In this Chapter, the following words have the meanings indicated.
(1) Conversion. "Conversion" means the change of residential property from rental to cooperative status.
(2) Cooperative. "Cooperative" refers to a cooperative housing corporation in which each member:
(i) Has an ownership interest in the cooperative; and
(ii) Is entitled to sole use of a particular unit that is owned by the cooperative.
(3) Cooperative project. "Cooperative project" means a plan of a developer to offer cooperative memberships for initial sale to the public.
(4) Department. "Department" means the Department of Housing and Community Affairs.
(5) Developer. "Developer" includes:
(i) An owner of residential rental property;
(ii) An agent of an owner of residential rental property;
(iii) A contract purchaser of residential rental property; and
(iv) A person who solicits another to purchase a cooperative membership.
(6) Handicapped. "Handicapped" means having a physical or mental disability that for more than one (1) year substantially impairs walking, seeing, hearing, speaking, working, learning, or another major life activity.
(7) Low-income. "Low-income" means household income that is below eighty (80) percent of the median income for Montgomery County. In this definition, household income includes total income from all sources, whether or not included as income for federal or state tax purposes. It is not reduced by a loss from a business or investment. It does not include a tax refund.
(8) Member. "Member" means a person with an ownership interest in a cooperative. It includes owners of cooperative shares as well as membership certificates.
(9) Membership. "Membership" means ownership interest in a cooperative.
(10) Membership certificate. "Membership certificate" means a legal document that evidences ownership in a cooperative. It includes shares and certificates.
(11) Property report. "Property report" means the report under Section 11C-4 as well as later changes of information in the report.
(12) Senior. "Senior" means being at least sixty-two (62) years old when the owner gives notice of tenant rights under this section.
(13) Subscription agreement. "Subscription agreement" means the contract by which a person agrees to purchase a cooperative membership.
(14) Unit. "Unit" means an area limited to the residential use of one (1) household under either a rental lease or cooperative membership.
(a) Residential only. This chapter does not apply to the sale of a nonresidential unit or a cooperative membership with rights limited to nonresidential use.
(b) Creation or conversion date. This chapter does not apply to a cooperative that was created or converted before January 1, 1985.
(a) Requirement. Before a developer enters into a subscription agreement for the initial sale of cooperative memberships to the public, the developer must register the cooperative project with the Department.
(b) Application. To apply for registration, a developer must submit to the Department.
(1) The property report; and
(2) An application fee.
(c) Notice to tenants.
(1) When a developer submits an application for registration with the Department, the developer by first class mail or personal delivery must give written notice to each tenant that the property may be converted.
(2) The developer must state the notice as follows:
"The property in which you live may be converted from rental to cooperative status. We are filing a detailed report with the Montgomery County Department of Housing and Community Affairs ________ (address and telephone number). You have the right to review and comment on the proposed cooperative within 30 days from ________ (date that the application is submitted)."
(d) Approval.
(1) Within 5 days after receiving an application, the Department must mail to the developer a notice of receipt of the application.
(2) Within 45 days after receiving an application, the Department must decide that either:
(i) The application complies with Section 11C-4 and issue an order registering the cooperative project; or
(ii) The application does not comply with Section 11C-4 and issue an order rejecting the application and stating the specific reasons for the rejection.
(e) Information changes. A developer promptly must submit to the Department any changes of the information in a registration.
(f) Ending of registration. The Department must issue an order ending a registration if:
(1) A developer notifies the Department that the developer has sold all of the cooperative memberships to purchasers other than a developer; and
(2) The developer cannot create additional memberships.
