Maryland Landlord’s Guide: Understanding the New Rent Stabilization Laws and What They Mean for Your Property

Montgomery County’s rent stabilization law has fundamentally changed how landlords operate rental properties throughout the region. Bill 15-23, which became fully operational in July 2024, represents one of the most significant shifts in Maryland landlord-tenant law in recent years. Property owners who fail to understand these new requirements risk substantial penalties, tenant disputes, and legal complications. Whether you own a single rental unit or manage a large portfolio, knowing how these regulations affect your property is essential for compliance and continued profitability.

Understanding the Rent Increase Cap

The cornerstone of Montgomery County’s rent stabilization law is the annual rent increase limitation. Landlords can now raise rent only by the lesser of the local Consumer Price Index for All Urban Consumers (CPI-U) plus three percent or six percent of the base rent. For the period from July 1, 2025, through June 30, 2026, the CPI-U stands at 2.7 percent, making the maximum allowable increase 5.7 percent for regulated units. This formula applies to all lease renewals, new leases, and multi-year leases unless an exemption applies.

The calculation is straightforward but requires attention to timing. The allowable percentage changes annually on July 1, and landlords must use the rate in effect when they provide notice to tenants. This means planning rent increases requires monitoring the CPI-U figures published by Montgomery County’s Department of Housing and Community Affairs. For landlords accustomed to market-rate pricing strategies, this represents a significant operational change that demands careful financial planning and budgeting.

Which Properties Are Subject to Regulation

The law applies to all county-licensed rental units built in 2002 or earlier, which includes the vast majority of rental housing stock in Montgomery County. This 23-year threshold means that as time passes, more properties will become subject to rent stabilization requirements unless they qualify for an exemption. Licensed properties include apartments, condominiums, townhouses, and single-family homes rented to tenants.

Property age is determined by the original date of construction or substantial completion, not the date of any renovations or improvements. Landlords should verify their property’s construction date through county records to determine whether rent stabilization applies. Any uncertainty about applicability should be resolved proactively, as operating under incorrect assumptions can lead to violations and tenant complaints.

Important Exemptions for Landlords

Several categories of rental properties remain exempt from rent stabilization requirements. Newly constructed buildings receive a 23-year exemption from the date of initial occupancy, encouraging continued development and investment in new housing. Small landlords who own two or fewer rental units in Montgomery County are also exempt, recognizing that individual property owners have different economic considerations than large-scale operators.

Additional exemptions include owner-occupied properties with only two units, accessory dwelling units on owner-occupied properties, units subject to affordable housing agreements with the county, and properties operated by religious organizations or as licensed assisted living facilities and nursing homes. Properties that undergo substantial renovation costing at least 40 percent of the assessed value may also qualify for a 23-year exemption. While these exemptions provide flexibility, landlords of exempt properties are strongly encouraged to follow the Voluntary Rent Guideline, currently set at 3.3 percent, to demonstrate good faith and avoid allegations of price gouging.

Notice Requirements and Timing

One of the most critical compliance requirements involves proper notice for rent increases. Landlords must provide tenants with written notice of any rent increase at least 90 days before the increase takes effect, regardless of lease length or current rent amount. This 90-day requirement represents a significant change from previous practice and applies to both regulated and exempt properties.

The notice must be in writing and clearly state the new rent amount and effective date. Email notification alone may not satisfy legal requirements unless the lease specifically permits electronic communication for legal notices. Many landlords now send notices via certified mail or use delivery services that provide proof of receipt to establish compliance. Missing the 90-day window means delaying the rent increase by at least three months, directly impacting cash flow and financial planning.

Banking Unused Rent Increases

The law allows landlords to bank unused portions of allowable rent increases for future use, up to a maximum of 10 percent above the current rent. If a landlord chooses not to raise rent to the full allowable amount in a given year, the difference can be preserved and applied in a subsequent year. For example, if the allowable increase is 5.7 percent but a landlord only raises rent by 2 percent, the remaining 3.7 percent can be banked for later.

This banking provision provides valuable flexibility for landlords who want to maintain good tenant relationships while preserving their ability to adjust rents when necessary. However, tracking banked increases requires careful record-keeping and documentation. Landlords should maintain files showing the allowable increase each year, the actual increase implemented, and the remaining banked amount available for future use.

Capital Improvements and Fair Return Petitions

Landlords facing significant capital expenses or financial hardship can petition the county for approval to exceed the standard rent increase cap. Capital improvement surcharges allow landlords to pass through costs for major improvements that benefit tenants and enhance property value. These might include roof replacements, HVAC system upgrades, building-wide security improvements, or other substantial renovations.

Fair return petitions provide a mechanism for landlords to demonstrate that the standard rent increase cap prevents them from earning a reasonable return on their investment. These petitions require detailed financial documentation showing operating expenses, debt service, capital needs, and other costs. The approval process can be lengthy and complex, making professional legal guidance essential for successful petitions.

Ensuring Compliance and Avoiding Penalties

Violating rent stabilization requirements can result in substantial penalties, mandatory rent refunds to tenants, and damage to landlord reputation. Property owners should implement systems to track allowable increases, maintain detailed records of all rent changes and notices, and document any exemptions or special circumstances affecting their properties. At Grant, Riffkin & Strauss, P.C., experienced attorneys help landlords navigate these complex regulations, draft compliant lease provisions, and respond to tenant disputes or county enforcement actions. Proactive compliance protects your investment and maintains positive tenant relationships in an increasingly regulated environment.