percent
on a property,
• Return on equity and investment debt seeks
a
retum f1'om 8.00 percent to
15.00 percent, and
• Historically, the threshold measures for the "cap" rate,
ROC,
and equity
investment debt exceed the rate of irlf1ation (please see paragraph
#2).
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 ofthe landlord-tenant h,mdbook
developed by
DHCA
to a tenant,
• The inspt'Ction cost to the landlord if there is
a
violation of applicable laws
more than
mice
in two consecutive years,
• The current rental. prices
for
multi-family housing,
• Tbe threshold rate for the capitalization rate, return on cost, and cost of
capital, and retOOl on equity
~md
investment debt,
• The
percent change in the
CPI-U
for
the Wa"hington-Baltimore
eMSA,
• The number of the temmts who would convert a one-year lease to a two-year
lea<;c 'Within 30 days after signing the lease, and
• Permitting tenants to extend for up to
two
months at the original lease amount
when the lease renewal amount exceeds
the
rental increase guidelines
Under Bill 19-15, DHCAwill develop and distribute a copy ofthe I!mdlord-tenant
handbook
to
landlords and require a landlord to provide a copy to
a
tenant upon
request. Hnance
assumes that
the
cost to the laridlord is determined
by
"production"
costs and the number of tenants who request a copy. At this time, those costs are
unknown, but those costs will affect the expenses incurred by the landlord and those
costs are assumed 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
",ill
vary
fi'om
landlord to landlord, it will have an effect on the landlord's income assuming the
landlord's cost avoidance to complying with applicable laws is less than the cost
of
the inspection.
Data
provided
by
MRIS and GCAAR
show that rental prices increased from the first
quarter of
2010
to the first quarter of
2015
as follows:
Page 3 of6
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Economic Impact Statement
Sill
19-15, IJandlord - Tenant Relations - Licensing of Rental Housing ­
Landlord-Tenant Obligations
Garden (1-4 Ooors):
Mid-Rise (5-8 floors):
Hi-Rise (9+ floors):
11.90%
34.70%
1.62%
Comparing those percent increases with the increase in the
CPI-U 0[9.01
percent
over the same period, rent increases for both garden and mid-rise apartments
exceeded the percent change in the
CPI-u.
Comparing the rent increases \-vith 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
ill
the
rent increa')cs
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 receive a positive economic benefit
by
restricting the increase in rental rates. Therefore, 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 he 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 benei:it.
Planning provided data trom the 2013 American Commtmity Survey (ACS), U.S.
CenslL<; Bureau that show the tenure of households that tent 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 countywide.
111at
percent steadily
decrea':>ed to 0.1 percent for renters who "moved in 1969 or earlier." Therefore there
are a larger percentage of renters who have recently moved into rental unit.<; 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 io occupy the unit at the CUITent rate for a
maximlml of two months after the tcnn of the lease expires
if
the rent increa<;e
exceeds the applicable guideline. DHCA will publish the average rcnt increase for
each unit under specific guidelines. If those guidelines are based on inflatiol1, and
since data in
#2
indicate that for both garden and mid-rise units the rent increase is
greater than
the
rate of ini:latl0n, while
it
is less than for high-rise units,
it
is uncertain
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 in the County.
Page 40f6
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Economic 1mpact Statement
Bill 19-15, Landlord -Tenant Relations - Licensing ofRentallIousing­
Landlord-Tenant Obligations
Bill 19-15 would have a negative effect on landlord's business revenue through
reduced allowable increases in monthly rents, additional expenditures incurred by
providing a handbook to tenants requesting it, and coste; for those inspections in
violation of applicable laws. With the restriction on rents and the additional operating
coste;, those factors may have a negative impact on employment and economic
contributions to the County's economy
as
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 kllO\\-U
a~
rental regulation or rent eont.rol, the National MultWunily I-lousing Council (NMHC)
states that this provision could have a negati ve 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 ofhOtL'3ing stock, and reduce
maintenance and repair. According to
an
article from EJW,
the
author states that
"my reviews
of
the rent-control literature finds
that
economic research
quite
consistently and predominantly frown.') on rent control." 'I11e author's findings
covered both empirical and theoretical research
on
issues including housing
availability, maintenance, and housing quality.
Aceording to an article in the
Journal ofEconomic Perspectives,
the author states that
"economists have been virtually unanimou..') in their opposition to rent wntrol." H.e
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 qwmtity and quality of housing available/' However, the author
.
proposes a revision to that survey
v.
1 1ichwas conducted 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 such, he suggeste; 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 "(bat
has
occurred
concerning the effects of the minimum wage."
