Maryland Landlords Seek Clarity in Light of Recent Rulings from the Court of Appeals

Posted on by Daniel Baurer in Litigation.

Recent court decisions have created great uncertainty in the law concerning: (i) the definition of “rent;” (ii) whether unpaid utility expenses and/or other unpaid expenses can be pursued in addition to unpaid rent in a failure to pay rent action; and (iii) how the other unpaid expenses can be pursued in Rent Court.

The Maryland residential tenancy statutes provide two types of District Court actions for landlords: (i) an action for failure to pay rent, pursuant to Md. Code Ann., Real Prop. § 8-401 (2016); and (ii) an action for breaches of covenants within the lease other than for failure to pay rent, pursuant to § 8-402.1.

Actions filed under § 8-401 for breaches of lease, are “expedited” actions “designed to allow a landlord to ‘rapidly and inexpensively obtain repossession of his premises’ […] [and] are strictly limited to the ‘relatively straightforward’ calculation of rent due.” Sager v. Hous. Comm’n of Anne Arundel County, 957 F. Supp. 2d 627, 635-36, 2013 WL 3943497 (D. Md. 2013) (emphasis supplied). Conversely, actions brought under § 8-402.1 are slower moving and better protect the tenant from eviction because the landlord has to show that the tenant’s breach of the lease is substantial and warrants an eviction.

The Maryland residential tenancy statutes are clear when the tenant has either failed to pay the rent or has otherwise breached a covenant within the lease. The type of claim that a landlord should pursue is much more muddled, however, when the tenant has both failed to pay rent and breached covenants within the lease.

The Maryland Court of Appeals recently reviewed the definition of “rent” in Lockett v. Blue Ocean Bristol, LLC, 446 Md. 397, 132 A.3d 257, (2016), a case involving the anti-retaliation statute as it relates to residential tenancies. This case involved a tenant who advocated on behalf of other tenants (as part of her participation in a tenants’ association), which caused a contentious relationship with the landlord. When it came time to renew the lease, the landlord refused. The tenant remained in the property and the landlord brought a holdover action against the tenant to have her removed. The tenant defended on grounds that the landlord wrongly retaliated against her. Over the course of that pending case, the tenant continued to reside at the property and pay rent, but disputed owing money towards utility charges and other fees. The landlord argued that since the tenant had failed to pay these fees, which the lease included as “rent,” its action to evict the tenant was not retaliatory.

The Court of Appeals disagreed with the landlord in holding that the tenant’s other debts, even if they were owed to the landlord, would not factor into whether the tenant was current on the rent “for purposes of the anti-retaliation statute.” Id. at 404, 132 A.3d at 261. In so holding, the Court of Appeals defined rent as “the periodic charge for use or occupancy of the premises, but not the various other payments that the tenant may owe to the landlord from time to time, even if the lease characterizes them as “deemed rent” or “additional rent.” Id. at 425, 132 A.3d at 273.

The Court’s decision has raised questions about what had been accepted practice in Rent Court.  Many residential leases contain provisions to deem unpaid utility bills (and other expenses/fees) as unpaid rent. Landlords typically include those charges in actions for eviction and damages in rent cases. Now, there is a substantial question as to whether the definition of “rent” will include these utility bills and other charges. This calls into question what is the appropriate cause of action when the landlord needs the expediency of a failure to pay rent action, but also wants to recover for other unpaid expenses that the tenant is obligated for, but has failed to pay.

As the law stands now, the Court of Appeal’s definition of rent is limited to the anti-retaliation statute and does not include the failure to pay rent statute. Landlords still have a good faith basis to include utility and other expenses in their eviction actions for failure to pay rent. However, many anticipate that the Court of Appeals will adopt the same definition should it ever review “rent” in the context of a failure to pay rent eviction action under § 8-401, and lower courts are likely to be split on the issue. The ultimate resolution may rest with Maryland legislature in clarifying the statute.