Roy Kelley Sells Maryland Homes : Maryland Real Estate Commission Provides New Deposit Refund Guidance

Maryland Real Estate Commission Provides New Deposit Refund Guidance

Deposit Refunds Because of Condo or HOA Documents

By Kathie Connelly

Executive Director of the Maryland Real Estate Commission

At recent monthly meetings of the Maryland Real Estate Commission, guidance was provided to real estate brokers holding earnest money deposits for buyers who are entitled to cancel a residential contract of sale because condominium or homeowners association documents are not provided by the seller.

Buyers who enter into contracts to purchase residential real estate in a condominium or homeowners association development are entitled to several disclosures from the seller which include notice of fees payable to the council of condominium owners or HOA, restrictive covenants on the property to be purchased that result from the property being subject to an HOA or Condo regime and insurance coverage on common areas of the development where the property is located.  Any buyer's that does not receive the HOA documents and disclosures at least five days prior to entering into the sales contract is entitled to cancel the contract within five days of receiving the documents and disclosures.  The buyer need not state any reason for canceling the contract, so long as the cancelation is in writing, the buyer is entitled to the "return of any deposits made on account of the contract, except that the vendor shall be entitled to retain the cost of reproducing" the documents and information disclosed to the buyer.  Real Property Article 11B-108 (b) (1).  Similarly, a buyer who enters into a contract of sale to purchase a condominium is entitled to cancel the contract within 15 days of receipt of the required documents and disclosures and is thereafter entitled to "return of any deposit made on account of the contract."  Real Property Article 11-126 (e).

The Real Estate Commission has now taken the position that the HOA and Condominium Acts allow a broker to refund the buyer's earnest money deposit when the buyer has canceled the contract exercising the right to cancel after receipt of the HOA or Condo documents and disclosures, without first obtaining a signed release from the seller.  Real Estate Brokers know that the Business Occupations Article requires that they maintain deposit monies in an approved account until a transaction is consummated or terminated, written instructions from the parties are received, an interpleader is filed in court or neither party objects to the broker's proposed disposition of the deposit. Business Occupations Article 17-505 (a).  Following this new policy statement by the Real Estate Commission, a broker may return the buyer's deposit once written notice to cancel the contract is given during the period reserved for the buyer to receive and review condominium or home owners association disclosures and documents.

If you have any questions concerning this guidance you can review the minutes of the Real Estate Commission meetings of May and June 2010 by visiting the Commission's website at http://www.dllr.state.md.us/license/mrec/.  You may also call the Commission at (410) 230-6200.