IN A TENANT HOLDING OVER ACTION, AN UNLICENSED LANDLORD RETAINS STATUTORY RELIEF TO REPOSSESSION, AND THE VALUE OF A LANDLORD’S POSSESSORY INTEREST IN PROPERTY IS INCLUDED WHEN CALCULATING THE AMOUNT IN CONTROVERSY.

The Court of Appeals of Maryland held that the use of the tenant holding over statute by a landlord to repossess their property from a tenant is appropriate even when the landlord is unlicensed.  Velicky v. Copycat Bldg. LLC, 476 Md. 435, 264 A.3d 661 (2021).  The court balanced a tenant’s rights to safe and habitable living conditions with a landlord’s rights to repossession after a tenancy is over. Id. at 481, 264 A.3d at 688.  The court also held that the right to repossession of a property interest had a monetary value, which counts towards the amount in controversy for determining a de novo or on the record appeal.  Id. at 481, 264 A.3d at 688.

Copycat Building, LLC (“Copycat”) did not have the requisite rental license, as required to rent residential property in Baltimore City.  Copycat owns and rents residential units at 1501 Guilford Avenue in Baltimore City.  Christopher Walke (“Walke”) and Anna Velicky (“Velicky”) were both month-to-month tenants in Copycat’s building.  Walke and Velicky both received a sixty-day notice to vacate the building and a notice of termination.  At the end of the sixty days, neither Walke nor Velicky had vacated Copycat’s building.

Copycat filed separate tenant holding over actions against Walke and Velicky in the District Court for Baltimore City.  Walke and Velicky filed motions to dismiss based on Copycat’s lack of a rental license. Both motions were dismissed, and the district court entered judgment in favor of Walke and Velicky, stating Copycat had not shown expired leases.  Copycat appealed both decisions to the Circuit Court for Baltimore City.  The circuit court entered a de novo judgment in each case for Copycat.  Walke and Velicky both petitioned the Court of Appeals of Maryland for a writ of certiorari to answer whether an unlicensed landlord can seek repossession of a property interest under the tenant holding over statute and the court granted certiorari.  Velicky additionally asked whether the circuit court should have heard the appeal on the record instead of de novo.

The Court of Appeals of Maryland first determined whether an unlicensed landlord could utilize the statutory relief of a tenant holding over action to regain possessory interest in real property.  Velicky, 476 Md. at 466, 264 A.3d at 679.  The court found the general rule was that the courts would not enforce an unlicensed professional’s monetary claims based on a contractual agreement requiring a license.  Id. at 466, 264 A.3d at 679-80 (citing McDaniel v. Baranowski, 419 Md. 560, 587, 19 A.3d 927, 943 (2010)).  The contract was the basis for the relationship between the landlord and the tenant, and therefore the contract governed alongside the statutory provisions provided by the summary ejectment process.  Velicky, 476 Md. at 471, 264 A.3d at 682 (citing McDaniel, 419 Md. at 574, 19 A.3d at 935; citing Md. Code Real Prop. § 8-401 (LexisNexis 2021)).  In jurisdictions that require a license, an unlicensed party cannot enforce a contract without showing they were licensed to enter that contract.  Id.  The court determined essential differences in this case compared to their previous ruling.  Id. at 473, 264 A.3d at 683 (citing McDaniel, 419 Md. at 587, 19 A.3d at 943).

First, the summary ejectment process is based on a breach of contract between the parties.  Velicky, 419 Md. at 473, 264 A.3d at 683-84 (see Real Prop. § 8-401(e)). If the landlord was unlicensed to enter any landlord-tenant contract, the statutory remedies of the summary ejectment process that come from the contract were unavailable.  Id. (see McDaniel, 419 Md. at 587, 19 A.3d at 943.)  While Copycat was unlicensed, it sought a statutory remedy through the tenant holding over statute, which applies when a tenancy contract is no longer in effect.  Id. (see Real Prop.. § 8-402(b)(2)).  The remedy being sought is not contractually based but arises out of the landlord’s possessory interest in the property.  Id. (see Real Prop.. §§ 8-401, 8-402).

