MPDU Homeowners

MPDU requirements are enforced through MPDU Covenants, which are placed on the property prior to sale for a certain length of time (a “control period”). An MPDU control period begins on the settlement date of the initial sale of the MPDU and currently lasts 30 years. If the MPDU was first purchased before April 1, 2005, the control period likely was 10 years.  If you are unsure when your control period expires, please reference the covenants you should have received at your closing or contact the MPDU office (email: [email protected]). 

Different rules apply at each stage of the MPDU process. A homeowner must know what those are before renting, refinancing, taking out a home equity loan, adding a spouse or adult children to the Deed, or putting the property up for sale. Below are some examples. 

• During the control period, you may not rent out the property. If you are required to temporarily relocate due to your job, you may send a letter to the MPDU Office requesting permission to rent the unit temporarily. Contact us via email [email protected] or USPS mail: MPDU Office, 1401 Rockville Pike, 4th Floor, Rockville MD 20852. 
• During the control period, when you seek to refinance, get a Home Equity Line of Credit or sell your property, certain MPDU lending and sale requirements apply. See below. 
• During the control period, if you sell your home, you must work with the MPDU office and a realtor. The control period will renew each time the MPDU is sold to a new buyer. See below.
• If an MPDU owner dies, the MPDU can be transferred by will or operation of law. During the control period, the heirs must live in the MPDU or must sell the MPDU through the MPDU program. If the MPDU controls have expired, the transfer of an MPDU to the heirs does not trigger the Shared Profit requirement; however, the Shared Profit is still required when the heirs sell the property.
• After the control period expires, if you sell your home, you must work with the County MPDU office and pay the shared profit to the County, if applicable. See below. 

Once the control period has ended and Montgomery County has received its share of the excess profits, (if applicable), the County will terminate the MPDU covenants. 

An MPDU homeowner who wants to sell their MPDU during the applicable control period must work with the MPDU office. 

MPDU owners must use a real estate agent if they decide to sell their MPDU. If the MPDU owner chooses an agent who lacks experience selling MPDUs, the real estate agent must attend a training session for listing agents. Training sessions are offered once a month. Only real estate agents with a listing agreement are allowed to attend.  

Steps for selling an MPDU during the control period:  

Step 1: MPDU homeowner requests the current “MPDU Maximum Resale Price”: 

• Fill out the Refinance and Resale Price Request Form, including your address, contact information; and, list of any improvements you have made to the property. 
• Email the form along with the required improvements documentation showing that the work has been complete and fully paid (email to [email protected])
• Within 21 days, the MPDU office will send the homeowner the MPDU Maximum Resale Price and an MPDU Marketing Form. 

Step 2: If the homeowner decides to sell the MPDU, they complete the MPDU Marketing Form and return it to the MPDU office (send email to [email protected] or send USPS mail to: MPDU Program, 1401 Rockville Pike, 4th floor, Rockville, MD 20852). 

Step 3: Through the MPDU office, the homeowner must first offer the MPDU to the County and the Housing Opportunities Commission (HOC), both of which have the right of first refusal to purchase the MPDU (both during and after the controls expire). At this time, the County is not purchasing MPDUs and HOC rarely purchases resale MPDUs. However, this step is required. The MPDU office will notify the homeowner by email regarding HOC's response. 

Step 4: If the County or HOC does not purchase the MPDU, it must be offered to MPDU program participants. A licensed real estate agent must receive MPDU Resale training if they are new to the MPDU program. The resale of the unit must be offered to MPDU Certificate Holders only and for a controlled resale price, determined by MPDU staff.  All MPDU resales are handled through a Random Selection Drawing (RSD) process. The unit is advertised on the DHCA website using information supplied by the Real Estate Agent, including a marketing flyer with photos and other information about the unit, as available. The marketing flyer must include contact information for the realtor who will then supply the Offering Code to interested applicants. The Offering Code is necessary to enter into the resale RSD. If the Realtor intends to offer an Open House, dates and times of that open house must also be displayed on the flyer.

Step 5: If, after the RSD is held, there are no interested certificate holders after all the persons on the marketing list have been contacted, the homeowner can request, in writing, permission to market and sell their MPDU to the public. The seller must email their request to [email protected]. The seller must wait for a written response from DHCA before marketing the unit to the public. Once the Real Estate agent receives a copy of the written approval from DHCA, they must send a copy of the listing by email to [email protected] for approval to list the MPDU on the Multiple Listing Service (MLS).  

When the real estate agent markets the MPDU to the general public, the Real Estate Agent must clearly inform the interested purchaser that they and the MPDU are still subject to the requirements of the MPDU law and regulations: The buyer must be a First-Time Homebuyer. A unit sold to non-participants remains an MPDU and the Maximum MPDU Resale Price and all rules governing the MPDU program remain in effect. Further, any member of the public who is interested in purchasing the unit must meet with an MPDU staff person prior to signing a sales contract to discuss the requirements of the MPDU program in detail. 

