In Maryland, tenants in residential properties with three or fewer units enjoy a right of first refusal for the purchase of their rental property. Under MD Code, Real Property, § 8-119, (c)(1), “[B]efore a residential rental property may be offered for sale to the public or a third party, including through a listing for sale, the owner of the property shall send each tenant a written notice of the tenant’s right to deliver an offer to purchase the property.” The owner’s notice must be in an official form provided by the Secretary of Housing and Community Development, and “contain material terms that the owner would agree to incorporate in a resulting contract of sale with the tenant.” The notice must state, “in a conspicuous manner, that the notice is a solicitation of an offer to purchase and is not intended as and may not be construed as a binding contract of sale,” and include “any information regarding deadlines for the tenant to submit an offer to purchase, including the duration of the tenant’s exclusive negotiation period.” A copy of the notice of the tenant’s right to deliver an offer to purchase the property must also be provided to the Office of Tenant and Landlord Affairs.
Tenants have thirty (30) days after delivery of the notice to respond and provide a written offer to purchase the property to the owner. Upon receipt of the tenant’s offer, the owner has five (5) days to respond and, if the the offer contains the same or more favorable material terms as those contained in the initial notice, must accept the offer and notify the Office of Tenant and Landlord Affairs. In the alternative, if the offer contains material terms that deviate from the terms of the notice, the owner must deliver a counteroffer to the tenant with an explanation of how the counteroffer deviates from the terms stated in the owner’s initial solicitation of an offer to purchase.
The tenant then has five (5) days following receipt of a counteroffer to accept or reject the owner’s counteroffer. If the tenant fails to respond to the counteroffer within five (5) days after receipt of the counteroffer, the counteroffer is deemed to be rejected and the owner must notify the Office of Tenant and Landlord Affairs of the rejection.
Finally, a tenant’s right of first refusal is terminated if the tenant does not either “deliver an offer to purchase” in response to the owner’s initial solicitation of an offer to purchase within the thirty (30) day response period, or “accept a counteroffer,” provided by the owner within the permitted five (5) day response period. Again, the owner must notify the Office of Tenant and Landlord Affairs of such termination.
The tenant’s right of first refusal does not apply to certain transfers, including but not limited to a transfer of title in lieu of foreclosure of a mortgage or deed of trust; a transfer of title through a court order, receivership, or court-approved settlement, or a transfer of title through the order of a bankruptcy court or sale by a bankruptcy trustee or debtor in possession.