Second, in contrast to the court’s prior ruling on the summary ejectment process, Copycat was not seeking monetary damages stemming from a contract where a license was required.  Velicky, 419 Md. at 474, 264 A.3d at 684 (see McDaniel, 419 Md. At 587, 19 A.3d at 943).  Instead, Copycat was seeking a return of its possessory interest in the property.  Id.

Third, the tenant holding over statute procedures differed from the statutory procedures for summary ejectment.  Velicky, 419 Md. at 474-75, 264 A.3d at 684 (compare Real Prop. § 8-401 with § 8-402 (The summary ejectment statute bases recovery on monetary claims, whereas the tenant holding over statute seeks to regain possession of real property.)).  In a summary ejectment action, a landlord can repossess a property when tenants fail to pay rent.  Velicky, 419 Md. at 475, 264 A.3d at 684-85 (citing Real Prop. § 8-401(f)).  Whereas, under the tenant holding over statute, the landlord-tenant relationship must be terminated, and the landlord must provide sixty days’ notice before filing an action.  Velicky, 419 Md. at 475, 264 A.3d at 685 (citing Real Prop. § 8-402(c)).

Finally, the court stated that if its prior ruling were to apply in this case, there would be no statutory remedy for an unlicensed landlord to regain possession of their property.  Velicky, 419 Md. at 475, 264 A.3d at 685.  The statutes that regulate the landlord-tenant relationship and modify the common law ejectment action balance a landlord’s property rights and establish protections for tenants.  Id.  Therefore, the court in the instant case declined to apply its ruling under the summary ejectment statute to an unlicensed landlord seeking repossession of their property under the tenant holding over statute. Velicky, 419 Md. at 478, 264 A.3d at 687.

The Court of Appeals of Maryland then determined whether an appeal of a tenant holding over action was appropriately reviewed de novo or on the record.  Velicky, 419 Md. at 478-79, 264 A.3d at 687.  A civil case on appeal is heard on the record when the parties’ consent or the amount in controversy is greater than $5,000.  Id. at 479, 264 A.3d at 687 (see Md. Code Ann., Cts. & Jud. Proc. § 12-401(f) (LexisNexis 2021)).  Next, a possessory interest in real property has value the same as a monetary claim; the aggregate of the two values represents the amount in controversy.  Velicky, 419 Md. at 480-81, 264 A.3d at 687-88 (citing Purvis v. Forrest Street Apartments, 286 Md. 398, 404-05, 408 A.2d 388, 391-92 (1979)).  Accordingly, the court determined that Copycat had a possessory interest equal to the statutory sixty-day notice requirement or two months of rent exceeding the threshold.  Id. at 481, 264 A.3d at 688.

Judge McDonald and Judge Watts both dissented.  Velicky, 419 Md. at 482, 264 A.3d at 690.  Judge McDonald opined that expedited statutory remedies should be limited to licensed landlords.  Id. at 488, 264 A.3d at 692 (McDonald, J., dissenting).  Judge Watts opined that unlicensed landlords would use the majority opinion to collect unpaid rent from tenants holding over without abiding by licensing requirements meant to create habitable living environments for tenants.  Id. at 500, 264 A.3d at 700 (Watts, J. dissenting).

In Velicky v. Copycat Building LLC, the Court of Appeals of Maryland determined that even an unlicensed landlord has a statutory right to their property.  This case worked to balance the public policy rights of a tenant to live in a habitable environment and a landlord’s rights to their property, but the dissenting opinions recognize important considerations of which Maryland lawmakers should be mindful.  The Baltimore City licensing requirements are meant to promote habitable living conditions for tenants.  Maryland’s General Assembly and legal practitioners should carefully analyze the cases that follow Velicky to determine if public policy goals are being protected and make necessary changes.

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Jacob Linn is a third-year student at the University of Baltimore School of Law and an Associate Editor for Law Forum. Jacob is from Carroll County, Maryland; he graduated from George Mason University with a Bachelors in Government and International Politics. Currently Jacob serves as a Rule 19 student attorney with the Low Income Tax Payer Clinic, and as lead law clerk at Strategic Tax Planning. Upon graduation in May of 2023, Jacob will pursue a career in tax law.