Once a qualified buyer submits an offer on the MPDU, the homebuyer accepts it, and the buyer attends a meeting with MPDU staff, then the Sales Contract can be ratified.

Step 6: Upon ratification of the sales contract by a certificate holder from Step 4 or a non-certificate holder from Step 5, the Real Estate Agent is responsible for getting the following documents to the MPDU office within fourteen (14) days after the execution of a sales agreement:

• The purchaser’s original copy of the MPDU Certificate of Eligibility (In cases where permission to sell to a non-certificate holder has been granted this item does not apply.)
• The original signed Purchaser Agreement form (this is an extremely important document to DHCA for enforcement purposes)
• The signed original Receipt of Chapter 25A and MPDU Covenants
• A copy of the executed sales contract 

After settlement, the Real Estate Agent is responsible to provide the MPDU Office the ALTA Settlement Sheet and a copy of the two-party deed. 

To refinance an MPDU or get a home equity line of credit (HELOC), an MPDU owner must complete the steps for refinancing an MPDU during the control period. Do not start the refinancing process before contacting the MPDU office and notifying your lender that your unit is part of the Moderately Priced Dwelling Unit program. Please note timeframes as the MPDU Office cannot honor “last minute” requests. These requests should be made at the beginning of the loan process, not when the loan is ready to close.  

Steps for refinancing an MPDU during the control period:

Step 1: MPDU homeowner requests the current “MPDU Maximum Resale Price”:

• Fill out the Refinance and Resale Price Request Form, including the type of financing you want; your address; and, any improvements you have made to the property.
• Email the form to [email protected]
• Allow 21 days for the MDPU office to respond to the request.

Step 2: MPDU homeowner receives a letter from the MPDU office stating the current MPDU refinance/HELOC value of the unit.

Step 3: MPDU homeowner sends that letter to their lender and tells them their home is an MPDU within the control period.  

Step 4: Before the refinance loan closes, the MPDU homeowner and/ or the lender sends an email to: [email protected] with the below information: 

• Lender: corporate name, address, phone, fax number and e-mail
• Settlement Agent: corporate name, address, phone, fax number and e-mail
• Title Company: corporate name and address
• Date of Settlement

Step 5: The MPDU Office will send the lender and settlement company an official letter of refinance/HELOC. The letter will instruct the settlement company to send a copy of the new recorded Deed of Trust and a copy of the Settlement Statement to the MPDU office no later than two weeks after recordation.   

Step 6: The lender and title company must ensure that the Deed for the MPDU states the MPDU covenants on the first page, with reference to the Book and Page and recordation date of the covenants, e.g., “Subject to covenants conditions and restrictions of record, including the Moderately Priced Dwelling Units (MPDU) Declaration of Covenants For Sale Subdivisions recorded in Book XXXXX at Page XXX.” With these references, anyone can look up the covenants online in the Montgomery County land records.  

Step 7: Once you refinance or obtain a home equity loan, the MPDU Office will record a "Notice of Sale and Refinance" for the MPDU in the Montgomery County land records.  

MPDU homeowners must be careful to adhere to these rules. Failing to do so could place an MPDU homeowner in financial and legal jeopardy because:  

• Montgomery County will not make special exceptions for MPDU owners who do not follow these rules.
• Montgomery County will not waive the MPDU resale price, nor the amount of shared profit owed to the County.
• The County will pursue legal action against MPDU owners who knowingly or unknowingly violate these restrictions. 

Note on MPDU “Resale Value”: The MPDU resale value is essentially the original sales price of the MPDU, plus inflation, and an allowance for improvements made to the unit.  Realtor fees are also included in the resale value calculation.  Due to the resale price limit on the MPDU during the control period, as well as the shared profit requirement after the controls have expired, an owner who refinances for an amount in excess of the MPDU value will be in jeopardy of owing more money than they will be able to receive if the unit is sold.

Note on MPDU “Market Value”: An MPDU does not have a “market value" until the control period has expired.

Note on Reverse Mortgages: Reverse mortgages are not permitted for a unit in the MPDU Program that is under the control period.