(a) Contents. A developer must include in the property report:
(1) The names and addresses of the owner and developer of the property;
(2) The names of cooperative members who became members before memberships were offered for sale to the public;
(3) A description of the cooperative project that contains:
(i) A survey of the site that shows the property boundary and the location of all existing or proposed improvements;
(ii) The floor plans for residential units;
(iii) A description on the nature and ownership of all real and personal property on the site that will be owned by the cooperative;
(iv) A statement as to whether streets within the cooperative project will be dedicated to public use or maintained by the cooperative;
(v) A list of violations of the county building or housing code existing when the developer files the property report;
(vi) A description of the work and projected completion dates for proposed construction or repair of violations of the county building or housing code;
(vii) A projected completion date for conversion;
(viii) The uses of individual units that are permitted by:
a. The cooperative articles of incorporation;
b. The bylaws that govern internal organization and operation of the cooperative;
c. The lease that gives a member the right to use a particular unit; or
d. Applicable zoning provisions;
(ix) A statement as to whether a member of the cooperative may rent a unit to a person who is not a member;
(x) The method and timing of the transfer of control of the cooperative from a developer to the members; and
(xi) The nature and extent of an interest that a developer will retain after control of the cooperative transfers to the members;
(4) Purchase information, including:
(i) Purchase price;
(ii) Conditions of purchase;
(iii) Projected settlement costs; and
(iv) A statement that, until closing, a developer must keep a deposit that a purchaser makes in connection with the purchase of a cooperative membership in an escrow account under section 10-301, Real Property Article, Annotated Code of Maryland;
(5) Financial information, including:
(i) The name of a construction lender or interim lender;
(ii) The name of an institution that is lending funds for the cooperative project;
(iii) A statement of the proportionate interest related to each membership, including:
a. Ownership interest in the cooperative; and
b. Responsibility for cooperative loan payments;
(iv) A summary of the terms of a lien on cooperative real property, including:
a. A loan or promissory note;
b. A deed of trust;
c. A mortgage;
d. A judgment that creates a lien on real property;
e. An option or contract to sell real property;
f. A trust agreement that affects the cooperative; and
g. A lien that results from a tax assessment by a public authority;
(v) A summary of the rights and responsibilities of a purchaser and cooperative member regarding liens on cooperative property; and
(vi) A statement of whether a member may claim a pass-through deduction for federal or state income tax for the payments made by the cooperative for real estate taxes and for interest paid on a loan secured by cooperative property;
(6) Copies of the following legal documents:
(i) Articles of incorporation;
(ii) Bylaws;
(iii) Subscription agreement;
(iv) Membership agreement; and
(v) Lease for a member;
(7) A list of other legal documents that the developer must make available on request, including:
(i) A deed for cooperative property;
(ii) A lease of property to which the cooperative is or will be a party; and
(iii) A contract that affects the use of, maintenance of, or access to cooperative property;
(8) In the case of conversion, a statement of the operating costs of the rental residential property for the three-year period before a conversion;
(9) A copy of the projected annual operating budget for the cooperative that includes:
(i) Operating costs, including:
a. Utilities;
b. Trash and garbage disposal;
c. Ground and building maintenance;
d. Security;
e. Maintenance and operation of the facilities; and
f. Insurance;
(ii) Management costs, including:
a. Legal services;
b. Bookkeeping and accounting services; and
c. Management fees;
(iii) Reserve fund information, including a report from a licensed engineer that states:
a. The condition and remaining useful life of major cooperative property elements; and
b. The projected schedule of expenses for deferred maintenance, repairs, and replacement of cooperative property elements;
(iv) A schedule of projected monthly payments that each member must pay to the cooperative, including:
a. Mortgage costs;
b. Operating costs;
c. Management costs;
d. Reserve fund costs;
e. Taxes;
f. Special assessments imposed by government; and
g. Service or recreation fees that a member may choose to pay; and
(10) A statement of all warranties.
(b) Unlawful statements.
(1) A developer must not state:
(i) That Montgomery County, Maryland, has approved a cooperative;
(ii) That Montgomery County, Maryland, has found that a property report is complete or accurate;
(iii) Anything in a property report that is false or misleading; or
(iv) Anything that differs from the contents of a property report.
(2) Warning. On the first page of each property report, the developer must give the following warning in boldface or enlarged type: "It is unlawful for anyone to state that Montgomery County, Maryland, has approved this cooperative housing corporation. It is unlawful to state anything that differs from the contents of this property report."
(c) Affirmation. A developer must sign a property report and verify under penalty of perjury that the report is complete and correct.
(a) Before subscription agreement. Before a purchaser signs a subscription agreement, the developer must deliver a copy of the property report to the purchaser.
