Maryland Land Bank: Powers, Funding, and Tax Treatment

A Maryland land bank authority is a locally created, quasi-governmental entity that acquires vacant, abandoned, and tax-delinquent property and returns it to productive use. Maryland counties and municipalities are authorized to form these authorities under Title 1, Subtitle 14 of the Local Government Article, which grants them broad powers to buy, hold, improve, and sell distressed real estate, issue bonds, accept grants, and extinguish certain tax liens.

How a Local Government Creates One

A land bank is created by ordinance. In charter counties with an elected county executive, or in municipalities with an elected mayor or chief executive, that official must also approve the ordinance. The ordinance is classified as administrative and cannot be challenged by referendum.¹

Two or more local governments can also enter into an intergovernmental cooperation agreement to form a single land bank serving all participating jurisdictions, including water and sewer authorities. This is useful in metropolitan areas where vacant-property problems cross city and county lines.¹

The ordinance must include proposed articles of incorporation identifying the land bank’s name (always “Land Bank Authority of [incorporating local government]”), the initial board members and their terms, the principal office address, and the entity’s purposes and powers. Once the local executive files these articles with the State Department of Assessments and Taxation and they are accepted for recordation, the land bank becomes a body politic and corporate and an instrumentality of the incorporating local government. Acceptance is conclusive evidence of formation; no additional approval step is required.¹

The land bank is run by a board of directors. Composition, appointment and removal procedures, term lengths, and the chair election process are all set by the creating ordinance. The statute does not fix a board size or mandate specific seats, so a city can reserve seats for housing advocates or neighborhood representatives while a county might build its board around elected officials or planning commissioners.²

What a Maryland Land Bank Can Do

Unless the articles of incorporation impose narrower limits, the statute gives a land bank an unusually broad set of powers.³

Adopt bylaws, sue and be sued, maintain offices, hire staff and consultants, and contract for goods, services, and management.
Borrow money, issue bonds, invest funds, and solicit gifts, grants, and loans from public or private sources.
Acquire, hold, improve, and dispose of real estate, and provide acquisition, management, and sale services to a local government for property the government already owns.
Create or own a corporation, LLC, partnership, or other entity, for-profit or nonprofit, to develop property and maximize its marketability.
Participate in federal, state, or local government programs and in intergovernmental entities created under state law.

The subsidiary-entity power matters in practice. A land bank that acquires a large parcel can form a purpose-built LLC to develop it, insulating the authority’s other assets from project-specific risk while keeping control of the outcome.

Acquiring Property and Clearing Title

A Maryland land bank can acquire real property, or any interest in real property, by gift, transfer, exchange, foreclosure, purchase, or any other method the authority considers proper. It can hold property in its own name, including tax-foreclosed property and property without clear title. It can sell, lease, transfer, or otherwise dispose of any property interest it holds, and procure insurance and execute deeds, mortgages, contracts, and leases as needed. One geographic restriction applies: property the land bank buys, owns, or sells cannot be located outside the jurisdiction of the local government that created it.⁴

Clouded titles are the single biggest obstacle to redeveloping abandoned property, and the statute tackles this directly. Where the land bank holds less than full fee simple ownership, it can quiet title or foreclose. The process requires the land bank to examine title, identify every person with a claim or interest, and file a complaint under Title 14, Subtitle 6 of the Real Property Article. A single quiet-title complaint can join multiple parcels, which cuts the time and legal cost of cleaning up a portfolio of abandoned lots.⁴

Every property the land bank holds must be inventoried and classified by title status and suitability for use. Clerks of court may not charge a recording fee when a state or local government transfers property to the land bank. A court can also appoint the land bank to serve as receiver in a receivership proceeding filed by the local government, giving it a formal role in managing distressed properties even before ownership changes hands.⁵