If your MPDU is no longer under the control period:

• You can rent out your property.
• You can refinance the property or take out a home equity loan but unless you’ve already paid the shared profit to the County, you should leave enough equity in the property so that you/the owner will be able to pay Montgomery County its shared profit when the unit is sold.  See below for more information.
• Paying off your mortgage does not relieve you of the obligation to follow the MPDU rules you agreed to.
• Only a spouse or an adult child may be added to the deed. The spouse or adult child will be obligated under the MPDU program. The original owner(s) are obligated to remain on the deed. A written request must be made to add a spouse or adult child to the deed by sending an email to: [email protected]. Be sure to provide the owner's name, spouse or child's name, the address of the MPDU and contact information. The owner, spouse, or adult child will need to sign MPDU forms before adding a person to the deed.
• If an MPDU owner dies, the MPDU can be transferred by will or operation of law. If the MPDU controls have expired, the transfer of an MPDU to the heirs does not trigger the Shared Profit requirement; however, the Shared Profit is still required when the heirs sell the property. 
• You can sell the property but you must work with the MPDU office to meet requirements; the sales price must be deemed as the current fair market value; and, you must pay a shared profit amount to the County. See below for more information.

The rules for selling an MPDU after the control period has expired depend on when the MPDU was initially offered (per the MPDU covenants). Homeowners, real estate agents, appraisers, lenders, and title companies should find the MPDU covenant reference on the first page of the deed. With the Book and Page references, anyone can look up the covenants in the Montgomery County land records. The covenants contain a list of all the MPDUs controlled by the covenants and will clarify whether a shared profit is required. 

Shared Profit: 

If an MPDU was initially offered by the builder through the MPDU program after March 20, 1989, the owner may sell the unit on the open market for a fair market price once the applicable control period has expired. The MPDU owner is required to share one-half of the “Excess Windfall Profit” with Montgomery County.  

• The Excess Profit is the difference between the contract sales price and the MPDU sales price calculation.
• The County uses these funds to finance and produce new affordable housing for other low- and moderate-income families.
• See below for information about determining the shared profit that is due.

Real estate agents & signed contracts: 

• Credit for a Real Estate Commission may only be given if the buyer and seller use licensed, third-party Real Estate Agents. The sale must be an arms-length transaction. No commission will be approved for the listing agent if he/she is a family member of the seller. Commission for the buyer’s agent will be granted.
• Montgomery County and the Housing Opportunities Commission (HOC) have the right to buy the MPDU at the proposed fair market sales price within 30 days after receiving the signed sales contract.  At this time, Montgomery County is not purchasing MPDUs and HOC rarely purchases resale MPDUs. 

MPDU post-control period sales process: 

Step 1: MPDU owner sends to the MPDU office:

• Completed copy of the Shared Profit Calculation Request Form;
• Calculation of Improvements Credit Request Form (if the MPDU owner is requesting credit for improvements made to the MPDU) and;
• Copy of the first page of the signed Sales Contract.

Send all by e-mail to [email protected] (or MPDU Office, 1401 Rockville Pike, 4th floor, Rockville, MD 20852).

Step 2: The MPDU Program office sends to the MPDU owner the Shared Profit Calculation and sends copies to the Real Estate Agent and Settlement Agent listed on the Share Profit Calculation Request Form. Please allow at least 21 days before settlement for this calculation. The letter will also indicate that the MPDU Program will not buy this MPDU.

Step 3: The Settlement Company must send a check for the Shared Profit Payment and a copy of the settlement sheet to Montgomery County. Make the check payable to Montgomery County, Maryland. The check should be sent to: 

• Attn: Shared Profit Calculation
• Moderately Priced Dwelling Unit Program
• Department of Housing and Community Affairs
• 1401 Rockville Pike, 4th floor
• Rockville, MD 20852-1428

If the funds are to be wired, the Settlement Company should send an e-mail to [email protected]  for wiring instructions. However, the MPDU office prefers that Shared Profits are paid by check whenever possible.

Example:  

The method used to calculate the Shared Profit owed to Montgomery County is set by the Executive Regulations governing the MPDU Program. The following example shows how the Shared Profit is calculated. The example assumes an initial purchase price of $65,000 in 1995, and a current market sales price of $200,000. 

 

How The Shared Profit Is Calculated

*CPI – the Consumer Price Index, a measure of inflation; this number will vary depending on the length of time you own the MPDU. The number shown above is only an example. **Credit for a Real Estate commission may only be given if the buyer and seller use licensed, third-party Real Estate Agents.

 

Step 4: Once the control period has ended and Montgomery County has received its share of the excess profits (if applicable), the County will terminate the MPDU covenants. 

Anyone considering a cash out refinance should contact the MPDU Office before they refinance.  Due to the shared profit provision of the MPDU law, enough equity should be left in the property so that the owner will be able to pay Montgomery County its shared profit when the unit is sold.  Montgomery County will not forgive shared profit owed due to an over-refinance of the property. To contact the MPDU office send an email to [email protected]

Once the control period has ended and Montgomery County has received its share of the excess profits (if applicable), the County will terminate the MPDU covenants.