Data provided by DHCA suggest that capping the increa..c:;e
in
monthly rents to the
consumer price index could result in keeping those rates below the threshold retum
on cost and 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 int1atjon may have a negative impact on investment in new rental
housing construction.
Those potential negative etlects on housing supply, the quality of hou..e;i.llg stock, and
business income and the threshold
rdtes
for property values and investment could be
partially offset by positive impacts
for
tenants by restricting rent increases.
It
is
uncertain v,,1thout 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 Relations -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 ofrset, that is, the costs to the
landlords and rental market industry are greater than the benefits to the tenants, there
\.vould be a
negative
impact
011
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
011
the portion of recordation tax revenues
that arc used to support rental
a..~sistance
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 sul:>.ject legislation
will have an
economic impact on the County, however,
as
mentioned in paragraph #3, without specific data on (be economic impacts to
landlords and tenants, a quantitative measurement of the impact on savings,
investment, employment and property values is not f:easiblc.
5.
The following contributed to or concurred with this analysis:
David Platt, Mary
Ca..c;ciotti, and
Rob
Hagedoom,
Finance;
and Lawrence Cager,
DHCA.
.--
Jco'e
Department of Finance
~
--_
.
7--~
_._
.......
_
..........._
............................
~
..
".,.
...
F.., ach}
Director
Page 60f6
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MONTGOMERY COUNTY COUNCIL
ROCKVILLE, MARYLAND
To: Members of the PHED 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 (CPI) may not adequately reflect changes in operating costs,
COUNCIL OFFICE BUILDING, ROCKVILLE, MARYLAND 20850 • 240/777·7966 • TTY 240/777-7914
 PDF to HTML - Convert PDF files to HTML files
neither does the current reliance on the rental component of the CPl, 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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ROCKVILLE, MARYLAND
MEMORANDUM
April 11,2016
TO:
FROM:
~~r,
Office of Management and Budget
Revised FIS for Bi1I19-15, Landlord-Tenant Relations -Licensing of Rental
Housing - Landlord Tenant Obligations
Please find attached the fiscal impact statements for the above-referenced
Nancy Floreen, President, County Council
SUBJECT:
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
Clarence
J.
Snuggs, Director, Department of Housing and Community Affairs
Jennifer Bryant, Office of Management and Budget
Alex Espinosa, Office of Management and Budget
Naeem Mia, Office of Management and Budget
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-----------
...
_----.-­
.i
Fiscal Impact Statement
Bill 19-15
Landlord-Tenant Relations - Licensing of Rental Housing - Landlord Tenant Obligations
1. Legislative Summary
Bil119-15, Landlord - Tenant Relations - Licensing of Rental Housing - Landlord Tenant
Obligations:
provides for annual inspection of certain residential rental properties;
requires the use of a standard form lease for certain residential rental properties;
requires the publication of certain information related to rental housing;
requires the Department of Housing and Community Affairs to review certain rent
increases;
• provides for certain 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 ofwhether the
revenues or expenditures are assumed in the recommended or approved budget. Includes
source of information, assumptions, and methodologies used.
There is no estimated change in County revenues due to Bi1119-15. While Section 29-22(f)
of the bill requires reimbursement of inspection costs under certain circumstances, the
amount generated is too speculative to ,estimate.
Bi1119-15 impacts expenditures in four areas: Code Enforcement; publication; translation
and dissemination ofthe Landlord Tenant Handbook and Standard Lease; Landlord Tenant
Rent Increase Review; and Licensing and Registration (see below).
• Code Enforcement (Section 29-22)
o There are approximately 69,000 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.
o Based on our current sampling technique (consistent
with
Montgomery County
Code, Chapter 29)
to
meet the current triennial inspection requirement,
approximately 5,865 units of multifamily housing units are required to be
inspected on an annual basis. Under the current requirement 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 10 percent of units inspected, 5 percent ofproperties have 50
percent of units inspected, and 15 percent of properties have 100 percent of the
units inspected.
1
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-I
_ _ _ _1 ..
r
o The proposed bill requires annual inspections of each property. After the most
recent three years of demonstrated compliance, annual inspections may revert
back to being triennially inspected. For purposes of this fiscal impact statement,
it is assumed that "in-compliance" relates to a property being free from any and
all violations. Since each property would be inspected annually, it is unlikely a
property would be free from any and all violations for three years. Thus, it
is
more likely that all multifamily properties would continue to require annual
inspections. Therefore, for purposes ofthis fiscal impact statement, annual
inspections of all multifamily properties are assumed.
o The average number of units inspected by a Code Enforcement Inspector is
approximately 700 per year. The total number of new units required to be
inspected under Bill 19-15 is 11,199 (17,595 multifamily units - 6,396 number
of units inspected in FY15).
o To increase the requirement of multifamily inspections from the calculated
minimum of 5,865 units to 17,595 units annually, the Department of Housing
and Community Affairs (DHCA) would need a total of 19 additional FTEs.
