9 November Update on Statewide Forms Oct-Nov 2023 by Jacky Mueck Featured 0 0 Comment 3907 BY TAYLOR KITZMILLER, ESQ. Serves as Associate Counsel at Maryland REALTORS®. Each fall, Maryland REALTORS® presents updates to its Statewide Forms Library, which contains the form contracts, disclosures, and addenda that members like you use to service clients and bring real estate transactions to settlement. This Manual is designed as a guide for Maryland REALTORS® members to understand the revisions to existing forms and the creation of new forms which will go into effect on October 2, 2023. As always, brokers and office managers seeking additional support are welcome to contact our Legal Affairs Department attorneys to schedule Statewide Forms Update sessions for their agents. Association attorneys are also available via our Legal Hotline service to answer questions about all of our Statewide Forms. NEW FORMS Assumption Addendum The Maryland REALTORS® Residential Contract of Sale includes an Assumption Addendum in its list of Addenda, however, such an Addendum did not exist in the Maryland REALTORS® Forms Library. Thus, Maryland REALTORS® created an Assumption Addendum. The Assumption Addendum is to be used when the property being sold has an existing mortgage and the buyer and seller agree that the buyer may take over or “assume” that mortgage as part of the purchase, subject to lender approval. The Assumption Addendum outlines the terms and conditions under which a buyer assumes responsibility for an existing mortgage on the property being purchased. Practice Tip: The lender holding the existing mortgage may require the Buyer to submit an application to prove the Buyer’s creditworthiness and ability to assume the mortgage. Exclusive Commercial Buyer/Tenant Representation Agreement This agreement outlines the terms and conditions under which a brokerage will exclusively represent a commercial property buyer or tenant in their search for suitable properties. Practice Tip: Members should be familiar with the majority of the terms in this agreement as it has been modeled after the Exclusive Buyer/Tenant Residential Brokerage Agreement. Foreign Investment in Real Property Tax Act (“FIRPTA”) Addendum The Maryland REALTORS® Residential Contract of Sale references a FIRPTA Addendum, however, such an Addendum did not exist in the Maryland REALTORS® Forms Library. Thus, Maryland REALTORS® created a FIRPTA Addendum. Under FIRPTA, a Buyer of residential real property located in the United States must withhold federal income taxes from the payment of the purchase price if the amount realized by the Seller exceeds Three Hundred Thousand Dollars ($300,000.00) and the seller is a foreign person, as defined by the I.R.S. The Seller should use the FIRPTA Addendum to notify the Buyer that the transaction is subject to FIRPTA or whether the Seller is claiming a FIRPTA exemption. Forest Conservation Act Addendum The Maryland REALTORS® Residential Contract of Sale references a Forest Conservation Act Addendum, however, such an Addendum did not exist in the Maryland REALTORS® Forms Library. Thus, Maryland REALTORS® created a Forest Conservation Act Addendum. The Seller should use the Forest Conservation Act Addendum to put the Buyer on notice that the property is subject to a Forest Conservation Plan which may restrict the Buyer’s use of the property. Practice Tip: The Maryland Forest Conservation Act (“FCA”) states that any activity requiring an application for a subdivision, grading permit or sediment control permit on areas 40,000 square feet (approximately 1 acre) or greater is subject to the FCA and will require a Forest Conservation Plan prepared by a licensed forester, licensed landscape architect, or other qualified professional unless certain exemptions apply. A Forest Conservation Plan provides specifics for retaining and protecting existing natural resource areas and provides for new tree plantings and their maintenance to ensure survival during construction. On-Site Sewage Disposal System (“OSDS”) Inspection Notice The OSDS Inspection and Test Addendum calls for the parties to exchange written notifications regarding the results of the OSDS Inspection and Test, however, Maryland REALTORS® did not provide a notice form for the parties to use. Thus, the OSDS Inspection Notice was created. Parties can now use the OSDS Inspection Notice to share the test results and negotiate repairs in connection with the OSDS Inspection and Test Practice Tip: Members should be familiar with