Owning a rental property in Maryland involves a ton of responsibility, including ensuring your rental is legally compliant. 

There are strict (and important) laws and regulations that landlords must abide by in order to legally operate their rentals. Learning about these laws before you start your rental property business is essential to your success and to avoid expensive mistakes. 

One of the best ways to ensure your Maryland rental is legally compliant and that all laws and regulations are followed is by working with a professional property manager like Mainstay Property Management. 

Whether you’ve just purchased your first Maryland rental property or need to brush up on your real estate laws, we’re sharing the information you need to ensure your rental is legally compliant. 

How to Ensure Your Maryland Rental Is Legally Compliant

Each state has different laws and regulations when it comes to running a legally compliant rental. It’s important to search for your specific state to fully understand the requirements. 

Obtain a Rental License

In Maryland, most cities and townships, such as Baltimore and Annapolis, require landlords to have a rental license. To obtain a rental license, there will be an inspection of the property to ensure that it is up to code and habitable. 

You will then register your rental property and pay an application fee to the local government. The fees and process will vary depending on the city where your rental is located. 

You must renew your rental license periodically to keep your rental property compliant. 

Lead Paint Compliance

If your rental property was built before 1978, then you must disclose if there is lead paint present in the property. This is an official form that you must present to your tenants. 

Additionally, rental owners must also register the property with the Maryland Department of the Environment (MDE) if it was built before 1978 and has lead paint.

Abide by Fair Housing Laws

When advertising or renting your property, it is crucial to understand what discrimination looks like in real estate. 

According to the Fair Housing Act, there are seven protected classes: race, color, religion, sex/gender, familial status, disability, and national origin. 

In Maryland, the source of income to pay for rent can not be discriminated against as well. 

Habitable Property

By law, rental property owners must provide a rental that is habitable. This means that it is:

• Safe to live in with no major hazards
• Sanitized with clean water and proper sewage disposal
• Well-maintained with working appliances, plumbing, and HVAC
• Structurally sound

This will be reviewed during a walk-through inspection while applying for your rental license. Tenants can also complain about the state of the property if landlords do not address their repairs and concerns promptly.

Compliant Lease Agreements

Even if it is not legally necessary, such as for short-term rentals, to have a written lease, it’s always a good idea. This legally binding document outlines the terms of payment and rules for tenants living in the property.

A compliant lease should include the following information:

• Names of Tenant and Landlord – Everyone living in the property should be on the lease
• Security Deposit Limits – In Maryland, you may collect up to two months’ rent for the security deposit
• Lease Terms – When the lease expires or if it automatically renews
• Rent Terms – How much rent is collected and when; state late fees or grace periods
• Disclosure of Non-Refundable Fees – Any non-refundable fees, like an application fee or pet fees, should be stated
• Lead Paint Disclosure – If the property was built before 1978
• Notice Requirements – How to submit a notice for eviction or lease termination

The lease should be dated and signed by all tenants and the landlord.

Landlord Insurance

Rental property owners should take out a landlord insurance policy to protect them from rent loss or property damage due to tenants. 

It’s also a good idea to require tenants to take out a renter’s insurance policy for extra protection of their belongings and liability. 

While landlord insurance is not a legal requirement, it’s smart business to have it as a rental property owner in Maryland. Additionally, you may be required to hold landlord insurance if your property is under a mortgage. 

Tax Setup

Setting up a new source of income through your rental property means maneuvering some new tax filing processes. Whether you have your property in an LLC or own it under your name, it’s always a good idea to connect with a CPA or a property management company that offers accounting services to ensure 100% compliance.

What Happens if Your Rental Is Not Legally Compliant?

Everyone makes mistakes, but when it comes to your rental property not being compliant, those mistakes could be quite expensive and frustrating.

Fines and Penalties

If your rental property is found to be violating any federal or state laws, such as lead paint disclosures, discrimination, or illegal security deposit collection, you could face hefty fines and penalties.

Cannot Legally Collect Rent

In the case that you need to evict a tenant or collect unpaid rent, if your rental property is not compliant, you lose the right to collect that rent. In court, the judge will likely side with the tenant if they find that you have been illegally collecting rent because you do not have a rental license or some other violation. 

Insurance Issues

When you take out a landlord insurance policy, there are many events that can be covered, such as rental loss due to property damage. However, if you skipped taking the necessary steps to have a legal rental property in Maryland, the insurance company could deny your claim. 

Tenant Lawsuits

It is not uncommon for tenants to sue their landlords over illegal activity, such as not returning the security deposit on time or providing an inhabitable property due to lack of care or repairs. 

You, as the landlord, could be on the hook for paying damages, returning rent to the tenants (rent abatement), and covering legal fees.

Note: This is not an exhaustive list of laws and regulations regarding rental property legal compliance in Maryland. Rental laws can be complex. Always consult with a qualified lawyer for answers about your specific situation.   

How to Stay Legally Compliant with Mainstay Management

It can be overwhelming and time-consuming to ensure your Maryland rental property is legally compliant. From keeping up with ever-changing real estate laws to filling out endless forms, it makes your passive income investment feel like active income. 

That’s where Mainstay Management can help! As Maryland’s leading property management company, we take on all of the responsibilities needed to manage and maintain your rental property—including keeping it 100% legally compliant. 

Our team of real estate experts knows Maryland’s local laws front and back. So, you never have to worry about facing a fine or violation. 

Contact us to see how we can help you rent your Maryland property and check your compliance today!