Maryland Tenant Rights: SMART FAQ About a Tenant’s Right of First Refusal in Baltimore City and City of Takoma Park

Baltimore City calls tenant rights TROFR, which is an acronym for “the right of first refusal.”

The law is established by Subtitle 6 of Article 13 of the Baltimore City Code. Meanwhile, in the City of Takoma Park, tenant purchase rights are called TOTP, which is the acronym for “tenant opportunity to purchase.” This law is established in Chapter 6.32 of the City of Takoma’s Park’s Municipal Code.

BALTIMORE CITY: The Tenant’s Right of First Refusal (TROFR) states that “before the owner of a single-family residential rental property sells or transfers the property to another, the current tenant has the opportunity to purchase the property on commercially reasonable terms.” At the same time, the law guarantees that a landlord “shall not be unreasonably impeded in selling their properties nor required to accept unreasonable terms of sale.”

CITY OF TAKOMA PARK: The City of Takoma Park created the Tenant Opportunity to Purchase (TOTP) to provide homeownership opportunities to residents of the city while also promoting the conversion of rental facilities to “owner-occupied housing, including condominiums and housing cooperatives.” The law states that “it is necessary and appropriate to require that the owners of rental facilities in the City offer the tenants, tenant association, and the City an opportunity to purchase the rental facility before the rental facility may be sold to a third-party purchaser.”

Unlike the City of Baltimore, which protects tenants in single-family properties only, TOTP in the City of Takoma Park applies to all rental facilities.

If you live in a Baltimore City single-family rental property or a City of Takoma Park rental facility, the landlord must first give you the opportunity to purchase it at a reasonable rate before they sell it. It is possible that the landlord has already agreed to sell to a third party (not you, the tenant), and if that is the case, that sale can be deemed invalid because the first right of refusal was not followed.

Each law outlines requirements in TROFR and TOTP.

THE OFFER

BALTIMORE CITY: The landlord sends the tenant a written offer of sale, which states the sales price and the terms and conditions of the sale agreed upon by the landlord and the buyer.

CITY OF TAKOMA PARK: In the City of Takoma Park, the landlord must offer the sale of the facility to the city as well as the tenant.

ACCEPTANCE OF THE OFFER

BALTIMORE CITY: The tenant has 30 days after the offer was mailed to accept the offer. Formal acceptance of the offer must also be sent via prepaid first-class mail with a receipt from the Post Office (such as a Certificate of Mailing) to verify it was sent before the 30-day deadline. The acceptance must include any use of government assistance programs.

CITY OF TAKOMA PARK: Tenants of single-family homes have seven days after an offer is received to deliver a written statement of interest to purchase the property to the landlord and the City Manager. If the tenant has not submitted a statement of interest, the city has seven additional calendar days to send a written statement of interest by first-class mail or by personally delivering it to the landlord.

The law states:

“The statement of interest must be a clear expression of interest on the part of the tenant or the City to exercise the right to purchase the rental facility as specified in this chapter. The tenant or the City may accept the offer of sale by submitting a written contract within 14 calendar days after the date of the written statement of interest. The contract must include substantially the same terms and conditions contained in the owner’s third-party contract of sale, if any, including any contract term that provides for a reasonable real estate commission.”

However, TOTP can vary depending on the number of units in the rental facility, so consult SMART Settlements for underwriting advice.

THIRD-PARTY OFFERS

BALTIMORE CITY: Within 30 days of mailing an agreement to a third-party buyer, the landlord must mail a notice of the contract to the tenant. The notice must be sent via prepaid first-class mail with a Certificate of Mailing. Once the notice is sent, the tenant then has 30 days to notify the landlord if they intend to accept the offer for the amount (or more) than what is stated in the contract.