• This includes 16 Housing Code Enforcement Inspectors, 1 Program
Manager II, 1 Principal Administrative Aide, and
I
Information
Technology Technician. DHCA would also need the associated
operating expenses for vehicles, workstations, tablets, mobile phones and
general operating expenses for the Code Enforcement staff.
• Total annual personnel and operating cost is estimated to be $1,685,880.
• Total initial operating expenses (for vehicles, workstations, tablets and
mobile phones) are estimated to be $504,027.
o Total estimated full year Code Enforcement cost of the legislation is $2,189,907
o Below are the detailed assumptions used to formulate the cost estimates:
2
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.e
Landlord Tenant Handbook Publication (Sections 29-6(f) and 29-28(f)
e
These sections require providing a Landlord Tenant handbook to every
tenant.
3
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I
.
• There are approximately 100,000 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.
• The average cost to produce one book is $1.00 and $1.15 to distribute by mail.
• Total one-time cost is approximately $215,000
to
provide one handbook per
rental unit.
• Based on the DHCA 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 23,400 units (100,000 x 23.4%) represented
as turnover is $50,310 including the cost to distribute the handbook.
• Landlord Tenant Handbook and Standard Form Lease translated and available in
Spanish, French, Chinese, Korean, Vietnamese, and other languages
as
needed Section
29-6(f) and Section 29-6 (g).
• Per the County's vendor, to translate the Landlord Tenant Handbook into the five
specified languages would cost $16,992.
• Translating the handbook into other languages as needed would cost between
$3,144 and $3,780 per language.
• It
is unknown how many "as needed" translations would be requested.
Per the County's vendor, to translate the Standard Form Lease into the five
specified languages would cost $6,457.
j
Translating the lease into other languages as needed would cost between $1,192
and $1,440 per language.
It is unknown how many "as needed" translations would be requested.
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!!ize - Units
!
9600
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words
De~cripti§n
_
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'
_
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Rate
- Amount
1~',~96Q9':Wl:i't~!i ;~',i, '~PAN,ISH~. ~~~n.;~~;'qf~M~(Q.Y,na}'~;l
.
b~~;: ~~y{;:'\;r;!~ '~"~.!~j-~Q~1'5\i:r~::;;<f)~~Q'1
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$0.15
i
1,440
Ij!i:·1.~4$;j~rd$;.:;;,:.K9OC~Nic$t~~~t1r~·~f,~'ni~t(;~'~d;'
•.
~.~:r~~s';,;~~~~·;j~,!'i}j::i:j,-~'~'.;;'~~,'$O~~~~0tJ~~1:1~~l;i~z._;1
i
7948jwords 'CHINESE, Standard Turnaround, 6-7 bus. days
!
$0.15
j
1,192
i
FRENCH, Standard Turnaround, 6-7 bus. days
:~::i~~8\:";'T""" --~;'~'\/·(EtN~~l~!1~~;~~~-~:t;. .~1;:~~;f:~1f~tl~[:~~t~~t;:'t:r-;~l;,j~~:~:~i~~~:;:j::~~~~:i~:!~i~!
• Landlord Tenant Rent Increase Review (Section 29-53(c))
o Under this section, the Office of Landlord Tenant Affairs must review all rent
increases that are more than 100 percent of the applicable rent iI}-crease guideline
to detennine patterns of increases that hann tenants.
o On an ongoing basis, alllimdlords would need
to
forward copies of all rent
increase notices monthly in order for DHCA staff to review and track them to
establish a pattern per the proposed code.
o This would require 0.5 FTE to complete on a regular basis.
o Total cost for 0.5 FTE of an Investigator III (Grade 25) is $52,335.
• Rental Housing Data Collection - Licensing and Registration IT Improvements (Section
29-510))
o The Licensing and Registration section would'be required to add certain reports
to
its current IT system and perfonn data analysis for each ofthe 69,000
multifamily 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 increases
that may particularly hann 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 oflicensing and registration staff time (180 hrs. x $45
=
$8,100) and 30 hours oflT staff time (30 hrs. x $63
=
$1,890). Total
implementation co'st is estimated at $9,900.
o Once the bill is implemented, DHCA expects that there will
be
less time required
by program staff but more time required by IT staffto maintain and update the
database.
