Maryland high court rules landlord licensure irrelevant in holdover tenant cases

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Landlords need not be licensed to seek repossession of their property from tenants continuing to reside month to month on expired leases by giving them the statutory 60-day notice to leave, a divided Maryland high court ruled Monday in a decision that equalized the rights of licensed and unlicensed landlords.

In its 5-2 decision, the Court of Appeals said local landlord licensing requirements generally do not apply once a lease expires. Through the statutory notice requirement, the General Assembly has enabled owners – regardless of licensure — to reassert their property rights while giving “holdover” renters time to relocate, the high court added.

The court’s decision was a defeat for former holdover tenants of the nearly 125-year old Copycat Building, a warehouse that has been converted into residential lofts largely for artists and musicians in Baltimore’s Station North Arts and Entertainment District.

The building’s landlord, The Copycat Building LLC, lacked a license that Baltimore issues to landlords upon certification of compliance with the city’s housing code.

The holdovers had argued at the high court that placing unlicensed landlords on a par with their licensed counterparts would frustrate the goal of Baltimore and county licensing authorities to ensure safe rental housing for all tenants. The holdovers said through counsel that the high court has held in other cases that judges are not obliged to enforce contractual obligations, including leases, when the party seeking enforcement is unlicensed, like Copycat.

But the Court of Appeals rejected those arguments, as had the Baltimore City Circuit Court.

The high court said the law of contracts does not apply in holdover cases because the lease — the contract between a landlord and tenant – has expired.

“Under the tenant holding over statute, the landlord’s right to gain repossession is not based in contract, nor is the remedy the result of any breach,” Brynja M. Booth wrote for the majority.

“In fact, the tenant holding over action is only available if there is no longer a contract in effect,” Booth added. “In other words, the statutory remedy (of repossession) does not arise from any contractual breach – it arises from the property owner’s possessory interest in the property.”

Booth was joined in the opinion by Chief Judge Joseph M. Getty and Judges Michele D. Hotten, Jonathan Biran and Sally D. Adkins, a retired jurist sitting by special assignment.

The majority decision drew scathing dissents from Judges Robert N. McDonald and Shirley M. Watts, who said the ruling essentially removes any incentive for landlords to pay the cost of licensure and ensure their properties are up to code.

They added that contract law does apply to holdover tenants because leases never truly expire. Leases have written holdover provisions that enable tenants to continue to reside at the property so long as they keep paying rent and are not told to leave.

The dissenters also expressed support for the holdover tenants’ view that unlicensed landlords seeking repossession must go through the slower common law process of proving in court that “exceptional circumstances” exist for why they should be entitled to repossess their property.

“In my view, the court’s case law makes clear that in order to be entitled to the expedited statutory remedies available to landlords in the district court – such as a tenant-holding-over action – a landlord must have a rental license required under local law if the license is intended to ensure the health and safety of rental housing,” wrote McDonald, who made a sports analogy.

“An offensive lineman on a football team, if he is lucky, might recover a fumble and carry it into the end zone to score a touchdown,” McDonald wrote. “But he is ineligible to catch a forward pass – the expedited way to the end zone – under the rules of the game. Here, the court has sanctioned the use of an expedited eviction remedy by one who, in my view, is ineligible – an unlicensed landlord.”

In her dissent, Watts disagreed with the majority’s conclusion that the Maryland legislature in Real Property Article Section 8-402 — the holdover statute — struck a comprehensive balance between the rights of landlords and holdover tenants.

“The problem with this is that there is no indication in RP Section 8-402 that the General Assembly has ever considered whether unlicensed landlords are able to pursue tenant holding over actions where a license is required by local ordinance,” Watts wrote. “In light of the majority’s holding, though, it may be that the General Assembly will want to review the issue of whether unlicensed landlords should be able to use tenant holding over actions under RP Section 8-402 to recover rent and possession of property and circumvent local licensing requirements that ensure the safety and habitability of rental properties.”

The former holdover tenants were represented at the Court of Appeals by Maryland Legal Aid, which did not immediately return a telephone message Tuesday seeking comment on the decision.

Copycat’s attorney, Herbert Burgunder III, also did not immediately return a telephone message seeking comment on the court’s decision. Burgunder is with Rimon PC in Baltimore.

The Court of Appeals rendered its decision in the consolidated cases Anna Velicky v. The Copycat Building LLC and Christopher Walke v. The Copycat Building LLC, Nos. 1 and 2 September Term 2021.