Opinion ID: 2311940
Heading Depth: 1
Heading Rank: 8

Heading: Right of First Refusal Provisions

Text: The relevant statutory sections here are Md. Code (1974, 1980 Cum. Supp.), § 11-102 (a) of the Real Property Article [Md. Code § 11-102 (a)] and M.C. Code §§ 11A-5C (b) (1), 11A-5C (d), 11A-5C (g) and 11A-7 of the Condominium Chapter. Maryland Code § 11-102 Establishment of [C]ondominium [R]egime provides in pertinent part: (a) By recording declaration, bylaws and plat.  The owner of any property in the State may subject the property to a condominium regime by recording among the land records of the county where the property is located, a declaration, bylaws, and condominium plat that comply with the requirements specified in this title. (Emphasis added.) Montgomery County Code § 11A-5C (b) (1) (now § 11A-9 (b) (1)) provides in pertinent part: (b) Transfers with Intent to Convert to Condominium. (1) Prior to the transfer of title to any rental facility which contains five or more dwelling units made with intent to convert to condominium as defined in this Section, the owner of such facility shall give certain organizations designated herein the right of first refusal to purchase the rental facility within a period of 120 days from the date of notice as provided herein, on the same terms and conditions, and at the same purchase price, as contained in any contract or agreement to purchase pursuant to which said transfer of title is to be made, or on other mutually agreeable terms and conditions. (Emphasis added.) Montgomery County Code § 11A-5C (d) (now § 11A-9 (d)) provides in pertinent part: (d) Intent to Convert to Condominium. (1) All transfers of rental facilities which contain five or more dwelling units shall be deemed to be transferred with intent to convert to condominium and subject to the requirements of this Section, unless the following requirements are met: a. The contract purchaser, within thirty days prior to the transfer, files an affidavit with the Director of the Office of Consumer Affairs stating that the transfer is not made with intent to convert to condominium.... b. The contract purchaser does not, within two years from the date of transfer of title, give tenants notice of intention to create a condominium.... (2) Compliance with the affidavit requirement of subsection 11A-5C (d) (1) a. shall be sufficient to permit the transfer of title to the contract purchaser without further compliance with the requirements of this Section; however, upon the giving of notice of intention to create a condominium within the time limit set forth in subsection 11A-5C (d) (1) b., the contract purchaser who is then an owner of the rental facility by the passage of title thereto, shall thereupon hold the title in trust subject to the right of first refusal of the organizations specified herein to purchase the rental facility and shall be required to satisfy the requirements of this Section as an owner and as a contract purchaser of a rental facility with a deemed contract of purchase with identical terms, conditions and purchase price as that contract of purchase by which the contract purchaser became owner of the rental facility. (Emphasis added.) Montgomery County Code § 11A-5C (g) (now § 11A-9 (g)) provides in pertinent part: (g) Penalties for Violation of Section. ... (2) Any person who violates any provision of this Section shall be liable for the payment to the County of a civil penalty as specified in Section 11A-7; each such transfer of title to any rental facility and each sale of a condominium unit within a condominium project in violation of the requirements of this Section shall constitute a separate offense. Montgomery County Code § 11A-7 (d) (now § 11A-11 (d)) provides in pertinent part: (d) Any person who violates any provision of this Chapter ... shall be liable for the payment to the County of a civil penalty, recoverable in a civil action, in the sum of not more than five hundred dollars for each such violation. Maryland Code § 11-102 (a) gives the owner of property the right to establish a condominium regime by recording a declaration, bylaws, and plat. In my view, nothing in M.C. Code § 11A-5C (a), (b), (c), (d) (1), (e), (f) and (g) prevents an owner of property in Montgomery County from establishing a condominium regime pursuant to Md. Code § 11-102 (a). All of these provisions establish a statutory scheme designed to regulate the circumstances under which property may be transferred by an owner who elects to sell his property rather than to establish a condominium regime. More particularly, the statutory scheme delineates the circumstances under which an owner of a rental facility must offer a right of first refusal to tenants before title may be transferred to a contract purchaser. None of these provisions is designed to impose any procedures or requirements upon an owner who elects to establish a condominium regime. Montgomery County Code § 11A-5C (b) (1) concerns transfers by an owner to a contract purchaser who intends to convert to condominium. That section, in essence, prohibits an owner from transferring title to a rental facility to a purchaser who intends to convert to condominium without giving tenants the right of first refusal. Montgomery County Code § 11A-5C (d) concerns transfers by an owner to a contract purchaser who does not intend to convert to condominium. Montgomery County Code § 11A-5C (d) (1) creates a presumption that all transfers of rental facilities are made with the intent to convert. Montgomery County Code § 11A-5C (d) (1) a. and b. establish a mechanism by which that presumption may be rebutted. Those subsections, when read in the context of M.C. Code § 11A-5C (b), establish that an owner may transfer a rental facility without offering the right of first refusal if the purchaser files an affidavit stating that he does not intend to convert to condominium and that purchaser does not give notice of an intention to convert within two years. These provisions make it possible for an owner to transfer a rental facility without offering the right of first refusal when a purchaser has no actual intent to convert to condominium but intends, in fact, to retain the building as a rental facility. There is nothing in the language of M.C. Code § 11A-5C (b) and (d) (1) a. and b. that prohibits that which is expressly permitted by Md. Code § 11-102 (a). Montgomery County Code § 11A-5C (b) and (d) (1) a. and b. are nothing more than provisions that govern transfer of rental facilities. They do nothing more than