Ground Rents are unique to the Baltimore Real Estate Market and often time seem mysterious and confusing to my clients. 

There is not central database of owners of ground rents.  To find out who owns your ground rent, you have to do a title search.

If you do not receive an invoice for ground rent from the ground rent owner, you do not have to pay ground rent.  If a ground rent owner fails to send an invoice to the ground rent tenant for some period of time and then decides to invoice for past due ground rent, State Law limits to three years the amount of back ground rent that can be billed for.

The Maryland Annotated Code provides that if there is no demand for or payment of a ground rent for a particular property for more than 20 consecutive years, "the rent conclusively is presumed to be extinguished and the landlord may not set up any claim for the rent or to the reversion in the property out of which it issued."

As a service to my clients, the following article, written by prominent Baltimore Real Estate Attorney Jonathan A. Azrael, (www.agflaw.com), and additional information is provided on this topic:

New Laws about Ground Rents     Ground Rent Redemption Rates

The Sun: Sunday, August 19, 2001: Page 3L Mailbag

Mystery of ground rents is solved with a few facts

Homeowners have little to fear from such leases

Over the past month, a number of questions have come in about ground rents, one of the most confusing and misunderstood aspects of real estate in the region.

Therefore, here is my annual primer on what they are, when they began and how they work.

Ground rents originated in Maryland when ownership of land was concentrated among the founding families, who leased parcels to tenants under long-term leases.

Today, the ground-rent system operates mainly in Baltimore and in parts of Baltimore County.  There, developers subdivided tracts of ground and built houses. The houses were sold, subject to a ground lease that required the homeowner to pay a semiannual rent to the developer. The ground rent would typically range from $15 to $240 a year. The ground lease typically is for a term of 99 years, automatically renewable forever. The developer, who created the ground rent, would retain it for an investment or sell it to another investor.

Some people feel that if their home is subject to a ground rent, they are in jeopardy because they do not really own the ground. This concern is not warranted. The only obligation of homeowners is to pay the ground rent for as long as they own the property.

The owner of the ground rent has no right to take possession of the propertv as long as the ground rent is paid. Even if it’s not paid, the ground rent owner has to go through a court proceeding and give ample notice to the homeowner before any action can be taken that jeopardizes the homeowner’s rights to the property. The homeowner is liable only for three years’ back ground rent.

Under Maryland Law, the owner of a residential property has a right to redeem most ground rents. The redemption price is 16.66 times the annual ground rent if the lease was created before July 1,1982. For example, a $60 annual ground rent can be redeemed for $1,000 ($60 x 16.66). For leases created after July 1, 1982, the redemption price is 8.33 times the annual ground rent. Often, however, ground rents are sold at much lower multiples.

Generally, you should not hesitate to purchase a residential property that is subject to a ground rent.

If you own a ground rent, make sure you have the current name and correct mailing address of the owner of the leasehold property. You can get access to state real property tax assessment records on the Internet at www.dat.state.md.us.

Ground rents are paid in arrears. In other words, a ground rent due in July covers the period from January 1 through June 30.  You should send a bill for the ground rent 30 to 45 days before the due date.  If the leasehold property is mortgaged, often the mortgage company will pay the ground rent directly to you. You should ask the property owner to advise you of the name and address of the mortgage holder as well as the mortgage account number.

When you have this information, you should bill the mortgage holder directly. If the ground rent is not paid by the due date, do more than send another bill. Look up the property owner’s phone number and call to request payment. When a phone call doesn’t work, some ground rent owners visit the property and talk to the occupants — or at least drive by the property to find out whether it is vacant or damaged.

A ground rent owner has two remedies if the ground rent is not paid:

First, he can sue the property owner in District Court for up to three years of back ground rent.  Because this is a small claim, neither party is required to have an attorney.  The court costs are minimal. It is necessary to serve the suit on the property owner, however. Service can be made by certified mail or by personal delivery of the lawsuit and court summons to the defendant or an adult living in the defendant’s residence.

The second remedy is to file a suit in the local Circuit Court to re­possess the property. The object of a suit for repossession is to eject the owner of the leasehold and foreclose the rights of the lease­hold owner and any mortgage holder.

Legal requirements for an ejectment suit are complex. The ground rent owner is well advised to hire an attorney to file and prosecute this legal action. The leasehold owner and mortgagees must be given adequate notice of the suit and have ample time to “save” their interest in the property by paying the past-due ground rent and all costs and damages sustained by the ground rent owner.

Copyright © 2006 Ben Frederick Realty, Inc
Last modified: 08/04/06