Property Management in Maryland
In a 3.20 percent county, Maryland taxes the top dollar of your gain at 11.70 percent.
Maryland changed the arithmetic of a management company sale in 2025 and left its licensing question where it has sat since 1994. The Budget Reconciliation and Financing Act added a 2 percent tax on net capital gain and two new top brackets, and the county collects its own rate on the same income. The licensing answer a buyer reaches for is a pair of Attorney General opinions, and the later one hedges more than the reliance placed on it. And the security deposit statute that turns up on Maryland diligence lists names the managing agent, which it does in order to exempt it.
Baltimore-Columbia-Towson (Baltimore City, Baltimore County, Anne Arundel, Howard, Harford, Carroll) / The Maryland DC suburbs — Montgomery County (Bethesda, Rockville, Silver Spring) and Prince George's County (Bowie, Hyattsville) / Frederick and the I-270 corridor / Annapolis and Anne Arundel County
An opinion the Maryland Attorney General called not self-evidently correct
Maryland licenses people, not firms. Bus. Occ. & Prof. § 17-101 defines a real estate broker as "an individual who provides real estate brokerage services," and § 17-301(a)(1) requires that "an individual shall be licensed by the Commission as a real estate broker before the individual may provide real estate brokerage services in the State." Title 17 contains no corporate, partnership or company license, so the day-one question in a Maryland property management deal is which licensed individuals stand behind the work. Managing for others sits inside the licensed definition, because § 17-101(l) is a closed list of real estate activities that includes, for consideration, leasing any real estate and collecting rent for the use of any real estate for another person.
Section 17-301(b)(4) then exempts "an agent of a licensed real estate broker or of an owner of real estate while managing or leasing that real estate for the real estate broker or owner." The Attorney General read that exemption to cover ordinary third-party management, first in unpublished Opinion No. 79-063 in 1979 and then in 79 Op. Att'y Gen. 393 (January 24, 1994), which declined to overrule it. The 1994 reasoning is legislative ratification rather than statutory reading. The General Assembly reenacted the exemption without substantive change in 1988, which the opinion treated as having "effectively ratified the Attorney General's conclusion that a property manager's leasing of apartments and collecting of rent for their owner are within the exemption, whatever proportion of the manager's total duties they represent." The exemption reaches managing and leasing and names no sales activity, so anyone doing brokerage sales work beside the management book is not covered by it.
Read the rest of the opinion before anyone builds on it. The Attorney General wrote that "[i]f we were writing on a clean slate, we might be inclined to the view of the exemption urged by your constituents," which was the narrower view; that "[w]hile the conclusion in the 1979 opinion is not unreasonable, it is also not self-evidently correct"; and that as a policy matter "the protective purposes of the licensing law might well be better served if the exemption were narrower." The office declined to overrule under its own housekeeping rule, which is that it overrules a prior opinion only where the opinion is manifestly incorrect or has been overtaken by changed circumstances. The opinion binds no court. It records that the Department of Licensing and Regulation had opposed the 1979 reading, and its footnote 1 states that providing real estate brokerage services without a license is a misdemeanor. Whether the exemption covers a specific book is a question for Maryland counsel.
One thing has moved underneath it. The opinion was written against the pre-recodification numbering, BOP § 16-301(b)(4) and § 16-101. The exemption language quoted in its footnote 2 is word for word the current § 17-301(b)(4), but the definition that exemption carves out of has been amended, and § 17-101(l) now reaches selling, buying and exchanging real estate at (1)(i) and adds a category for serving as a consultant regarding the other listed activities. No reported Maryland decision and no later opinion located as of this writing has tested the exemption against the current definition. A second change was proposed and did not pass: House Bill 1644, introduced February 26, 2026, would have modified the definition of real estate brokerage services to encompass certain property management activities, given the Commission authority to penalize licensees for property management violations, and required biennial continuing education, and it was rereferred to the Economic Matters Committee on March 16, 2026 without being enacted. A buyer's licensing plan for a Maryland book therefore rests on a 1994 advisory reading of a definition that has since been amended.
