Prince George's County, Maryland, Considers Right of First Refusal for Multifamily Rental Property Sales

by Ballard Spahr LLP
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The Prince George's County Council is considering legislation that would require sellers of multifamily rental facilities with 20 or more dwelling units to provide the County Department of Housing and Community Development (DHCD) with a right of first refusal (ROFR) before the property can be sold to a third party.

Owners and developers of multifamily housing in the County should be aware of the bill’s potential impact on such projects. In neighboring Montgomery County, where a similar law has been in effect for decades, developers have incurred significant expenses and delays related to compliance. 

The Prince George’s County bill, CB027-2013, is sponsored by Councilmember Mary Lehman. The bill requires the seller of a multifamily rental property to provide DHCD with a ROFR within five days after executing a bona fide contract of sale. The Department then has seven business days to make an initial determination on whether it intends to exercise its ROFR, 53 days in which to exercise that right, and an additional 120 days to obtain financing to purchase the property. 

While the bill is modeled after Montgomery County's law, there are several key differences. The Prince George's County bill would require that notices be given to tenants, but unlike Montgomery County's law, it does not grant a ROFR to a tenant organization or other entity (e.g., the Housing Opportunities Commission in Montgomery County). Unique to the bill is a provision requiring that within seven business days following receipt of the ROFR, DHCD shall make an initial determination on whether it intends to exercise the ROFR and notify seller of the same. 

Similar to Montgomery County’s law, the Prince George's County legislation permits sellers to avoid the ROFR process by entering into a rental agreement subject to DHCD discretionary approval. In addition to allowing DHCD to exercise its ROFR in partnership with other entities, the bill also allows DHCD to assign its rights. A late amendment to the bill would restrict its application to certain areas of the County; these areas would be determined by the Council, with the concurrence of the County Executive. It is not clear what areas would be included or when the determinations would be made.

The bill was reviewed by the Transportation Housing & Environment Committee at its June 20, 2013, work session. The Committee voted 3-0 to forward the bill to the Council. The bill could be introduced to the Council as soon as July 2, 2013, with a public hearing to follow. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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