It
is estimated that it
will
take approximately 110 hours of licensing
and registration staff time (110 hrs. x $45
=
$4,950) and 90 hours ofIT staff time
(90 hrs. x $63
=
$5,670). Therefore, the ongoing staff cost is estimated at
$10,620.
5
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--------------------------------t-­
,
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, workstations, tablets and mobile phones
Production and distribution of the handbook
Translation of Landlord Tenant Hantlbook and Standard Lease
Staff time to implement reporting and analysis tools
$504,027
215,000
23,449
9,990
$752,466
Total One-Time Cost
4.
An
actuarial analysis through the entire amortization period for each bill that would affect
retiree pension or group insurance costs.
Not Applicable
5.
An
estimate of expenditures related to County's information technology
(In
systems,
including Enterprise Resource Planning (ERP) systems.
Bil119-15 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
modificati<;>ns to the current system would be done in-house and would not require
purchasing additional IT hardware or software; however, DHCA anticipates a need for one
additional IT FTE (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.
6
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7.
An
estimate of the staff time needed to implement the bill.
Additional FTEs are required to implement Bill 19-15. For the Code Enforcement section
there is a need to add 19 FTEs. This includes FTEs for inspectors, program managers, an IT
Technician, and an administrative aide (see above in #2). There
is
also need for an additional
0.5 FTE (Investigator
III)
in the Office of Landlord Tenant Affairs to complete a review of
rent increases of 100 percent or more. In the year that the bill is implemented, DHCA
estimates it will take approximately 180 hours of licensing and registration
staff
time
perform data analysis for each ofthe 69,000 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.
to
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 will take approximately 110 hours of licensing and registration staff time and 90 hours
ofIT staff time.
8.
An
explanation ofhow the addition ofnew staff responsibilities would affect other duties.
This would affect the Licensing and Registration section. These tasks would require
additional temporary support while current staff perfonns the necessary analysis.
,
i;
!
i
9.
An
estimate of costs when an additional appropriation is needed.
DHCA would require $2,490,680 for the staffing and associated costs listed above in the
fiscal year the bill is enacted for implementation and $1,799,145 per year, each year after
implementation ofthe 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 multifamily
properties. The total cost estimate may
be
different based on the percentage of units required
to be inspected annually.
It
also assumes the Tenant handbook will be distributed by mail.
Cost would be less
if
the handbook were
distribu~d
electronically.
11. Ranges of revenue or expenditures that are uncertain or difficult to project.
The total cost to translate the Landlord Tenant Handbook and the Standard leas is uncertain
as it is uncertain how many "as needed" translation requests DHCA will receive. Below is the
per-unit cost of each translation.
i
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• Translating the handbook into other languages as needed would cost between
$3,144 and $3,780 per language.
• Translating the lease into other languages as needed would cost between $1,192
and $1,440 per language.
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 following contributed to and concurred with this analysis:
Clarence Snuggs, DHCA
Tim Goetzinger, DHCA
Chris Anderson, DHCA
Jay Greene, DHCA
Rosie McCray-Moody, DHCA
Dan, McHugh, DHCA
Francene Hill, DHCA
Jennifer Bryant, OMB
Date
~A/
/;t,
8
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DEPARTMENT Of
FINANCE
lsiah Leggett
Coun(F E.recutii'e
Joseph
F.
B0acn
Direcfor
MEMORANDUlvt
June 24, 2016
TO;
FROM:
Nancv Floreen, President, County Council
b'-}l:fennifer
A. Hughes,
Director:otfi~:
of
Management and Budget
Joseph F. Beach, Director, Department of Finance
Revised EIS for Bill 19-15, Landlord - Tenant
Housing - LandlQrd-Tenant Obligations
.~
./41A)~
~oO
SUBJECT:
Rela~ns
-
Lk~si~'Rental
//'2
j:1..
Please find attached revised economic impact st1tements fhr the above­
referenced legislation.
JAB:!i.
cc: Bonnie Kirkland, Assistant Chief Administrative Officer
Lisa Austin, Offices of the COlmty Executive
Joy
Nurmi, Special Assistant to the County Executive
Patrick Lacefield, Director, Public Information Office
Robert Hagedoom, Acting Director, Department of Finance
Clarence
J.
Snuggs, Director, Department of Housing and Communit.y
Affairs
David Platt, Department of Finance
Naecm Mia, Office of Management and Budget
Office of the Din>etor
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101 MomneStreet, l5thFloor • Rockville. Maryland 20850 • 240-777-8860 • 240-777-8857 FAX
www.Il1onlgomerycollntymd.gov
montgomerycountymd.gov
1311
301-251-4850 TTY
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Revised Economic Impact Statement