(b) Before issue of membership certificate. Before a developer issues a membership certificate, the developer must deliver to the purchaser a copy of a change made in the property report after making the subscription agreement.
A developer may enforce a subscription agreement for the initial sale of a membership to a member of the public only if:
(a) The developer gives the purchaser a property report before the purchaser signs the agreement; and
(b) The subscription agreement in conspicuous type contains a notice of the right of a purchaser to receive:
(1) A property report registered under section 11C-3; and
(2) Notice of purchaser rights to rescind an agreement under section 11C-8.
(a) Inspection access. For the purpose of verifying property report information, a developer must give access for inspection of cooperative project property if at least twenty-five (25) percent of the tenants who live in the property:
(1) Sign an inspection request; and
(2) Designate an engineer who is licensed by the State of Maryland.
(b) Inspection liability. The tenants who request the inspection are liable for damage caused by the inspection.
(a) Within fifteen days. A purchaser may rescind a subscription agreement for the initial sale of a membership within fifteen (15) days after signing a subscription agreement.
(b) Within five days. A purchaser may rescind a subscription agreement for the initial sale of a membership within five (5) days after receiving any material change in the property report.
(c) Until receipt of a membership certificate. If a developer fails to comply with a requirement of this chapter, the purchaser may rescind the subscription agreement until the purchaser receives a membership certificate.
(d) Liability. A purchaser may rescind a subscription agreement under this section without liability on the part of the purchaser.
(e) Notice in writing. A purchaser may rescind a subscription agreement under this section by giving the developer written notice of rescission.
(f) Return of deposit. If a developer receives a notice of rescission, the developer must within ten (10) days return to the purchaser the deposit that the purchaser made on account of the subscription agreement.
(g) Waiver of right prohibited. A purchaser may not waive the right under this section to rescind a subscription agreement.
(a) Scope of warranty. A developer must give a cooperative and its members a warranty on the structural elements of the real property of the cooperative, including:
(1) Roof;
(2) Foundation;
(3) Ceilings;
(4) Floor;
(5) Walls; and
(6) Mechanical, electrical, and plumbing systems.
(b) Provision of warranty. A developer must warrant that:
(1) The developer is responsible for correcting a defect in material or workmanship; and
(2) The structural elements meet industry standards that were in effect when the building was constructed.
(c) Beginning of warranty. A warranty under this section begins with the first issue of a membership certificate to a purchaser other than the developer.
(d) Incomplete structural element. If a structural element is not complete at the time of the first issue of a membership certificate, the warranty on that structural element begins with the latter of:
(1) Completion of the structural element; or
(2) Availability of the structural element for use by all members.
(e) Warranty period.
(1) A one-year warranty covers elements within the exclusive use of a member occupying an individual unit, including:
(i) Internal walls;
(ii) Ceilings;
(iii) Floors;
(iv) Doors;
(v) Fixtures; and
(vi) Appliances.
(2) A three-year warranty covers elements within the common use of all members, including:
(i) External and supporting walls;
(ii) Roof;
(iii) Foundation;
(iv) Mechanical, electrical, and plumbing systems; and
(v) Common area walls, floors, ceilings, and doors.
(f) Applicability of warranty. A warranty under this section does not apply to a defect caused by abuse or failure to perform maintenance by:
(1) A member; or
(2) A cooperative after control transfers to cooperative members.
(g) Notice of defect. Within the warranty period, either a member or the cooperative must give the developer notice of a defect that is known.
(h) Suit for enforcement. Within one (1) year after a warranty period ends, the member or the cooperative may file a suit for enforcement of a warranty under this section.
(a) Right to leave. A tenant may leave a unit after the developer gives notice of tenant rights under section 11C-23, even if the lease term has not expired.
(b) Notice to developer. Before a tenant leaves a unit under this section the tenant must give the developer at least thirty (30) days written notice.
(a) Extended lease offer.
(1) A developer must offer extended leases to eligible tenants until at least twenty (20) percent of the units are under extended leases.
(2) The tenants eligible for an extended lease include:
(i) Low-income senior tenants;
(ii) Low-income handicapped tenants;
(iii) Senior tenants who are not low-income;
(iv) Handicapped tenants who are not low-income; and
(v) Low-income tenants who are not senior or handicapped.
