Summary

Prince George’s County adopted revised regulations that expand the multifamily rental property right of first refusal provisions of County law.

The Upshot

• Multifamily property owners submitting the ROFR to the County have always had to submit various documents and materials related to property condition and operations. The revised regulations require owners to include much more information in the initial ROFR submission.
• The County has not typically exercised its ROFR. However, these new regulations may assist the County in doing so as it partners with developers in connection with the ROFR.

The Bottom Line

County multifamily property owners should know what additional materials are now required for ROFR submission. It’s also important to note that the time period for the County to exercise the ROFR does not begin until all required materials are submitted.

FULL ALERT

Prince George’s County (County) adopted revised regulations expanding the right of first refusal (ROFR) provisions of Section 13-1110, et seq. of the County law. Since 2013 and subject to certain limited exemptions in the law, in order to sell a multifamily rental property in Prince George’s County an owner must first provide notice to tenants of the property and a right of first refusal (ROFR) to the County acting through its Department of Housing and Community Development (DHCD).

Since its inception, ROFR exercise by DHCD has been viewed as very unlikely. However, that may change, as DHCD has sought to identify developers who may be interested in taking an assignment of DHCD’s ROFR rights.

Submission of the ROFR to DHCD has always required submittal of various documents and materials related to the property condition and operations. However, the revised regulations require much more information to be included in the initial ROFR submission. These new required items are:

• Expected re-rent rates within 1 year of closing;
• Names of mortgage holders, existing mortgage balances and terms, repayment terms, interest rates, loans for which dwelling units are collateral, liens, covenants, easements, and other documents recorded against the property;
• Security deposit schedule and identification of escrow accounts;
• Any architectural, engineering, mechanical, structural, general construction plans and specifications;
• Lead certification;
• Phase I Environmental Survey;
• Capital needs assessment or property condition survey;
• Current and historic information on underground storage tanks on the property;
• Copies of services contracts that include property management, maintenance, security, construction, or other agreements related to the sale of the rental facility;
• Any existing warranties on any major components of the apartment, including the roof, HVAC, boilers, hot water heaters, etc.; and
• Excel file containing rent roll.

Multifamily property owners should be aware that these additional materials are now required to be included in the ROFR submission, and that the time period for DHCD to exercise the ROFR does not commence until all required materials have been submitted. 

Lawyers in Ballard Spahr’s Real Estate Development and Transactions Group are available to assist multifamily property owners in complying with the requirements of the ROFR law and addressing complications that may arise related to these new requirements.