If the 30 days expire and the landlord enters into an agreement that is lower than the original price stated in the contract, the landlord must notify the tenant again to offer the right of first refusal. In this instance, the tenant has 15 days from the date the notice was mailed unless (1) more than six months have passed since the tenant received the first offer or (2) the net proceeds of the contract with the third party are less than 80% of the first offer to the tenant; in either of those cases, the tenant has 30 days from the date the notice was mailed to respond with intent to purchase.

CITY OF TAKOMA PARK: If the landlord has an existing contract with a third party, the offer must state that the tenant, registered tenant association, and the City of Takoma Park have the “right to purchase the property at the contracted price and on substantially the same terms and conditions as the third-party contract of sale for the rental facility.” The landlord must send the offer within seven calendar days of receiving the written request for information from the tenant, tenant association, and/or City.

For multi-family facilities, the offer must include:

• A complete copy of any third-party contract to purchase
• Floor plan and other architectural and engineering plans or specifications
• All documents required under Chapter 6.28
• Itemized list of monthly operating expenses and capital expenditures for the two preceding years
• The most recent annual rent stabilization report filed with the City
• A rent roll
• List of tenants and lists of vacant apartments

For a single-family facility, the offer must include:

• A complete copy of any third-party contract to purchase
• All documents required under Chapter 6.28

For every day the Landlord is delayed in mailing the offer, the time period for the tenant, tenant association, or City to express written interest in purchasing the facility is extended by a day.

THE CONTRACT

BALTIMORE CITY: Once a tenant accepts an offer to purchase, the landlord has 10 days to offer a signed sales contract. The contract must include the right of the tenant to be released from the purchase if they cannot secure the necessary financing. The tenant has 10 days to sign and return the offer along with a deposit. The settlement must take place within 60 days.

CITY OF TAKOMA PARK: For a single-family facility, the contract of sale must provide the tenant with a reasonable period of time (30 days or more) between the execution of the contract and settlement to secure financing.

The tenant is afforded more time to secure financing if “a government or other loan program for low- or moderate-income persons or for first-time homebuyers and the government agency or lender estimates in writing that a decision with respect to financing will be made within 60 calendar days after the date of the contract.” The extension should align with the written estimate.

If six months pass from the date the landlord gave notice of an offer to the tenant, tenant association, or City and the landlord has not gone to settlement on this facility, then the landlord must begin the TOTP process again.

BALTIMORE CITY: Landlords may transfer ownership without first offering the property to a tenant if the sale is:

• Transferred to the landlord’s spouse, child, parent, sibling, or in-law
• Transferred by will or under inheritance law
• A gift to a religious, charitable, or benevolent tax-exempt recipient
• Transferred of title in a deed of trust or mortgage
• Transferred to a government agency
• Related to specific cases of creating a ground rent interest
• Transferring title in place of foreclosure of a deed of trust or mortgage
• A sale at public auction after the landlord offered the property and the tenant refused
• Sold in the course of the administration of the landlord’s estate after the landlord’s death
• A bona fide gift from the landlord to relatives or ancestors as defined in Section 267(c)(4) of the IRS Code of 1986
• A transferred title in which:
  • the property is listed for sale with a bona fide third-party licensed real estate broker, and
  • the landlord sends the written notification by certified mail with a return receipt requested to the tenant at their last known address along with a copy of all information included in the public offering for sale within 48 hours of the real estate broker listing the property. The written notification must also state that:
    • the right of first refusal under this subtitle does not apply because of an exemption and specify which exemption applies
    • the tenant may negotiate for the purchase of the property just as the general public does
    • the tenant may contact the Homeownership Institute in the Department of Housing and Community Development for information about the process of purchasing and financing a home

CITY OF TAKOMA PARK: All sales contracts related to rental facilities are covered except those:

• To a family member
• Limited by bona fide mortgage or deed of trust terms
• To a mortgagee in lieu of foreclosure
• Under a court order
• From one co-tenant to another by operation of the law
• To the state or local government
• Of a minority title interest
• Of an accessory apartment