the format of the OSDS Inspection Notice as it is modeled after the Property Inspections Notice. Owner Financing Contingency Addendum The Maryland REALTORS® Residential Contract of Sale includes an Owner Financing Contingency Addendum in its list of Addenda, however, such an Addendum did not exist in the Maryland REALTORS® Forms Library. Thus, Maryland REALTORS® created an Owner Financing Contingency Addendum. The Owner Financing Contingency Addendum outlines the terms and conditions under which a Buyer and Seller agree to a sale where the Seller provides financing to the Buyer. In other words, the Seller acts as the lender, allowing the Buyer to make payments directly to the Seller instead of obtaining a traditional mortgage from a bank or financial institution. Practice Tip: Owner financing is a complex transaction governed by many State and Federal laws. Real estate brokers are not qualified, nor licensed, to ensure that the terms of the Owner Financing Contingency Addendum comply with these laws. Members are strongly encouraged to advise their clients to consult with a competent legal professional when considering Owner Financing Seller’s Home of Choice Addendum The Maryland REALTORS® Residential Contract of Sale includes a Seller’s Purchase of Another Property Addendum in its list of Addenda, however, such an Addendum did not exist in the Maryland REALTORS® Forms Library. Thus, Maryland REALTORS® created such an Addendum but under a different name—Seller’s Home of Choice Addendum. This Addendum allows the Seller to make the Contract contingent upon the Seller’s purchase, financing, settlement, or lease of a new property. Practice Tip: Members should be familiar with the format of the Seller’s Home of Choice Addendum as it is modeled after the Sale, Financing, Settlement or Lease of Other Real Estate Addendum which Buyers currently use to make the Contract contingent upon the Buyer’s sale, financing, settlement or lease of their existing home or other real estate. Water Quality Test Notice The Water Quality Test Addendum calls for the parties to exchange written notifications regarding the results of the Water Quality Test, however, Maryland REALTORS® did not provide a notice form for the parties to use. Thus, the Water Quality Test Notice was created. Parties can now use the Water Quality Test Notice to share test results and negotiate corrective action in connection with the Water Quality Test. Practice Tip: Members should be familiar with the format of the Water Quality Test Notice as it is modeled after the Property Inspections Notice. Water Yield Test Notice The Water Yield Test Addendum calls for the parties to exchange written notifications regarding the results of the Water Yield Test, however, Maryland REALTORS® did not provide a notice form for the parties to use. Thus, the Water Yield Test Notice was created. Parties can now use the Water Yield Test Notice to share test results and negotiate corrective action in connection with the Water Yield Test. Practice Tip: Members should be familiar with the format of the Water Yield Test Notice as it is modeled after the Property Inspections Notice. REVISED FORMS Consumer Notice to Buyers of Residential Real Estate in Maryland A Condominium/HOA Reserve Study disclosure has been added to the Consumer Notice to Buyers of Residential Real Estate in Maryland. House Bill 107, passed by the Maryland General Assembly during the 2022 legislative session, requires all condominiums and homeowners associations (whose common area components require a total initial purchase and installation cost of at least $10,000) to update their reserve study every five years or conduct a new study by October 1, 2023 if no prior study has been performed. Condominiums or homeowners associations conducting their first reserve study must achieve the recommended annual reserve funding within three fiscal years. To meet this funding requirement, the monthly dues for residents will likely increase, or a special assessment may be imposed. The Condominium/HOA Reserve Study disclosure paragraph warns Buyers of the potential increase in dues or special assessments and advises Buyers to pay close attention to the reserve study report of a condominium/HOA. Practice Tip: The Consumer Notice to Buyers of Residential Real Estate in Maryland should always be included with an Exclusive Buyer/Tenant Representation Agreement. Escrow Agreement Between Buyer, Seller, and Escrow Agent The “Distribution of Deposit” Paragraph has been modified to include