Handling Delinquent Tax Liens

Tax-delinquent parcels are the core inventory, and the statute creates a specific pathway for the liens that encumber them. After the local government has made an unsuccessful attempt to collect outstanding liens at tax sale, and with the approval of the relevant governing body, tax collector, or water and sewer authority, the land bank can accept a deed or assignment from the property owner (or any person with an interest) in lieu of foreclosure. This covers delinquent property taxes, special local taxes, and delinquent water and sewer liens.⁶

Alternatively, the local government or water and sewer authority can transfer its lien interest to the land bank. Once the land bank holds the lien, it can collect on it directly, keeping all taxes, penalties, and interest, or it can foreclose, sell the property, and retain the proceeds to cover its costs. Any net proceeds left over after costs go back to the tax collector for pro-rata distribution among the taxing units and water and sewer authorities.⁶

A conveyance by deed in lieu of foreclosure does not wipe out other encumbrances. Easements, security interests, mortgages, private deed restrictions, state-recorded liens, and tax or water and sewer liens from jurisdictions that did not consent to a release all survive the transfer. But tax and water and sewer liens on property the land bank holds can be released or abated at any time by the local government or authority that holds them. This is how back taxes get forgiven to make a property viable for redevelopment.⁶

Tax Exemptions on Land Bank Property

While a land bank holds property, that property is exempt from all state and local taxes and assessments. Revenue the land bank earns from its properties and activities is also tax-exempt. Once the land bank sells or leases the property to a private entity, the exemption ends and normal property taxes resume from the date of sale or lease.⁷

There is one exception aimed at affordable housing. When a land bank sells or leases property to a qualifying nonprofit organization (as defined in the Housing and Community Development Article) under a redevelopment agreement that remains in force, the property stays exempt from state and local property taxes even after the transfer. Bonds issued by the land bank also receive favorable treatment: principal and interest, transfers of the bonds, and any income from them, including profits on sale or transfer, are exempt from all state and local taxes.⁷

How a Land Bank Is Funded

Maryland land banks combine self-generated revenue, government grants, and debt financing.

The most direct source is revenue from the authority’s own property activities: sales, leases, rent, fees, and other project-related income. Money the land bank receives from tax collections, penalties, and lien payments on properties it holds is also retained.⁸

The statute explicitly authorizes land banks to solicit and accept gifts, grants, and loans from any public or private source, and to participate in federal, state, and local government programs.³ The Community Development Block Grant program is a natural fit, since CDBG funds can be used for acquiring real property, demolition, and rehabilitating residential and nonresidential structures.⁹ EPA Brownfields grants can support work on contaminated properties, funding site assessments and cleanup activities.¹⁰

A land bank can also issue bonds to pay the cost of acquiring or improving property, and can fund, refund, purchase, hold, pledge, cancel, or resell those bonds. The board passes a resolution for each issue specifying the project, the public purpose, and the maximum principal amount.¹¹

Immunity and Legal Exposure

A land bank may receive the same immunities as the local government that created it, meaning it can benefit from the governmental and sovereign immunity framework that protects Maryland counties and municipalities from many tort claims.¹²

The word “may” carries weight. Immunity is not automatic; the articles of incorporation and the creating ordinance determine whether and to what extent it applies. A local government could, in theory, form a land bank without full governmental immunity, though most ordinances extend the protection because exposing the authority to premises-liability claims on every condemned building it acquires would make operations financially unworkable. Immunity does not eliminate all exposure. Land banks can sue and be sued under their general powers, must comply with environmental regulations at the state and federal level, and remain bound by contracts with buyers, lessees, and development partners.

Environmental Obligations

Land banks routinely acquire properties with unknown environmental histories, and federal law does not exempt them from the resulting liability. Two areas need the most attention.

