Maryland Commercial Disclosures: Environmental & Zoning

Since Maryland's admission to the Union on April 28, 1788, the state's commercial property laws have largely adhered to the doctrine of caveat emptor (let the buyer/tenant beware). Unlike residential properties, where the Maryland Code, Real Property Article imposes strict, mandatory checklists of disclosures—most notably regarding lead paint, mold, and habitability—the commercial sector operates with fewer statutory requirements, though significant exceptions exist for latent defects and environmental safety.

Caveat Emptor and Latent Defects

While Maryland generally follows caveat emptor in commercial transactions, landlords and sellers have a positive legal duty to disclose known latent defects. These are material conditions that are not discoverable by a reasonable inspection and which pose a direct threat to the health or safety of occupants (Maryland Common Law; see also principles in Real Property Art. § 10-702 as applied to latent defects). Outside of these specific health and safety threats, the tenant is generally responsible for conducting their own rigorous due diligence before signing a lease agreement.

1. Environmental Hazards & Mandatory Reporting

The most significant disclosure concerns for commercial landlords and tenants involve environmental liabilities and statutory reporting requirements.

• Phase I Environmental Site Assessment (ESA): Maryland commercial lenders routinely require a Phase I before financing a property acquisition. If a tenant is leasing space with potential historical contamination, they should negotiate an intensive environmental review period.
• Underground Storage Tanks (USTs): Per Maryland Code, Environment § 4-411.1, owners of underground oil storage facilities must register them with the Maryland Department of the Environment (MDE). Landlords must ensure these are registered and in substantial compliance, as oil cannot be legally delivered to unregistered facilities.
• Hazardous Substance Reporting: Maryland Code, Environment § 7-222 requires a "responsible person" (including owners and operators) to report the release of hazardous substances above threshold levels to the MDE immediately upon discovery.
• Strict Liability: Under both state and federal law (like CERCLA), a tenant operating a business on contaminated land can be held strictly liable for multi-million dollar cleanups, even if they did not cause the original spill.

2. Building Energy Performance Standards (BEPS)

Under the Climate Solutions Now Act of 2022 and COMAR 26.09.03, Maryland has implemented mandatory energy benchmarking.

• Covered Buildings: Owners of commercial buildings with 35,000 square feet or more of gross floor area (excluding parking) must report energy use and Greenhouse Gas (GHG) emissions data to the MDE annually.
• Transaction Disclosures: Contracts for the sale or lease of such properties must now include or exchange this performance data to ensure compliance with state net-zero mandates.

3. Zoning and Permitted Use

It is entirely the tenant's responsibility to verify that the property is zoned for their intended business purpose.

• If a tenant signs a 10-year lease for a restaurant in Montgomery County, but later discovers the building is only zoned for light industrial warehousing, the lease is typically still valid and enforceable. The tenant will be liable for the total rent amount while being legally barred from operating.
• Sophisticated tenants negotiate a "cure or cancel" clause that allows them to terminate the lease, without penalty, if they fail to receive the necessary use-and-occupancy permits and zoning variances from the local municipality within 90 days of execution.

The Americans with Disabilities Act (ADA)

Compliance with the ADA is another area heavily negotiated in commercial leases. The law requires places of public accommodation (retail stores, restaurants, offices) to be accessible.

• A lease must allocate who is responsible, financially and structurally, for bringing the property into ADA compliance—whether it's installing a wheelchair ramp, retrofitting restrooms, or widening doorways. In newer NNN leases, the financial burden is frequently shifted entirely onto the tenant.

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