Real Property - Termination of Residential Real Estate Contracts - Contingency Clauses
Summary
HB1029 amends Maryland real property law governing the termination of residential real estate contracts when a purchaser relies on a contingency clause. The bill narrows and clarifies the definition of “contingency” by removing the detailed list of examples from the statute and retaining a more general definition: a clause that requires a specific event or action to occur for the contract to be enforceable and that allows a party to terminate the contract and seek return of trust money.
The bill also changes the timeline for handling disputed trust money after a purchaser terminates a contract under a contingency clause. If the seller does not provide the holder of trust money with a filed District Court complaint or a notarized mediation request within 10 days of the purchaser’s written request, the holder must now distribute the trust money to the purchaser within 5 days after that deadline and notify both parties. If the seller does provide the required court or mediation filing, the holder must continue to hold the funds until a court order, mediation agreement, or interpleader action resolves the dispute. The act takes effect October 1, 2026.
Impact
HB1029 amends Sections 10-802 and 10-803 of the Real Property Article, affecting residential real estate settlement practices, escrow agents, and licensed real estate brokers who hold trust money. It shortens the default period before disputed earnest money or deposit funds must be returned to the purchaser when the seller does not initiate a court or mediation process, which may speed up resolution and reduce the time funds remain in escrow. The bill preserves the District Court as the forum for disputes over distribution of trust money and maintains liability protection for holders who follow the statute.
Sentiment
The available legislative record suggests the bill was broadly supported and noncontroversial. It received a favorable committee report in the House, was adopted by the House, and passed third reading with 121 yeas and 0 nays. No committee transcript or recorded debate is provided, but the unanimous vote indicates strong consensus around clarifying contingency-clause procedures and accelerating return of trust money in residential real estate transactions.
Contention
No explicit opposition appears in the provided materials. The main policy issue embedded in the bill is the balance between protecting purchasers’ access to their deposits and preserving sellers’ ability to contest the return of trust money through court or mediation. Any practical concern would likely center on the shortened distribution deadline and whether the streamlined definition of “contingency” could affect how real estate practitioners draft and interpret residential contracts.
Relating to certain municipal regulation of certain mixed-use and multifamily residential development projects and conversion of certain commercial buildings to mixed-use and multifamily residential occupancy.