CERCLA and the Bona Fide Prospective Purchaser Defense

Under the Comprehensive Environmental Response, Compensation, and Liability Act, current property owners can be held responsible for cleanup costs even if they did not cause the contamination. The bona fide prospective purchaser (BFPP) defense offers protection when specific statutory criteria are met.¹³

To qualify, the land bank must have acquired the property after January 11, 2002, and must show that all disposal of hazardous substances occurred before acquisition. Before closing, it must conduct “all appropriate inquiries” into the property’s ownership and use history, which in practice means commissioning a Phase I Environmental Site Assessment. After acquisition, the land bank must provide all legally required notices about any contamination discovered, exercise appropriate care by taking reasonable steps to stop ongoing releases and prevent future ones, cooperate with any government cleanup response, and comply with any land-use restrictions or institutional controls. Skipping the pre-acquisition assessment forfeits the defense and leaves the land bank exposed to full Superfund liability.¹³

Lead-Based Paint Disclosure

When a land bank sells or leases residential property built before 1978, federal disclosure rules apply as they do to any seller. Before the buyer signs, the land bank must disclose any known information about lead-based paint, provide all available records and reports on lead hazards, give the buyer the EPA pamphlet “Protect Your Family From Lead in Your Home,” include a lead warning statement in the contract, and give the buyer a 10-day window to arrange a lead inspection (which can be modified by agreement or waived).¹⁴

A few exemptions can matter in land bank operations: foreclosure sales, housing built after 1977, zero-bedroom units (like lofts or dormitories, unless a child under six lives there), and housing where painted surfaces have been tested by a certified inspector and found free of lead-based paint. The land bank must keep a signed copy of the disclosure for at least three years after the sale.¹⁴

Donating Property to a Land Bank

Because a Maryland land bank is an instrumentality of local government, property donated to it generally qualifies as a charitable contribution under federal tax law. Individuals and corporations can claim a deduction for the fair market value of donated real estate, subject to annual percentage limits. For contributions to a governmental unit, the deduction is limited to 50 percent of the taxpayer’s contribution base (roughly, adjusted gross income) for the year.¹⁵

For noncash donations valued above $5,000, the donor must obtain a qualified appraisal from an independent appraiser and attach IRS Form 8283 to the tax return. Self-appraisal is not allowed. Corporations on the accrual method can treat a board-authorized contribution as paid during the taxable year if actual payment follows by the 15th day of the fourth month after the tax year ends.¹⁵

For an owner sitting on a vacant lot with mounting code violations and back taxes, donating the property, taking the deduction, and walking away can be cheaper than continuing to hold it. For the land bank, donated parcels reduce acquisition costs and widen the pipeline of properties available for return to use.

1
Maryland General Assembly. Maryland Code Local Government – Section 1-1403 Land Bank Authority
2
Maryland General Assembly. Maryland Code Local Government – Section 1-1404 Board of Directors
3
Maryland General Assembly. Maryland Code Local Government – Section 1-1405 Powers
4
Maryland General Assembly. Maryland Code Local Government – Section 1-1406 Property
5
Maryland General Assembly. Maryland Code Local Government – Section 1-1412 Property Inventory and Classification Fee
6
Maryland General Assembly. Maryland Code Local Government – Section 1-1413 Outstanding Tax Liens
7
Maryland General Assembly. Maryland Code Local Government – Section 1-1415 State and Local Taxes
8
Maryland General Assembly. Maryland Code Local Government – Section 1-1414 Money and Proceeds
9
U.S. Department of Housing and Urban Development. Community Development Block Grant Program
10
US Environmental Protection Agency. FY 2026 Brownfields Multipurpose Assessment and Cleanup Grant Competition
11
Maryland General Assembly. Maryland Code Local Government – Section 1-1420 Bonds
12
Maryland General Assembly. Maryland Code Local Government – Section 1-1410 Immunity
13
Office of the Law Revision Counsel. 42 USC 9601 – Definitions
14
U.S. Environmental Protection Agency. Real Estate Disclosures About Potential Lead Hazards
15
Office of the Law Revision Counsel. 26 USC 170 – Charitable Etc Contributions and Gifts