Prior to 2012, the Indemnity Deed of Trust (“IDOT”) had long been the preferred structure for borrowers in Maryland looking to finance their property because it would allow deferment of recordation taxes that would otherwise be required at the time of the loan. In 2012, the Maryland Legislature passed a law that imposed the recordation tax on any instrument securing a guaranty for a loan of more than $1 million where the guarantor was not primarily liable, meaning that IDOTs and conventional deeds of trust securing loans over $1 million were treated the same. This created serious problems for commercial borrowers and lenders. In an effort to fix these problems, the Maryland Legislature revised the existing law in 2013 in order to:
- Remove the bar on refinancing commercial loans;
- Raise the exemption threshold for qualifying loans;
- Clarify the rules for guarantees below the threshold; and
- Impose the recordation tax on “new money” only.