Attention Maryland Investors**** - Posted by William Bronchick

Posted by BobM on July 16, 2001 at 14:17:50:

It’s worse for you as the seller, if you’ve taken a down payment on the L/O. If the sale fails and you don’t have the statement on the contract, the down payment gets treated by the court as a security deposit. Sec. 8-203 states a sec. dep. can’t exceed 2 months rent (no such limits on L/Os). If it does, you’re in violation of the code and the tenant can get treble damages. I had a client that did this; came in expecting we’d sue for the sale and ended up fighting to collect back rent (he hadn’t come to me to set up the L/O). I don’t do a lot of RE work, but Maryland seems tough on landlords.

Attention Maryland Investors**** - Posted by William Bronchick

Posted by William Bronchick on July 13, 2001 at 12:20:21:

I have just become aware of Sec. 8-202 of the Maryland statutes, which requires a seller on a lease/option transaction to state in the option agreement “THIS IS NOT A CONTRACT TO BUY”.

Here is the URL:

The tenant/buyer has the right to cancel the option if this is not complied with. I would not imagine a tenant/buyer wanting to cancel his own option, but that’s the law! Interestingly, the law does not state that a tenant/buyer can ask for his option money back after canceling the option.

I like this law, because it helps bolster the landlord/seller’s case in court if the tenant/buyer tries to claim an equitable interest in the property (i.e., that the lease/option was really a “sale”, requiring the landlord to foreclose the tenant/buyer upon default).

Thanks to Lauren Hart of Maryland for pointing out this statute.

I almost went to court - Posted by Tarun_MD

Posted by Tarun_MD on July 14, 2001 at 11:42:12:

One of my sellers on a lease option deal wanted to back out and our lease option agreement did not have that language on it. My attorney pointed that out to me and said that the seller could back out of the contract because of this Maryland law. However, the seller and his prepaid legal attorney didn’t find out about this statue and we eventually resolved the matter out of court.

Re: Attention Maryland Investors**** - Posted by Alan-Baltimore

Posted by Alan-Baltimore on July 13, 2001 at 14:17:09:

It’s funny that you posted this, since I am in the process this week of getting my T/Bs to re-sign the revised option contract. (I am using your forms which have otherwise been great.)

Although I’m not a lawyer, the way that I read the section quoted below is that since the option can be totally voided by the T/B, they might have a good case for getting their option deposit refunded. (Another good reason to take security deposits in addition to option deposits!) At the very least, you might find yourself spending a lot of time (read $$$) in court examining the fine points in this matter.

Anyway here’s the text:

© If a lease option agreement fails to comply with subsection (b) of this section and is otherwise enforceable, the lease, the lease option agreement, or both may be voided at the option of the party that did not draft the lease option agreement.

I always sit down with my T/B and we read and discuss all the text in each contract, but as you stated, this is a good CYA clause so that there can be no doubt as to what is being signed.

Re: Attention Maryland Investors - Posted by JohnBoy

Posted by JohnBoy on July 13, 2001 at 12:34:58:

I kind of like that clause even if it’s not required by law because of the reason you stated about bolstering the landlord/seller’s case in court should a tenant/buyer ever try to claim an equitable interest in the property.

Clearly that would show the option is NOT a sale and just merely an option to buy.

I think I’m going to add that to my option contract.