January 10th, 2022
Landlord 101: Check Your License!
The Maryland Court of Appeals recently issued an important decision which interpreted a longstanding Maryland licensing rule which stipulates that a Maryland landlord may not offer to rent a residential property without having a rental license. As a general rule, an unlicensed Maryland landlord who leases a residential property is unable to enforce the terms of any lease, including a landlord’s right to collect rent. Furthermore, failure to obtain a rental license may subject a Maryland landlord to fines for each day the property is rented without a license. The exception, as set forth in Velicky v. The Copycat Building LLC, provides unlicensed Maryland landlords an opportunity to collect a limited amount of rent in an action to evict a tenant holding over in the property after the lease term ends.
In Velicky, an owner transferred Maryland residential property to a limited liability company but failed to transfer their rental license for such property, resulting in the company being an unlicensed landlord. Thereafter, the company issued notices to certain tenants terminating their tenancy and commenced eviction actions based on a tenant holdover when those tenants failed to vacate the property. Based on its interpretation of applicable Maryland statutes, the Maryland Court of Appeals permitted the landlord to seek “holdover” rent as damages, regardless of the lack of licensure, which would otherwise have prevented the enforcement of a tenant’s rent obligation during the term of the lease.
The licensing requirement for Maryland landlords serves an important regulatory function, in ensuring legitimate and quality housing for Maryland tenants. From a landlord’s perspective, obtaining a license is more than merely the hassle of paperwork and the licensing fee; it is the essential ingredient in ensuring that the landlord’s rights under the lease are enforceable. As now has been made clear by the Maryland Court of Appeals in Velicky, a residential landlord should take care not only to maintain its rental licenses but to properly assign any leases in connection with any transfer for estate-planning or liability-protection purposes.
Separately, while the court’s holding in Velicky applies in the context of residential leases, commercial landlords and tenants should be mindful of the strict requirements and the pitfalls in Maryland’s regulatory scheme relating to commercial property.
Please contact any one of Stein Sperling’s real estate attorneys with any questions or any assistance you may need.