delineate the circumstances under which rental facilities may be transferred with or without offering the right of first refusal. Consequently, these provisions apply only to owners who elect to transfer a rental facility to a contract purchaser; they do not apply to owners who elect to convert to condominium. Thus, although these provisions may affect an owner's right to transfer his property, because they do not interfere with his right to convert to condominium, they do not, in my view, prohibit an owner of property in Montgomery County from establishing a condominium regime pursuant to Md. Code § 11-102(a). Moreover, in my view, M.C. Code § 11A-5C (b) and (d) (1) a. and b. do not have the practical effect of prohibiting that which is expressly permitted by Md. Code § 11-102 (a). With respect to M.C. Code § 11A-5C (b), I recognize that under certain circumstances, as the majority points out, that subsection may result in a forced sale and may, therefore, prevent a contract purchaser from establishing a condominium regime. Because, in my view, M.C. Code § 11A-5C (b) (1) has a practical effect only on contract purchasers, it is not in conflict with Md. Code § 11-102 (a) because Md. Code § 11-102 (a) does not give a contract purchaser the right to establish a condominium regime. What the majority overlooks is that Md. Code § 11-102 (a) gives that right only to owners of property. I reach the same conclusion with respect to M.C. Code § 11A-5C (d) (1) a. and b. The manifest purpose of these subsections is to make it possible for an owner to transfer a rental facility without offering the right of first refusal when he has no intention to convert within two years of transfer of title. Thus, these subsections provide a mechanism for a purchaser who wants to buy and maintain a rental facility to purchase that facility without the delay or risk created by right of first refusal provisions. I cannot comprehend how a law that enables a purchaser to buy a rental facility without imposing a right of first refusal requirement has the practical effect of preventing that purchaser from creating a condominium regime. Moreover, even if M.C. Code § 11A-5C (d) (1) a. and b. had such an effect, it would not conflict with Md. Code § 11-102 (a) because Md. Code § 11-102 (a) does not give a contract purchaser the right to establish a condominium regime. In my view, there is nothing in the plain language or practical effect of M.C. Code § 11A-5C (b) and (d) (1) a. and b. that conflicts with Md. Code § 11-102 (a). Accordingly, I would hold these subsections to be valid. Montgomery County Code § 11A-5C (d) (2) concerns procedures to be followed by a contract purchaser who has become an owner of a rental facility after swearing in an affidavit that he had no intention to convert to condominium but who nonetheless gives notice of such an intention within two years of the date of transfer of title. That subsection embodies that portion of the statutory scheme designed to protect the rights of tenants under such circumstances by requiring that the owner must offer a right of first refusal when he gives notice of his intention to convert to condominium. Because this provision requires an owner to give a right of first refusal before he may establish a condominium regime, it is in conflict with Md. Code § 11-102 (a) which permits an owner to establish a condominium regime by doing nothing other than recording a declaration, bylaws, and plat. It is for this reason that I agree with the majority's holding that M.C. Code § 11A-5C (d) (2) is invalid. However, in my view, M.C. Code § 11A-5C (d) (2) is severable from the remaining valid portions of § 11A-5C. In determining whether the valid portions of a statute or statutory scheme are severable from the invalid portions, courts look to the intent of the Legislature. The test of severability is whether a legislative body at the time of enactment would have intended that the valid portions be effective if it had known that the invalid portions could not be carried out. Under the principles of severability, there is a presumption, even in the absence of an express clause or declaration, that a legislative body generally intends its enactments to be severed, if possible. Moreover, the presence of a severability clause in an enactment, while not conclusive, reinforces the presumption of severability. Finally, when the dominant purpose of an enactment may largely be achieved by the enforcement of the remaining valid portions of the Act, courts will generally hold the valid portions of the Act severable and enforce them. O.C. Taxpayers for Equal Rights, Inc. v. Mayor of Ocean City, 280 Md. 585, 600-01, 375 A.2d 541, 549-50 (1977); Ulman v. State, 137 Md. 642, 645, 113 A. 124, 126 (1921). Here M.C. Code § 11A [the Act] contains a severability clause which reinforces the presumption of severability. M.C. Code § 11A-5C Sec. 2. (now § 11A-13 Sec. 2.). Moreover, the valid portions of the Act will be effective even though the invalid portions cannot be carried out. The dominant purpose of the statutory scheme of the Act, embodied in § 11A-5C (d), is to protect tenants by requiring an owner to offer a right of first refusal before transfer to a purchaser who intends to convert to condominium. Even if § 11A-5C (d) (2) is invalidated, § 11A-5C (b) remains fully enforceable under § 11A-5C (g). The purpose of M.C. Code § 11A-5C (d) is to provide similar protection to tenants under the limited circumstance in which an owner who previously had sworn that he had no intention to convert to condominium nonetheless converts to condominium. I recognize that the invalidation of M.C. Code § 11A-5C (d) (2) deprives tenants of the protection of the right of first refusal under this very limited circumstance. Nevertheless, tenants even under such circumstances remain protected to a large degree by the laws of perjury which serve as a deterrent to owners who might engage in such conduct. Thus, that portion of the statutory scheme embodied in § 11A-5 (d) (2) is of minor significance, and its invalidation does not prevent the valid portions of the Act from being effective. Because the dominant purpose of M.C. Code § 11A-5C can be achieved by the enforcement of the valid portions of the Act, I am convinced that the Montgomery County Council would have enacted § 11A-5C even if it had know that M.C. Code § 11A-5C (d) (2) was invalid. Because I conclude that M.C. Code § 11A-5C (d) (2) is severable, I would hold the remaining portions of M.C. Code § 11A-5C to be valid.