(3) If the number of eligible tenants exceeds twenty (20) percent of the units, the developer must grant extended leases on the basis of continuous residence within the building:
(i) First to senior or handicapped low-income tenants;
(ii) Second to senior or handicapped tenants who are not low-income; and
(iii) Third to low-income tenants who are not senior or handicapped.
(b) Extended lease provisions.
(1) The length of an extended lease is:
(i) For low-income senior and low-income handicapped tenants, the lifetime of the senior or handicapped tenants who live in the unit when the developer gives notice of tenant rights under section 11C-23; and
(ii) For other eligible tenants, three (3) years.
(2) A rent increase under an extended lease is limited to:
(i) A maximum percentage increase that does not exceed the rent component of the U.S. Consumer Price Index for urban wage earners and clerical workers, U.S. Department of Labor, for the most recent twelve-month period; and
(ii) A minimum period of at least twelve (12) months between increases.
(3) Other extended lease terms follow those of the lease that was in effect immediately before the tenant received the notice of intent to convert.
(c) Later option to purchase unit. A tenant who is eligible for an extended lease may instead exercise the right to purchase a membership under section 11C-17.
(d) Tenant option to end extended lease. A tenant may end an extended lease at any time by giving the developer written notice of at least:
(1) Thirty (30) days if the remaining lease period is less than one (1) year; or
(2) Ninety (90) days if the remaining lease period is more than one (1) year.
(e) Developer option to end extended lease. A developer may end an extended lease only after:
(1) Sixty (60) days from the death of the last surviving senior or handicapped tenant who lived in the unit; or
(2) The tenant fails to pay the rent due or violates a material provision of the lease.
(a) Developer right to temporarily relocate. If cooperative conversion requires work that endangers the health or safety of tenants, a developer:
(1) Must not begin work until endangered tenants with extended leases have been temporarily relocated; and
(2) May temporarily relocate an endangered tenant with an extended lease after one hundred eighty (180) days from filing the notice of intent to convert.
(b) Unit available within building. If a comparable unit is available within the same building or complex, a developer must relocate a tenant to that unit:
(1) After at least thirty (30) days' written notice; and
(2) At rent and other lease provisions at least as favorable to the tenant as under the extended lease.
(c) Unit not available within building. If a comparable unit is not available within the same building or complex, the developer may require a tenant to temporarily leave the extended lease unit after:
(1) Giving the tenant at least one hundred eighty (180) days' written notice; and
(2) Paying the tenant an amount equal to three (3) months' rent under the extended lease.
(d) Return to unit.
(1) After a developer gives notice that work on a unit has been completed, the developer must allow the tenant to return to the extended lease unit within sixty (60) days.
(2) The term of an extended lease begins upon the return of the tenant to the extended lease unit.
(e) Moving expenses. Within fifteen (15) days, a developer must pay or reimburse all tenant expenses reasonably incurred in moving from or returning to the unit under an extended lease.
(a) Payment required. A developer must pay to a low-income senior or low-income handicapped tenant an amount equal to three (3) months' rent for the unit of the tenant if:
(1) The tenant chooses not to accept a lifetime extended lease; or
(2) The developer does not offer the tenant a lifetime extended lease because the number of extended lease units exceeds twenty (20) percent of the cooperative units.
(b) Payment. A developer must pay a tenant under this section before the following, whichever occurs first:
(1) An increase in the rent of the tenant or a change in a material term in the lease; or
(2) Thirty (30) days after the developer makes the last extended lease with an eligible tenant.
(a) Payment required.
(1) If a tenant leaves after receiving notice of tenant rights under section 11C-23, the developer must pay the tenant for relocation under this section in addition to a payment instead of an extended lease under section 11C-13.
(2) Under this section, the developer must pay a tenant for relocation whether the tenant leaves voluntarily or at the request of the developer.
(b) Amount of payment.
(1) If a tenant is low-income, the relocation payment under this section is:
(i) Three hundred seventy-five dollars ($375.00), which the developer must pay by the time the tenant leaves the unit; and
(ii) Reimbursement for moving expenses in excess of three hundred seventy- five dollars ($375.00) up to seven hundred fifty dollars ($750.00), which the developer must pay within thirty (30) days of receiving a written request from the tenant.
