For Deeds and Deeds of Trust to be recorded in Maryland, several steps and sometimes several stops are necessary to get to record in the clerk’s office. The goal is always to get the document in front of the Clerk of Court to record the document and provide a recording reference for future use. Without getting on record in the land records office, the documents may not apply to parties, other than the buyer and seller, and may allow other parties to record their documents first and obtain a superior position.
It is in the best interest of the parties to get documents on record promptly, however, omissions and errors can cause documents to be rejected and delay the recording process. Delays in recording can limit the rights of parties to the documents. Here are some best practices to keep your documents from being rejected.:
- Make sure the Real Estate property taxes that are charged to the property have been paid. Remember taxes can be assessed during the year. ¼, ½ and ¾ year levies on new homes and construction. As Deeds cannot be recorded in Maryland unless taxes are paid and current, then these supplemental taxes must be paid before recording a Deed.
- Pay any Clean Lot Liens and resolve permit violations. Lots that are declared a nuisance by the County and cleaned by the County create a Clean Lot Lien. In addition, Permit Violations present a potential issue as the local jurisdiction will not allow a property to transfer until Clean Lot Liens are paid and Permit Violations are resolved.
- Obtain a Lien Certificate, also called a Tax Certificate. A Lien Certificate, issued by the local jurisdiction, states all of the taxes and fees that are due on a property, and can be relied upon when presenting a Deed for recordation to the jurisdiction. In some counties and Baltimore City, Deeds cannot be recorded unless accompanied by a current Lien Certificate.
- Compare the legal description in the Deed to the assessed description. These descriptions should reasonably match. There are all kinds of things that can happen to a legal description over time. There can be sales of portions of the property, road widening cases or changes in surveyed descriptions that account for the discrepancies in the two descriptions. Check how the property is assessed, not just how the prior Deed describes the property. The review will alert one to errors in area, ownership, and even find additional tax account numbers that were previously missing in the Deed.
- Send a copy of a recently recorded Deed affecting the property to SDAT. While electronic records are making advances, the Transfer or Treasury Office still must wait for the State Assessment Office (SDAT) to update the assessment rolls for the transfer, and revised description, to appear on the Treasury system. If the transfer has occurred in the last 90 days, it is good practice to send a copy of the Deed and avoid the rejection.
- State the actual consideration (sales price) on the Deed. Remember that in Maryland the actual consideration must be stated on the Deed, unless it is truly a no consideration Deed.
- Attach the Maryland State Withholding Tax form. Out of state sellers are obligated to pay capital gains on the sale of their real property. Therefore, individuals that are Maryland residents or companies that are filed with the State Department of Taxation and in good standing there need to complete the exemption form or additional taxes must be withheld. Without the additional taxes and the exemption form, the Deed will be rejected.
- Recite the Maryland Code sections that allow for exemptions from taxation. Deeds and Deeds of Trust, if exempt from taxation, should recite the applicable code section providing the exemption. There may even be a need for longer recitals in the Deed or Deed of trust to describe the history of the transaction and the situation leading up to the transfer. Please remember that if you claim an exemption, the Transfer or Treasury Office will probably require back up material, such as copies of the settlement statement or even the contract.
Deeds of Trust
- Use the correct local tax form. Do NOT alter any required form, especially a required County or Baltimore City affidavit. The forms generally have security features, such as a seal, and the reviewer can quickly determine whether the form is current or has been altered. With a quick review, the clerk knows exactly how to tax your document. However, the reviewers are generally not attorneys and rely on properly completed forms to aid them in properly processing documents. Changes slow down the recording process and will cause the Deed of trust to be rejected.
- Recite the unpaid principal balance in refinances and “purchase money” Deeds of Trust. All Deeds of Trust being used to purchase real property and refinances or modifications of existing Deeds of Trust should contain specific language on their face and the appropriate completed form to determine the basis for taxation. Especially the unpaid principal balance must be stated on the face of the Deed of Trust to apply the refinance exemption and avoid paying tax twice on the same money. If no “New Money” is being advanced, then the Deed of Trust or Modification Agreement should state that fact, as well as recite the unpaid principal balance, to determine the tax on the document.
- Recite an unpaid principal balance smaller than the original loan amount. One cannot add to the original loan amount and call it principal. If taxes were not paid on the added consideration/balance, then it cannot be used for an exemption. If it was never taxed it cannot be part of the exemption.
- Include a Maryland Land Intake Sheet form. Both Deeds and Deeds of Trust require Land Intake Sheets to be accepted for recordation. It is essential that any exemption also be claimed here as well as showing the amount of transfer and recordation taxes owed on the document. The Land Intake Sheet shows how transfer and recordation taxes have been calculated, whether an exemption was claimed and where future tax bills should be sent. The forms also assist in indexing the documents by naming the parties.
- Have your document reviewed by the clerk before presenting it recordation. In some jurisdictions, documents can be provided for review or questions can be asked of the clerk regarding how a document will be taxed. However, it is essential to remember that clerks are not allowed to provide legal advice, such as how to obtain an exemption or how to draft a document. Again, please remain aware that clerks are not attorneys and should not be asked to practice law.
The recommendations given here should help you avoid the most common causes of rejection of Deeds and Deeds of Trust. Please remember to always check with the local jurisdiction as to whether special forms are required for recordation, and what back up materials are necessary to provide for an exemption. A little preparation and research can provide for a smooth recordation process.
If you have any questions about this process or wish to discuss this topic further, please click here to contact Earl Wise directly.
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