My fiancés sister has been staying with us since August 2012, per the agreement between her and my fiancé she was to pay $275.00 per month... never being asked to help with cable, electric or household items. The past month she has not paid any rent, her personal items are still here and when he spoke to her she said she needed to save money so she was not going to pay any rent for a couple of months..
He wants her to leave but legally he can't just put her out and she knows this. What can he do?

He can legally evict her and should. Starting with a 'notice to quit' for non-payment of rent, followed by going to the court house to file papers for eviction (for a fee) and finalizing with a sheriff escorting her out (also for a fee).
She might pay or leave before eviction is final, of course.
Even if she pays he can evict her.

MD requires a 5 day pay or quit notice. So you give her a written notice to pay what she owes or vacate within 5 days. If she doesn't pay, then you go to your local court for an eviction order.

Now if she pays, then he can serve her with a 30 days notice to vacate. And the process is the same after the 30 days.