Section 8-203 excludes the managing agent, and the threefold claim lands on your clients
Real Property § 8-203 gets flagged in diligence as successor liability for the buyer. The statute reads the other way. The successor-in-interest sentence sits in § 8-203(d)(3), which is triggered by the sale or transfer of the landlord's interest in the leased premises, including receivership and bankruptcy, and that same paragraph carries the carve-out: the landlord remains liable, "but not the managing agent or court appointed receiver." The remedy in § 8-203(e), an action for up to threefold the withheld amount plus reasonable attorney's fees where a deposit is withheld without reasonable basis, runs against the landlord as well.
Selling a management company transfers no landlord's interest in any leased premises. The buyer of the management business is not a successor in interest within § 8-203.
What does transfer is the management agreements and the account machinery behind them. Maryland requires a deposit to be placed within 30 days in a federally insured financial institution that does business in the State, in an account devoted exclusively to security deposits, bearing interest at the greater of the 1-year U.S. Treasury yield curve rate as of the first business day of the year or 1.5 percent a year, accruing monthly on deposits of $50 or more held at least six months, and returned within 45 days. Interest is part of what § 8-203 requires be returned, so an account where it was never credited is short by the amount of it.
The deposit accounts still matter in diligence, on the management agreement and not on § 8-203(d)(3). The owner clients carry the statutory exposure, and the manager wrote the ledger. A client assessed up to threefold plus fees on a deposit the manager mishandled has a claim under the management agreement. Reconcile each account and test whether the statutory interest was credited.
A Maryland surtax that did not exist for any closing before 2025
The Budget Reconciliation and Financing Act of 2025 (Ch. 604) added a 2 percent tax on net capital gain at Tax-General § 10-105(a), on top of ordinary rates, for any individual whose federal adjusted gross income exceeds $350,000, regardless of filing status. It applies to tax years beginning after December 31, 2024, and is reported on Form 502CG, or Form 504CG for fiduciaries. The Comptroller lists the exclusions: a primary residence sold for less than $1,500,000, gains inside retirement accounts, certain livestock, land under conservation, agricultural or forest preservation easement, property qualifying for an IRC § 179 deduction, and affordable housing owned by nonprofits. Nothing on that list reaches the sale of a management business, its goodwill, or a founder's equity.
The trigger is total federal adjusted gross income rather than the size of the gain, so proceeds that put a seller over $350,000 in the year of closing bring the surtax in, and the threshold is tested again in each year an installment or earnout pays. Underneath the surtax, the same act extended the rate schedule: 6.25 percent of taxable income from $500,001 through $1,000,000 and 6.50 percent above $1,000,000 for a single filer, 6.25 percent from $600,001 through $1,200,000 and 6.50 percent above $1,200,000 filing jointly. Maryland gives capital gain no preferential rate. Add the county income tax, levied on the same taxable income and collected on the same return, and a seller resident in Baltimore City, Baltimore County, Montgomery, Prince George's or Howard County, each at 3.20 percent for 2026, is at 11.70 percent on the top dollars of the gain.
The county rate follows the seller's county of residence, not the county the doors are in, and runs from 2.25 percent in Worcester to 3.30 percent in Kent and Dorchester for 2026. Anne Arundel and Frederick bracket their rates, so a single large gain moves a seller up inside them. Anne Arundel runs 2.70 percent, 2.94 percent and 3.20 percent, the top rate applying above $400,000 of taxable net income for a single filer and $480,000 filing jointly. Frederick runs 2.25, 2.75, 2.96 and 3.20 percent, the top rate above $150,000 single and $250,000 joint. A seller leaving Maryland is a separate question. A part-year resident is taxed on income attributable to the residency period, and the Comptroller's withholding guidance states that nonresidents generally have no local rate and instead have an additional state tax withheld at the lowest local rate of 2.25 percent. Which of those describes a specific closing is for Maryland tax counsel; this firm does not give tax advice.
Maryland's casual and isolated sale exemption from the 6 percent sales and use tax stops at a sale price under $1,000, so an asset purchase moving computers, office furniture and equipment can carry tax on the equipment schedule. Tax-General § 11-209 exempts transfers made under a corporate reorganization and capital contributions to a partnership or limited liability company, so the choice between an equity and an asset structure moves the number. Titled vehicles are handled separately, through the titling excise tax on retitling rather than the 6 percent.
Questions Maryland sellers ask
- I own some of the rental properties I manage. Can I sell them together with the company?
