More Thoughts From the Recent Legislative Session

Each year, we review the results of the most recent legislative session to evaluate its impact on our clients. Given the current slowdown, we have also been asked to re-evaluate existing contracts to confirm that they are in full compliance with the law, are enforceable and our clients are not in danger of being in default of them. An economy of this nature presents more challenges than a booming economy, but it can also present us with the time and opportunity to review and fully evaluate our contracts.

The legislature added little this year that negatively affects the world of real estate contracting. We probably have MNCBIA’s legislative lobbying groups to thank for this. It is also possible, however, that our own industry efforts at full disclosure may have contributed to this as well. The legislature did not establish any additional disclosure requirements for new home contracts. A fairly extensive list of the current state requirements is set forth in Section 14-117 of the Real Property Article of the Maryland Code, and this, supplemented by a review of relevant county and local requirements remains sufficient to perform a new home sales contract review, at least with respect to statutory requirements. This year, the legislature enacted a statute that requires a seller to disclose the existence of conservation easements that benefit certain state agencies and trusts. However, it does not specifically apply to the county conservation easements that traditionally affect subdivided lots. Perhaps this is because many developers currently include disclosure language about conservation easements in the homeowners association documents for the community and many builders have their sales agent discuss the conservation easements on the lots, and the restrictions they impose, when the subdivision plat or survey is reviewed with the customer. These voluntary disclosures can go a long way toward avoiding additional disclosure requirements.

On a legal geek note, the legislature added a number of statutory exceptions to the common law Rule Against Perpetuities that will benefi t the industry. Sections 11-102 of the Estates and Trusts Article and 2-116(d) of the Real Property Article have been amended to exempt from the common law Rule Against Perpetuities contracts, leases, options, rights of fi rst offer, rights of first refusal, rights of fi rst negotiation or similar preemptive rights relating to the use, possession, transfer or ownership of real or personal property that are made for actual consideration and have an effective date of October 1, 2007 or later. Contracts or options relating to interests in business entities, such as limited liability companies, are also exempt. Parties to a contract are still free to establish their own outside contract performance date, provided it either doesn’t exceed 60 years or complies with the original Rule, with some minor modifi cations. However, if they don’t, the contract isn’t automatically void. It’s only void if performance doesn’t occur within seven years. The enumeration of the existing exceptions in one place, and the addition of these new exceptions that benefit our industry is a giant step forward. The legislature also enacted laws relating to the redemption of residential ground leases, receiverships for homeowners associations and condominiums, and notices relating to condominium conversions but none that negatively impact our industry that haven’t been written about in this magazine before. We thank those who work so hard on our behalf and applaud our industry’s own efforts at full disclosure.

Donna M. McMillan is an attorney with the law firm of McMillan Metro, P.C. Her experience relates to the representation of builders and developers in entity and real estate related matters.