In the past three decades, previously undeveloped land in Maryland has become prime for urban sprawl. With new neighborhoods and communities popping up in places where people had not historically lived, the issue of connecting new communities with the infrastructure and services needed to be habitable plagued developers. To connect the new communities to the main water and sewer systems, the developers (and sometimes the county or municipality) constructed and installed separate water and sewer lines. While necessary, it also proved costly for those responsible for the construction and installation, and they searched for a way to recapture the cost. Enter the Front Foot Benefit Charge (“FFBC”).
The establishment of Front Foot Benefit Charges, passed the cost of installing the water and sewer lines onto the property owner. Under an FFBC, the property owner pays his/her/their pro rata share of the cost of the installation and construction of water and sewer lines in yearly installments for anywhere between twenty and forty years. The FFBC payments go to either a private entity or directly on the county tax bill. In today’s transient society, most people move before paying the full FFBC charge. Therefore, a “declaration of charges” or a covenant detailing the FFBC is recorded in county land records, causing the FFBC to “run with the land” and transfer with the property whenever it sells to a new owner.
Since Front Foot Benefit Charges transfer with the property, Maryland law has placed the burden on the seller to disclose whether an FFBC impacts a property. But even the most informed seller can accidentally forget the FFBC. How is that possible, you may wonder? Well, considering the FFBC bill is yearly, and many property owners do not understand why they are paying it, it is not surprising that when it comes time to list their property for sale, the existence of the FFBC slips the seller’s mind. However, such a memory lapse can have costly consequences for the seller. As outlined in the Maryland Contract for Sale, the buyer can cancel the contract and recoup their earnest money deposit if the FFBC is not disclosed in the contract and found before settlement. Even worse, if the FFBC is not disclosed to the purchaser until after settlement, the seller will be responsible to the purchaser for the full amount of the unpaid assessment. Because the stakes are high, it is crucial for listing agents to conduct research separate from what the seller discloses on every property listed, ensuring the capture of all relating to the property. Every agent should consider this independent review as part of their due diligence – it will not only save a seller from an expensive consequence but also save the agent from an embarrassing conversation with their client.
So, what can an agent do to ensure that Front Foot Benefit Charges are correctly disclosed?
- Recognize that newer communities, built in the last twenty to thirty years, are more likely to be impacted by an FFBC and take more care when listing properties in these areas.
- Review the online resources. Specifically, check the land records to locate a declaration or covenant impacting the property the seller may have forgotten about. Then, review the tax records to see if the county is collecting an FFBC on the property tax bill.
- Become an expert in the neighborhoods existing in the community in which you are selling property. Learn which areas have FFBCs and keep your list of those neighborhoods. Creating a knowledge toolbox that can be referred to when working with clients will not only build trust between the agent and the client but will also help provide an exceptional customer service experience to the client.
This article originally ran in the February 2023 Chesapeake Real Producers.