- They can be sold, but Maryland writes the licensing test at the level of the whole proposed transfer. Bus. Occ. & Prof. § 17-301(b)(5) covers "any person in negotiating the sale, lease, or other transfer of a business enterprise if the proposed transfer does not include any interest in real property other than a lease under which the business enterprise operates." Once the proposed transfer includes your own doors, the exemption does not reach that negotiation, and putting the real estate on its own schedule inside the same transfer does not change that. The condition names a lease under which the business operates, so a master lease or a guaranteed rent leasehold is also an interest in real property the exemption does not save.
- How much Maryland tax will I owe on the sale?
- Three layers, all on the same return: the § 10-105(a) rate schedule, the 2 percent tax on net capital gain once federal adjusted gross income passes $350,000, and your county's rate, which for 2026 runs from 2.25 percent in Worcester to 3.30 percent in Kent and Dorchester. No exclusion on the Comptroller's list covers a business sale, goodwill, or founder's equity. This firm does not give tax advice.
- Does my buyer need a Maryland real estate license in place before closing?
- There is no firm license to hand over at closing, because Title 17 licenses individuals: § 17-101 defines a real estate broker as "an individual who provides real estate brokerage services" and § 17-301(a)(1) requires the individual to be licensed. What a buyer would be relying on instead is the 1994 opinion set out above. That reading is advisory and binds no court, and unlicensed brokerage is a misdemeanor, so take the staffing question to Maryland counsel on your actual book.
- Are the non-competes I have with my leasing agents and technicians worth anything in Maryland?
- Not for anyone paid at or under $22.50 an hour, and that line does not move on its own. Md. Labor & Employment § 3-716(a) makes a noncompete in an employment contract null and void as against the public policy of the State where the employee earns 150 percent of the State minimum wage rate under § 3-413 or less. Section 3-413 fixes the State rate at $15.00 per hour beginning January 1, 2024 and carries no escalator, so the threshold sits at $22.50 an hour, roughly $46,800 at 2,080 hours, and county minimum wage ordinances do not raise it, because § 3-716 keys to the State rate. What the section expressly does not reach is an agreement about "the taking or use of a client or patient list or other proprietary client-related or patient-related information," which survives at any wage level. By its terms § 3-716 applies to employment contracts, so a seller's own covenant granted in the purchase agreement is a different instrument.
Where these facts come from
Everything above that is a rule rather than a judgment is listed here with its publisher and the date it was checked. Licensing, tax and non-compete rules change, sometimes without much notice. None of this is legal or tax advice, and it is not a substitute for your own counsel and CPA.
Md. Code, Business Occupations and Professions § 17-301(a)(1) provides that an individual shall be licensed by the Commission as a real estate broker before the individual may provide real estate brokerage services in the State. Section 17-301(b)(4) exempts "an agent of a licensed real estate broker or of an owner of real estate while managing or leasing that real estate for the real estate broker or owner." Section 17-301(b)(5) exempts "any person in negotiating the sale, lease, or other transfer of a business enterprise if the proposed transfer does not include any interest in real property other than a lease under which the business enterprise operates."
Maryland General Assembly. Checked 2026-09-07.
The (b)(5) condition is written at the level of the whole proposed transfer and is not severable by component: if the proposed transfer includes an interest in real property beyond the lease the business operates under, the exemption does not apply to that negotiation. This exemption addresses real estate licensure only and answers no other licensing question. Nothing on this page states a conclusion about who may be engaged or paid on a Maryland transaction.
Bus. Occ. & Prof. § 17-101 defines "real estate broker" as an individual who provides real estate brokerage services. The definition of "provide real estate brokerage services" at § 17-101(l) is a closed list of real estate activities, including for consideration selling, buying, exchanging or leasing any real estate and collecting rent for the use of any real estate for another person, assisting another person to locate residential real estate, regularly dealing in real estate, operating a business whose primary purpose is promoting real estate sales through a listing publication, subdividing land, and serving as a consultant regarding any of the listed activities. Title 17 contains no definition of a corporate, partnership or company license.
Maryland General Assembly. Checked 2026-09-07.
Nothing in the § 17-101(l) list reaches the sale of a business or a business opportunity. The list has been amended since the Attorney General opinion cited below was written, in particular by the addition of the consultant category and of selling, buying and exchanging at (1)(i).
