New Maryland Law Regulates Residential Property Service Agreements

Effective June 1, 2023, certain Residential Property Service Agreements such as property maintenance agreements are subject to new restrictions under Maryland Real Property Code §§ 14-901 et seq.  A “Service Agreement” is defined as “an agreement where a service provider agrees to provide an individual services for (i) the maintenance of residential property that an individual owns; or (ii) the purchase or sale of residential property.”

Service agreements excluded from coverage include but are not limited to: utility agreements; mortgage loan and commitment agreements; home warranty and similar agreements; and option or right of first refusal to purchase residential property.

Under the new law, covered service agreements entered into on or after June 1, 2023, must not:

• Be effective for more than one year;
• Bind subsequent bona-fide purchasers;
• Grant a lien or other security interest in the residential property to a Service Provider; or
• Allow the Service Provider to transfer their rights under the agreement to a third party without notice to the homeowner.

A service provider that attempts to record an unlawful service agreement may be guilty of a misdemeanor and subject to imprisonment not exceeding 6 months or a fine not exceeding $1,000 or both.  In addition, prohibited contracts may be void, and violations may be found to violate the Maryland Consumer Protection Act and could carry potential fines of up to $10,000 for each violation.

Although the new restrictions apply to agreements effective on or after June 1, 2023, the Maryland Office of Financial Regulation (OFR) issued guidance on July 31, 2023, indicating that certain agreements effective prior to June 1, 2023, may still violate Maryland licensing laws and potentially could be subject to penalties and other enforcement actions from the OFR.

The information contained herein is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this blog should be construed as legal advice from Shumaker Williams P.C. or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. This blog is current as of the date of original publication.