The Montgomery County Council passed a bill this week establishing a $2 million-a-year fund for elderly and handicapped persons who need money to make down payments on their apartments when the units are converted to condominiums.

Under the legislation, which passed unanimously, each household that includes at least one elderly or handicapped person can receive a grant or loan, depending on need, of up to $3,000 toward a payment on a condominium.

Revenue for the program, known as the Condominium Conversion Emergency Aid Fund, will come from the one percent transfer tax on the purchase price of condominiums that buyers must pay, and from the increase in property tax revenue that results when rental units are converted to condominiums.

"This law should help to reduce displacement among the elderly and handicapped," said Jacqueline Rogers, director of the county Department of Housing and Community Development.

The increase in condominium conversions has forced many apartment dwellers in Montgomery County to move because they cannot afford the mortgage, maintenance and closing costs when their apartments are converted. But there is little replacement housing in the county for displaced tenants.

According to housing firgures, 2,559 units were converted in Montgomery between January and July last year. County officials tried to stem the tide by enacting a four-month moratorium on conversions in July. Now that the moratorium is over, officials are trying to find other ways to help apartment tenants.

The law passed this week also would provide loans or grants of up to $3,000 for elderly or handicapped persons who move out of their apartments when they are converted, and who need additional money to meet the rent on new apartments. The grants or loans are intended as rent money for a two-year period.

The council also passed a resolution this week to support legislation that would keep down the sale price if a tenant who buys his apartment when the building is converted then decides to sell it. Council members did not discuss specific measures that could be used to prevent high profits.

The resolution resulted from concern expressed by council members that tenants who use the county subsidy programs enabling them to purchase their apartments could make big profits selling the units soon afterwards.

"We have to think about whether resale would defeat the purpose of the county's programs," said council member Elizabeth Scull. "These programs are supposed to help people . . . being displaced."

In other action, the council decided to defer a decision until next week on a measure that would require developers to file with the county a property report on buildings they plan to convert to condominiums. The report would state the condition of external and supporting walls, appliances, roof, foundation and plumbing.

"This is a consumer protection bill," said council member Ester Gelman. "Some people feel it's important so they know the exact condition of what they're buying."

Developers would have to spend a filing fee of up to $1,000 per property report to cover the cost of the review. The county has to approve the report before apartments can be converted to condominiums.