the new release of deposit procedure set forth by Senate Bill 651. Senate Bill 651, passed by the Maryland General Assembly in 2023, changed the process for the release of an earnest money deposit when the Buyer terminates the Contract pursuant to a contingency. Under the new law, if a Buyer terminates the Contract pursuant to a contingency as defined by Section 10-803(a)(2) of the Real Property Article, Annotated Code of Maryland, they may provide a written notice to the Seller and the holder of the deposit requesting the full return of the deposit. If the Seller wants to protest the release of the deposit, Seller must provide the holder of the deposit with a notarized, written request for mediation relating to the release of the deposit within ten (10) days of receipt of the Buyer’s request. If the Seller does not protest the release of the deposit or if they fail to provide the holder of the deposit with a notarized, written request for mediation within the ten (10) day period, the holder of the deposit shall distribute the deposit to the Buyer within thirty (30) days of receipt of the Buyer’s request. Practice Tip: The “old” release of deposit procedure still remains in the Distribution of Deposit Paragraph of the Escrow Agreement. The “old” release of deposit procedure should be followed when the Seller terminates the Contract or if the Buyer terminates the Contract for a reason other than a contingency as defined by Section 10-803(a)(2) of the Real Property Article, Annotated Code of Maryland. Exclusive Right to Lease Residential Brokerage Agreement, Exclusive Right to Sell Residential Brokerage Agreement, and Exclusive Right to Sell Unimproved Land Brokerage Agreement A Wire Fraud Disclosure has been added to all agreements. In accordance with Senate Bill 579, passed by the Maryland General Assembly in 2023, the “Listing Term” Paragraph has been modified on all agreements to note that the listing term of the agreement may not be longer than one (1) year in duration. In the Exclusive Right to Sell Residential Brokerage Agreement, the newly created “FIRPTA Addendum” has been added as a checkbox in the “Addenda” Paragraph. Exclusive Buyer/Tenant Residential Brokerage Agreement In accordance with Senate Bill 579, passed by the Maryland General Assembly in 2023, the “Buyer Agency Term” Paragraph has been modified to note that the buyer agency term of the agreement may not be longer than one (1) year in duration. General Residential Dwelling Lease Template Pursuant to House Bill 102, passed by the Maryland General Assembly in 2023, a “Pet Protection During Eviction/Loss of Possession of Property” Paragraph has been added to the General Residential Dwelling Lease Template providing a tenant with a link to a flier on the Maryland Department of Agriculture website. The flier provides information on how an evicted tenant can provide temporary or permanent housing for their pet. Post Settlement Occupancy Agreement The “Term of Occupancy and Consideration” Paragraph has been modified to specify the exact time of day for when the Seller must vacate the property. Residential Contract of Sale The “Deposit” Paragraph has been updated to reflect the new release of deposit procedure set forth by Senate Bill 651. The new FIRPTA and Forest Conservation Act addenda have been added to the list of Addenda. The titles of the “Sale, Financing, Settlement or Lease of Other Real Estate” and the “Home of Choice” addenda have been changed to “Buyer’s Sale, Financing, Settlement or Lease of Other Real Estate” and “Seller’s Home of Choice” respectively. Sale, Financing, Settlement or Lease of Other Real Estate Addendum The Sale, Financing, Settlement or Lease of Other Real Estate Addendum only relates to the Buyer’s disposition of their existing home or other real estate. Thus, to label the Addendum more accurately, the title has been changed to Buyer’s Sale, Financing, Settlement or Lease of Other Real Estate Addendum. Unimproved Land Contract of Sale Paragraph 26 of the Unimproved Land Contract of Sale has been modified to include an additional contingency for whether the property can connect to the public sewage system. RETIRED FORMS The following forms will be retired from the Maryland REALTORS® Statewide Forms Library as of October 2, 2023: COVID-19 Addendum to Exclusive Right to Sell Residential Brokerage Agreement or Exclusive Right to Lease Residential Brokerage Agreement COVID-19 Related Delay Addendum Forms, Oct-Nov 2023, ON23, Statewide Forms Share Comments are closed.