Maryland Stays Commercial Evictions, Residential Foreclosures and Repossessions in Response to COVID-19

Notably, the order does not require the tenant to notify the landlord of the Substantial Loss of Income prior to any rent due date, and only a showing to the court is required. Theoretically, a landlord could bring an action for repossession due to rent default, and not learn until a court proceeding that a tenant has suffered a Substantial Loss of Income. However, since Maryland State Courts have been ordered closed for all hearings other than emergency hearings, an eviction proceeding could not take place in any event, unless courts are reopened before the prohibition is terminated.

Furthermore, the order does not excuse or waive any payment obligation, which presumably would include rent, other damages, interest, permissible contractual late fees and applicable attorneys’ fees. It merely suspends eviction judgments for the duration of the state of emergency. The landlord is not precluded from drawing down on a letter of credit or applying the security deposit to unpaid rent, for example, or exercising any remedies other than eviction.

The Maryland Real Property Code permits a landlord to bring an eviction proceeding for breach of the lease if the behavior of the tenant or cohabitant demonstrates a “clear and imminent danger” of doing harm to themselves or others. The order expressly provides that a tenant’s or cohabitant’s diagnosis of COVID-19 or testing for COVID-19 shall not constitute a “clear and imminent danger” for purposes of this statute permitting an action for breach of lease, thereby preempting any landlord argument for eviction on this basis.

The Order’s prohibition on certain repossession and initiation of residential foreclosures does not require any showing of financial losses due to COVID-19. The order suspends any self-help remedy under the Maryland Commercial Law Code or any rule or regulation that would permit a creditor to repossess any car, truck or personal property used as a residence until the state of emergency is terminated and the health emergency is rescinded. In addition, it orders the Commissioner to discontinue acceptance of Notices of Intent to Foreclose and to suspend the operations of its Notice of Intent to Foreclose Electronic System for the same duration. These blanket suspensions have no COVID-19 impact requirement.

Finally, the order lifts the lending limits on Maryland state-chartered banks and credit unions for a particular transaction or series of transactions if the Commissioner finds that doing so would not reasonably be expected to impair the safety or soundness of the bank or credit union, as applicable. This suspension on lending limits is not specifically limited to the duration of the state of emergency, but for the duration of the order (to remain effective until the state of emergency is terminated or until rescinded or amended). The suspension may provide relief for landlords and creditors, as well as tenants and debtors, all of whom are affected by the state of emergency, whether directly or indirectly.

For the duration of the state of emergency, the Amended and Restated Order extends the “Substantial Loss of Income” protections from eviction to residential and commercial tenants alike, and provides for a blanket suspension of self-help repossession remedies for vehicles and personal property that serves as residence and a prohibition on the initiation of residential foreclosures.

For more information, please reach out to your regular Pillsbury contact or the authors of this client alert.

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