In 79 Op. Att'y Gen. 393 (January 24, 1994), the Attorney General declined to overrule unpublished Opinion No. 79-063 (1979) and concluded that when the General Assembly reenacted the exemption in 1988 it "effectively ratified the Attorney General's conclusion that a property manager's leasing of apartments and collecting of rent for their owner are within the exemption, whatever proportion of the manager's total duties they represent." The opinion also states: "If we were writing on a clean slate, we might be inclined to the view of the exemption urged by your constituents"; "[w]hile the conclusion in the 1979 opinion is not unreasonable, it is also not self-evidently correct"; that "[a]s a policy matter . . . the protective purposes of the licensing law might well be better served if the exemption were narrower"; and that the office overrules a prior opinion only if the opinion is manifestly incorrect or has been overtaken by changed circumstances. The opinion records that the Department of Licensing and Regulation had opposed the 1979 reading. Footnote 1 states that a person who provides real estate brokerage services without a license is guilty of a misdemeanor. Footnote 2 quotes the exemption in the pre-recodification numbering, BOP § 16-301(b)(4), in language identical to the current § 17-301(b)(4); the opinion also cites the then-current definition at BOP § 16-101.
Office of the Attorney General of Maryland. Checked 2026-09-07.
An Attorney General opinion is advisory and binds no court. The opinion decided the position of an individual acting as agent for property owners and says nothing about who may own a management company. The definition the exemption carves out of has been amended since 1994 and no reported decision or later opinion located as of publication has revisited the exemption against the current § 17-101(l). This is general information and not legal advice; Maryland licensing positions on property management are contested and should be confirmed with Maryland counsel.
House Bill 1644 (2026 Regular Session) was introduced on February 26, 2026 and rereferred to the Economic Matters Committee on March 16, 2026 without being enacted. Its synopsis describes modifying the definition of real estate brokerage services to encompass certain property management activities, granting the Real Estate Commission authority to penalize licensees for property management violations, and requiring biennial continuing education.
Maryland General Assembly. Checked 2026-09-07.
Described from the legislative synopsis and procedural history. The bill text has not been read line by line for this page, so no effective date and no amendment to the § 17-301 exemptions is asserted here.
Md. Code, Real Property § 8-203 governs residential security deposits. The successor-in-interest provision at § 8-203(d)(3) is triggered by the sale or transfer of the landlord's interest in the leased premises, including receivership or bankruptcy, and provides that the landlord remains liable, but not the managing agent or court appointed receiver. Deposits must be placed within 30 days in a federally insured financial institution that does business in the State, in an account devoted exclusively to security deposits, bearing interest at the greater of the 1-year U.S. Treasury yield curve rate as of the first business day of the year or 1.5 percent per year, accruing monthly on deposits of $50 or more held at least six months. A landlord who without reasonable basis fails to return a deposit within 45 days is liable under § 8-203(e) for up to threefold the withheld amount plus reasonable attorney's fees.
Maryland General Assembly. Checked 2026-09-07.
The sale of a property management company conveys no landlord's interest in leased premises, so § 8-203(d)(3) is not engaged by it and the threefold remedy runs against the landlord. The statute also caps the amount of a deposit and carries an exception to that cap; the cap is deliberately not quoted here because a target's ledger may contain deposits taken under earlier versions of the rule, and each deposit should be tested against the rule in force when it was collected.
Technical Bulletin 58 describes the additional 2 percent tax on net capital gain enacted by the Budget Reconciliation and Financing Act of 2025 (Ch. 604) at Tax-General § 10-105(a), imposed on individuals whose federal adjusted gross income exceeds $350,000 regardless of filing status, applicable to tax years beginning after December 31, 2024, and reported on Form 502CG (Form 504CG for fiduciaries). The exclusions are a primary residence sold for less than $1,500,000; gains inside retirement accounts; certain livestock held 12 or more months where farming is at least 50 percent of gross income; land under conservation, agricultural or forest preservation easement; property qualifying for an IRC § 179 deduction; and affordable housing owned by nonprofits.
Comptroller of Maryland. Checked 2026-09-07.
No exclusion covers the sale of a business, goodwill, or a founder's equity interest. The $350,000 threshold is measured on federal adjusted gross income for the tax year and is not indexed. Whether a particular component of the consideration is net capital gain for federal purposes is a question for tax counsel and is not asserted here.
