On March 25, 2024, the Supreme Court of Maryland (formerly known as the Court of Appeals, the State’s highest court) issued an opinion which may have significant impacts on the management of residential rental properties.
The decision was issued in the case of Westminster Management, LLC v. Tenae Smith, et al., a case which originated in the Baltimore City Circuit Court. A group of tenants sued their former landlord alleging that certain of its management practices were illegal. The Court agreed.
The Court issued three holdings which could affect property management practices:
- The Court confirmed recent decisions that Rent Courts can award judgments only for actual rent due and unpaid, excluding ancillary or related charges. “We hold that in the context of residential leases, “rent,” for purposes of Sec. 8-401 of the Real Property Article (the failure to pay rent law) , means the fixed, periodic payments a tenant is obligated to pay for use or occupancy of the leased premises. Provisions of residential leases that purport to expand the definition of “rent” are ineffective for purposes of 8-401.”
Thus, rent court claims cannot include charges for items such as utilities, legal fees, repairs, etc.
- The Court also addressed lease provisions allowing a landlord to allocate rent payments, including those specifically designated as “rent,” to other, “non-rent” obligations. For instance, if a bad check fee is posted to the rent ledger, that charge cannot be paid out of a subsequent rent payment.
“We hold that such an allocation violates the prohibition in Real Property Sec. 8-208(d)(2) (which requires) a tenant “to waive or to forego any right any right or remedy provided by applicable law” because it effectively allows a landlord to bring a summary ejectment proceeding based on allegedly overdue “rent” that the tenant has already paid.”
The Court thus voids the common practice of applying rent payments to charges other than rent (such as legal fees or lockout charges), leaving actual rent unpaid.
- The Court also expanded the scope of the 5% late fee for unpaid rent. Interpreting the history of the late fee statute, the Court held that the 5% late fee includes any cost of collection (such as agent’s fees,) other than court-awarded costs.
Thus, the late fee statute precludes a landlord from charging a 5% late fee “…and also imposing additional charges incurred due to the late payment of rent …”
Leases and rent collection procedures should be reviewed to avoid conflicts with this new ruling.
Contact our office if you have questions regarding this matter.