The Maryland Senate’s passage of the widely debated and publicized Budget and Taxation bill effectively eliminates a long-used approach to avoid the current payment of mortgage recordation taxes on a commercial real estate loan. Rather than providing a direct deed of trust on the real estate to secure the loan, the property owner would create a related entity to act as borrower (usually a wholly owned subsidiary) and the property owner would guaranty the loan, securing the guaranty with an indemnity deed of trust (an “IDOT”). Under existing law, there is no current recordation tax on the IDOT. Effective July 1, 2012, Maryland’s recordation tax law will apply to IDOTs (except in the case of an IDOT securing a loan of less than $1,000,000 or to the extent recordation tax is paid on another instrument securing such loan). We expect this amendment to the recordation tax law to end the general use of IDOTs in Maryland, thereby increasing the cost of financing for most commercial real estate borrowers.
Federal, DC and Maryland individual income tax returns and estimated payments are due on Monday, April 18, 2011 (even though April 15, 2011 is a Friday this year). Under the federal tax law, if the date for filing returns falls on a legal holiday, Saturday or Sunday, the filing date is extended to the next day which is not a legal holiday, Saturday or Sunday. For this purpose, legal holidays include legal holidays in the District of Columbia. Thus, this year the filing date is changed because DC celebrates Emancipation Day on April 15. The next day that is not a legal holiday, Saturday or Sunday, is Monday, April 18.
Lender liability law, which gained prominence during the savings and loan crisis of the 1980s, has again become an active area of litigation in recent years. Lenders in Maryland traditionally have had at least two ways to protect against plaintiffs seeking to challenge the enforceability of a commercial loan. First, lenders often include a confession of judgment clause in the agreement, permitting the lender to seek default judgment against a defaulting borrower immediately without trial. Second, the Maryland Credit Agreement Act, Md. Code, Cts. & Jud. Proc. § 5-408, requires all commercial (not personal) loan agreements to be in writing. By extension, the Credit Agreement Act prohibits the use of alleged oral promises to modify the terms of the commercial loan agreement.