(2) If a tenant is not low-income, the relocation payment under this section is reimbursement of moving expenses up to seven hundred fifty dollars ($750.00), which the developer must pay within thirty (30) days of receiving a written request from the tenant.
(c) Written request for moving expense. Before a developer must reimburse a tenant for moving expenses under this section, the tenant must give the developer a written request and reasonable evidence for reimbursement within thirty (30) days after moving.
(a) Eviction after tenant given notice to leave. After a developer gives notice of tenant rights under section 11C-23, the developer may give a tenant notice to leave before expiration of one hundred eighty (180) days if the tenant fails to leave the unit by the end of thirty (30) days' notice given to the developer under section 11C-10.
(b) Leases that would expire. If a lease expires during the one-hundred-eighty-day period after notice of tenant rights under section 11C-23, a developer must offer that tenant an extended lease term lasting at least until the end of the one-hundred-eighty-day period without changing other provisions of the lease.
(a) Right to transfer. A developer may transfer a membership for a unit under an extended lease after the developer gives:
(1) The tenant with the extended lease notice of the transfer of the membership; and
(2) The purchaser of the membership written disclosure that the unit is under an extended lease required under this chapter.
(b) Continuation of extended lease. If there is a transfer of a membership for a unit under an extended lease, the extended lease continues regardless of cooperative corporate documents that prohibit or restrict occupancy by a person other than the member.
(a) Offer required. Before a developer makes a subscription agreement for a unit or evicts a tenant to sell a membership for the unit of the tenant, the developer must:
(1) Notify the tenant of the price and other material terms of sale in the same manner as this chapter requires for other purchasers; and
(2) For at least sixty (60) days, offer the membership for that unit to the tenant.
(b) Offer if unit is changed. If a conversion plan significantly changes the dimensions of a unit, the developer must offer the tenant of that unit a membership for a unit of comparable size and location.
(a) Definitions. In this section, the following words have the meanings indicated.
(1) Rental property.
(i) "Rental property" means real property that includes one (1) or more structures or other improvements that are operated as a single entity.
(ii) "Rental property" does not include a transient facility such as an apartment hotel, boardinghouse, tourist home, inn, motel, hotel, school dormitory, hospital or medical facility, or a facility operated for religious or charitable purposes.
(2) Tenant organization. "Tenant organization" means an association of resident tenants of a rental property that the Department certifies as representing at least 30 percent of the occupied units or 5 units, whichever is greater.
(b) Requirements before transfer. Before an owner transfers a rental property or more than 10 units, the owner must:
(1) Offer the rental property for sale to the county, its designated housing agency, and a certified tenant organization within the rental property at a fair market price and at material terms that are at least as favorable as those offered to or accepted from a third party purchaser. The owner must continue this offer for at least sixty (60) days from the latest date the offer is received by the county, its designated housing agency, or the tenants of the facility; or
(2)
(i) Notify the Department in writing that the transfer of the rental property is not for the purpose of cooperative conversion; and
(ii) Comply with the requirements of either Chapter 11A or 53A.
(c) Exercise of right to purchase. An owner must sell the rental property to the County, its designated housing agency, or the tenant organization if the County, agency, or organization:
(1) Signs a purchase contract that contains substantially the same price and material terms as the offer of the owner, except for the period by which the parties must settle;
(2) Secures financing within one hundred eighty (180) days from the beginning of the sixty-day offer period; and
(3) Settles on the contract within one hundred eighty (180) days from the beginning of the sixty-day offer period.
(d) Extension of time. The owner and the County, its designated housing agency, or the tenant organization may agree to extend the time for securing financing or settlement without liability to another purchaser.
(e) Other contract rights. A purchase contract or the transfer of title for a rental property to a party other than the County, its designated housing agency, or a tenant organization is contingent upon compliance by the owner with this Chapter.
