Ground Rents are unique to the Baltimore Real Estate Market and oftentimes seem mysterious and confusing to clients from other areas of the country.
Simply, a Ground Rent is a fee, usually paid twice per year, that is paid to an investor who owns the ground under the property. Grounds rents are 99-year leases that automatically renew for additional terms of 99-years each. The amount of ground rent due never changes. As the owner of the building subject to a ground rent, the building owner must maintain the property and pay the taxes. As long as the ground rent is paid, the building owner can be secure in their property ownership; no one is going to take away the property.
The owner of a property subject to a Ground Rent can buy-out, or redeem, the ground rent. If you offer to redeem the ground rent at the statutory redemption rate, the ground rent owner must sell it to you.
The Statutory Redemption Rate varies depending on the date the ground rent was created. Some ground rents are not redeemable.
The following only applies to residential ground rent leases with a term of 99 years. It does not apply to ground leases on commercial property or commercial-multi-family property, including co-ops.
|Original Lease Date||Multiply the Annual Rent * by||or divide the Annual Rent * by||For Example|
|April 8, 1884 to April 5, 1888||25||0.04||$96 * 25 = $2,400|
$96 / 0.04 = $2,400
|After July 1, 1982||8.33||0.12||$96 * 8.33 = $800|
$96 / 0/12 = $800
|If the ground rent was created at any other time||16.66||0.06||$96 * 16.11 = $1,600|
$96 / 0.06 = $1,600
* Rents are sometimes quoted as an ANNUAL and sometimes as a SEMI-ANNUAL price. Make sure you calculate based on the ANNUAL rent, not the semi-annual rent.
You can force redemption of a Ground Rent only after it has seasoned:
|Original Lease Date||Redeemable After:|
|July 1, 1971 or later||The Ground Rent must be in existence for at least 3 years before you can force redemption.|
|July 1, 1969 to July 1, 1971 or July 1, 1982 or later||The Ground Rent must be in existence for at least 5 years before you can force redemption.|
|Before July 1, 1969||The Ground Rent can be redeemed at any time|
Ben Frederick Specializes in Apartment Buildings and Mixed-Use Commercial Investment Real Estate in Baltimore, Maryland