Tax-General § 10-105(a) sets the Maryland individual rate schedule, which the Budget Reconciliation and Financing Act of 2025 extended with two new top brackets. For single filers, 5.75 percent of taxable income from $250,001 through $500,000, 6.25 percent from $500,001 through $1,000,000, and 6.50 percent above $1,000,000. For married filing jointly, 5.75 percent from $300,001 through $600,000, 6.25 percent from $600,001 through $1,200,000, and 6.50 percent above $1,200,000. Maryland taxes capital gain as ordinary income at these rates and provides no preferential capital gains rate.
Maryland General Assembly. Checked 2026-09-07.
Withholding Tax Facts for January through December 2026 lists the county income tax rates collected on the Maryland return. Baltimore City, Baltimore County, Montgomery, Prince George's and Howard are each .0320 (3.20 percent). Worcester is .0225 (2.25 percent) and Kent and Dorchester are .0330 (3.30 percent). Anne Arundel uses brackets at .0270, .0294 and .0320 (2.70, 2.94 and 3.20 percent), with the top rate applying above $400,000 of taxable net income for a single filer and above $480,000 filing jointly. Frederick uses brackets at .0225, .0275, .0296 and .0320 (2.25, 2.75, 2.96 and 3.20 percent), with the top rate applying above $150,000 single and above $250,000 joint. Allegany and Kent were adjusted for 2026. The publication states that nonresidents generally do not have a local tax rate and that an additional state tax is withheld using the lowest local tax rate of .0225 (2.25 percent). Applied together with the 6.50 percent top state bracket and the 2 percent tax on net capital gain, the resulting top combined marginal rate on capital gain for a resident of a 3.20 percent county is 11.70 percent.
Comptroller of Maryland. Checked 2026-09-07.
The publication states county rates as decimals; the percent figures above are those same published rates written as percentages. The 11.70 percent figure is arithmetic on three separately sourced rates and is not a figure the Comptroller publishes. County rates are set annually and follow the taxpayer's county of residence; a part-year resident is taxed on income attributable to the residency period. Anne Arundel and Frederick are cited as bracketed counties because the publication sets out their brackets; the publication is not read as a statement that no other county brackets its rate. No interstate rate comparison is made on this page because the comparison rates were not verified as of publication.
Maryland imposes a 6 percent sales and use tax. The casual and isolated sale exemption at Tax-General § 11-209 is limited to sales at a price under $1,000. Section 11-209 also exempts transfers made under a corporate reorganization and capital contributions to a partnership or limited liability company. A sale of a motor vehicle subject to the titling excise tax under the Transportation Article is handled under that separate regime rather than the sales and use tax.
Maryland General Assembly. Checked 2026-09-07.
Confirm the current rate, the casual and isolated sale threshold and the motor vehicle treatment with Maryland tax counsel before pricing an equipment or fleet schedule. No other state's occasional-sale exemption was verified for this page, so no comparison is drawn. Maryland's bulk transfer notice mechanism is not discussed on this page because Commercial Law Title 6 is limited to enterprises whose principal business is the sale of merchandise from stock, which generally excludes a service business.
Md. Labor & Employment § 3-716(a) makes a noncompete or conflict-of-interest provision in an employment contract or a similar document or agreement null and void as being against the public policy of the State where it restricts an employee who earns equal to or less than 150 percent of the State minimum wage rate under § 3-413 from taking new employment or becoming self-employed in the same or similar business. Section 3-413 sets the State minimum wage at $15.00 per hour beginning January 1, 2024 and contains no automatic annual adjustment, so the threshold is $22.50 per hour, approximately $46,800 at 2,080 hours. Section 3-716 expressly does not apply to an agreement respecting the taking or use of a client or patient list or other proprietary client-related or patient-related information, and by its terms reaches employment contracts rather than a covenant given by a seller in a purchase agreement.
Maryland General Assembly. Checked 2026-09-07.
County minimum wage ordinances do not raise this threshold, because § 3-716 keys to the State rate established under § 3-413. Section 3-716 also carries provisions on licensed health occupations employees in direct patient care and on veterinary practitioners, which will not touch a property management payroll but show the section is amended live and should be re-checked each session.
Page last reviewed 2026-09-07.
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