Bill Summary – FastDemocracy

SB 73
                                  Department of Legislative Services
                                             Maryland General Assembly
                                                   2021 Session
                                         FISCAL AND POLICY NOTE
                                                First Reader
Senate Bill 73                (Senator Young)
Education, Health, and Environmental Affairs
               State Real Estate Commission - Property Managers - Registration
This bill requires specified persons to register with the State Real Estate Commission in
the Maryland Department of Labor (MDL) as property managers before providing,
attempting to provide, or offering to provide property management services in the State,
subject to specified conditions. A person otherwise licensed by the commission may
provide property management services in the State without also being registered as a
property manager and meeting the related liability coverage requirements.
                                                      Fiscal Summary
State Effect: Special fund expenditures for MDL increase by $294,200 in FY 2022; future
years reflect annualization and the elimination of one-time costs. Special fund revenues for
MDL increase by about $550,000 in even-numbered fiscal years and minimally in
odd-numbered fiscal years. Assumptions used for these estimates are discussed below. The
bill’s penalty provision is not anticipated to materially affect general fund revenues.
      (in dollars)               FY 2022                FY 2023               FY 2024               FY 2025                FY 2026
   SF Revenue                      $550,000                       -             $550,000                       -             $550,000
   SF Expenditure                  $294,200                $258,600             $266,000                $275,500             $285,200
   Net Effect                      $255,800              ($258,600)             $284,000              ($275,500)             $264,800
Note:() = decrease; GF = general funds; FF = federal funds; SF = special funds; - = indeterminate increase; (-) = indeterminate decrease
Local Effect: None.
Small Business Effect: Meaningful.
                                         Analysis
Bill Summary:
“Property manager” means a person who is registered by the commission to provide
property management services and includes a partnership or a corporation. “Property
management services” means the leasing, managing, advertising, renting, or handling of
trust money of a property, subject to limited specified exceptions, such as for services
provided on an incidental basis and without additional compensation by employees of a
property owner.
Generally, a property manager must register with the commission before providing,
attempting to provide, or offering to provide property management services in the State.
The penalty for failing to do so is a fine of up to $1,000, imposed by the commission. The
commission must determine the qualifications for registration.
The commission may set reasonable fees for the issuance and renewal of property manager
registrations and other related services it provides. The fees must be set so as to produce
funds to approximate the cost of registering property managers. A registration expires on
a date set by the commission, unless it is renewed for an additional two-year term.
Generally, a property manager must be covered by a surety bond in the amount of at least
$100,000, if the property manager rents fewer than 20 properties, or $200,000, if the
property manager rents 20 or more properties. A property manager must provide acceptable
proof of the surety bond to the commission.
Current Law:
A person is not required to register with the State Real Estate Commission before
providing, attempting to provide, or offering to provide property management services.
Generally, an individual must be licensed by the State Real Estate Commission as a
real estate broker, associate broker, or salesperson before the individual may provide real
estate brokerage services in the State, subject to specified requirements for licensure and
ongoing licensee behavior. Real estate brokerage services include, for consideration,
selling, buying, exchanging, or leasing any real estate or collecting rent for the use of any
real estate on behalf of another person. Licensees are not required to have or provide proof
of a surety bond to the commission. Initial fees for brokers, associate brokers, and
salespersons are $190, $130, and $90, respectively; renewal fees are $20 less.
SB 73/ Page 2
State Fiscal Effect:
Special fund expenditures for the State Real Estate Commission Fund increase by $294,179
in fiscal 2022, which accounts for the bill’s October 1, 2021 effective date. This estimate
reflects the cost of hiring four staff to generally oversee the registration program and related
anticipated complaints. It includes salaries, fringe benefits, one-time start-up costs,
programming expenses, and ongoing operating expenses.
         Positions                                                           4
         Salaries and Fringe Benefits                                 $196,854
         Programming Expenses                                           75,000
         Operating Expenses                                             22,325
         Total Fiscal 2022 State Expenditures                         $294,179
Future year expenditures reflect full salaries with annual increases and employee turnover
and ongoing operating expenses.
The number of individuals who will ultimately register as property managers under the bill
is unknown. Consistent with past estimates, this analysis assumes that 2,500 individuals
register in fiscal 2022, with minimal new registrations thereafter. Based on that number
and the costs estimated above, a registration fee of approximately $220 is sufficient to fund
the program’s expenses.
Accordingly, assuming full compliance and continued renewals, special fund revenues
increase by about $550,000 in fiscal 2022 and each even-numbered fiscal year thereafter.
Due to the two-year renewal cycle, special fund revenues increase minimally in
odd-numbered fiscal years.
Any variation from these assumptions alters the registration fee required. For example,
registration fees for property managers further increase – potentially significantly – to the
extent that MDL requires additional staff, has additional expenses, and/or registers fewer
property managers than the 2,500 assumed above.
The bill’s penalty provision is not anticipated to materially affect general fund revenues.
Small Business Effect: The bill likely affects small businesses that provide property
management services and are not otherwise exempted from the bill’s registration and surety
bond requirements. These businesses must comply with qualifications set by the
commission, purchase the required surety bond if they do not otherwise have one, and pay
registration fees.
SB 73/ Page 3
                               Additional Information
Prior Introductions: HB 929 of 2020, an identical bill as amended, passed the House and
was referred to the Senate Judicial Proceedings Committee, but no further action was taken.
SB 520 of 2017, a similar bill, received an unfavorable report from the Senate Education,
Health, and Environmental Affairs Committee.
Designated Cross File: HB 239 (Delegate Rogers) - Economic Matters.
Information Source(s): Maryland Department of Labor; Department of Legislative
Services
Fiscal Note History:      First Reader - January 18, 2021
rh/mcr
Analysis by: Stephen M. Ross                           Direct Inquiries to:
                                                       (410) 946-5510
                                                       (301) 970-5510
SB 73/ Page 4