(a) Information and access. After an owner makes an offer to sell a rental property under this chapter, within seven (7) days of a request, the owner must give to the county, its designated housing agency, or the tenant organization:
(1) The following types of information:
(i) Architectural plans and specifications;
(ii) Engineering plans and specifications;
(iii) Estimates for repairs or capital improvements;
(iv) Management and maintenance expense data for the prior two (2) years;
(v) Operating budgets;
(vi) Rent roll;
(vii) Surveys; and
(viii) Utility consumption and expense data for the prior two (2) years.
(2) Access for inspection of the rental property.
(b) Confidentiality. The county, its designated housing agency, or a tenant organization must keep confidential the information that it receives from an owner.
Exempt from the county and tenant right to purchase requirements under section 11C-18 is a transfer:
(1) That is required under a mortgage or deed or trust;
(2) That a mortgage holder requires in order to implement or avoid foreclosure;
(3) That a court orders;
(4) Of a partial interest in undivided property from one part-owner to another;
(5) Of property required under a will or state law to be distributed after death of the owner;
(6) To an agency of state or local government;
(7) To a spouse, son, or daughter;
(8) Made in order to liquidate a partnership or corporation; and
(9) To a partnership or corporation wholly owned by the property owner.
(a) Sale. If the County, its designated housing agency, or a tenant organization does not accept an offer to sell a rental property under this Chapter, an owner may complete a transfer of the rental property to another person at a price and material terms that are no more favorable to the purchaser than those the owner offered to the County, the agency, and the organization.
(b) Proof of compliance. Within 10 days after receiving a request by an owner, the Department must certify in writing either that:
(1) The owner has complied with this Chapter and may transfer a rental property to a person other than the County, its designated housing agency, or the tenant organization;
(2) A transfer of a rental property is exempt from the requirements of this Chapter; or
(3) The owner has not complied with this Chapter, and state in reasonable detail the reasons why the Department finds that the owner has not complied.
Each year that a developer is in control of a cooperative, the developer must:
(a) Prepare a written budget that includes a reserve fund large enough to pay for deferred maintenance, repairs, and replacement of cooperative property under a reasonable estimate of the useful life of property components; and
(b) Contribute to the reserve fund for each membership the developer owns or controls.
(a) Notice to tenants. A developer must give each tenant of the property one hundred eighty (180) days' written notice of the intent to convert and a summary of all tenant and purchaser rights, an application for an extended lease, and a copy of an extended lease under this Chapter before the developer:
(1) Converts a property to cooperative;
(2) Gives a tenant of the property a notice to leave for the purpose of selling a membership; or
(3) Makes a subscription agreement.
(b) Notice to new tenants. After a developer gives notice under this section and before the developer accepts a new tenant for the property, the developer must give the prospective tenant:
(1) Notice that the notice required under this section was given; and
(2) Notice of the date on which the initial notice was given.
(c) Notice to the Department. At least 10 days before a developer gives the notice under subsection (a), the developer must give to the Department:
(1) A copy of the notice; and
(2) The name and unit number of each tenant to whom the notice is to be given.
(a) Right to terminate. Within three (3) years after the transfer of control of the cooperative from the developer of the members, the cooperative may terminate a contract that:
(1) Is executed after the conversion date; or
(2) Requires performance, after the latter of:
(i) One (1) year after the conversion date; or
(ii) The date that control of the cooperative transfers to the members.
(b) Notice. Termination is effective when the cooperative delivers written notice of at least thirty (30) days to another party to the contract.
(c) Exception. This section does not apply to contracts or grants between the cooperative and a governmental agency or public utility.
(a) Complaint. A person with direct knowledge of a violation of this Chapter may file a written complaint with the Department under Chapter 11.
(b) Enforcement authority and procedures. The Department may enforce this Chapter under Chapter 11.
(c) Penalties.
(1) A person who violates this Chapter is liable for the civil penalties under Chapter 11; and
(2) The County may enforce this Chapter under the provisions for a class "A" violation under Sections 1-18 and 1-19 of this Code.
(d) Alternative remedy. This Chapter does not limit the rights of a person to seek a remedy that is otherwise available.
The county executive may adopt regulations to implement this chapter under method (2) of section 2A-15 of this Code.
Notwithstanding any corporation document to the contrary, a cooperative housing corporation may amend its bylaws by a vote of a majority of the members. This section applies to bylaws adopted before or after this section became law.