1. Real Estate and Other Housing
2. Homeownership
3. Understanding Ground Rent in Maryland

Understanding Ground Rent in Maryland

Topics on this page:

What is Ground Rent?
How do I understand if a residential or commercial property goes through ground rent?
What if I can not get in touch with the ground lease holder?
What occurs if I fail to pay ground rent?
What does it imply to redeem ground lease?
Just how much does it cost to redeem ground lease?

What is Ground Rent?

In particular scenarios, a homeowner owns the house they live in however not the land your house sits on. Somebody else (the ground lease holder) owns the land and leases the land to the homeowner. Under Maryland law, a ground lease holder is entitled to rent payments from the owner of the home that lies on their land. These payments are called ground lease.

Ground lease is most common in the Greater-Baltimore realty market but exists throughout Maryland. Ground lease payments normally range from $50 to $150 each year and are generally paid semi-annually (two times a year). The language of the ground lease will set out the conditions of payment. A ground rent lease is typically for 99 years and renews forever.

Ground lease deals are various from typical landlord and renter relationships. This is because the ground lease owner has no right to take back any residential or commercial property unless the occupant does not pay rent. That is, the ground lease holder doesn't have a reversionary right to the residential or commercial property or any structures constructed on it unless the house owner stops working to make the needed payments. If the leaseholder is present with their ground lease payments, the residential or commercial property stays under their control.

The house owner is accountable for maintenance of the land and any improvements on the land, including enhancements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The house owner has the authority to change, redesign, and reconstruct the residential or commercial property as they wish, however they need to guarantee that their actions maintain the worth of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole responsibility of the property owner to procure and make payment on any energies that service the residential or commercial property.

How do I know if a residential or commercial property undergoes ground rent?

When a residential or commercial property is noted for sale, the residential or commercial property description must list whether the residential or commercial property has any suitable ground rent. If the residential or commercial property is noted as "Fee Simple," the listing includes both the home and the residential or commercial property (ground) in the purchase price - there is no ground rent. If there is an indicator of "Ground Rent" in a listing, it shows that a charge must be paid to the owner of the ground on which the residential or commercial property sits.

If you own a home, or are aiming to purchase a home, you can determine if a residential or commercial property goes through payment of a ground lease by taking a look at the deed. Ground lease deeds are submitted in the land records of the Circuit Court in the county where the residential or commercial property lies. Oftentimes, a deed for numerous ground leas owned by one owner will be written. Land records can be found on the site mdlandrec.net.

Maryland law requires that ground lease holders register ground rent leases on the Maryland State Department of Assessments and Taxation's (SDAT) Ground Rent Registry. If you are not sure that your residential or commercial property has a ground rent, you can view the registration status through SDAT's Real Residential or commercial property Search. (When seeing the residential or commercial property record, click on "View Ground Rent Redemption")

If a ground lease is signed up for your residential or commercial property, you are obliged to pay the ground lease to the ground lease holder. You should get in touch with the owner listed on the registration type relating to payment of the ground lease or to inform the owner that you would like to redeem your ground rent. It is likewise your duty to notify the ground lease holder if you change your address or transfer ownership of the residential or commercial property. If you are a ground lease renter (house owner) or leaseholder and you have a question, it is a good idea to get in touch with a lawyer.

Read the law: Md. Code, Real Residential Or Commercial Property § 8-703; § 8-704; § 8-705.

What if the residential or commercial property does not appear in the Ground Rent Registry?

Under Maryland law, a ground lease is not signed up until it is published in the online windows registry of ground leases. Amendments must also be signed up. If a ground lease is not registered, the ground lease holder may not:

1. Collect or try to collect any ground rent payments, late fees, interest, collection expenses, or other expense associated to the ground lease;
2. Bring a civil action against the leasehold tenant to implement any rights the ground lease holder might have under the ground lease; or
3. Bring an action against the leasehold renter under the ground lease laws.

If a ground lease is not registered, and the holder of the lease gathers, or attempts to gather, ground lease payments, late charges, interest, collection expenses or other expenses, the leasehold renter might submit an affidavit to the State Department of Assessments and Taxation suggesting that the lease holder remains in infraction of the law.

Once an affidavit has been received, the Department will notify the leaseholder of the alleged infraction, and the leaseholder must submit evidence to reveal that their collection was not in offense of the law. If the leaseholder fails to send proof within 45 days of being alerted, the Department might void the ground lease registration.

Either party might appeal the decision of the Department to the Circuit Court. Appeals needs to be submitted within 45 days of notification of the final decision.

NOTE: If you find that there is no ground lease signed up on your residential or commercial property, there is absolutely nothing you should do. If you are called by an organization declaring that you owe them ground lease payments, it might be a fraud, or the ground lease holder is trying to illegally gather payments that they are not entitled to.

Read the law: Md. Code, Real Residential Or Commercial Property § 8-707.

What if I can not get ahold of the ground lease holder?

If you buy a residential or commercial property that goes through ground rent and are not able to contact the ground lease holder, your mortgage company may desire to reserve ground rent fees in escrow in case a ground lease holder appears and demands payment of lease. The optimum quantity of back ground lease that can be gathered is limited to 3 years. This implies, if you have lived in home for 10 years, and suddenly a ground lease holder appears and demands payment, they can only gather 3 years of back ground lease and after that ask you to pay the annual fee moving on.

Read the law: Md. Code, Real Residential Or Commercial Property § 8-806.

What takes place if I stop working to pay ground lease?

If you stop working to pay ground rent on time, the ground lease holder can file a lien versus the home on their land for the ground lease owed. The ground lease holder may foreclose on the lien, similar to a bank can when you fail to pay your mortgage. If the ground lease holder files an action in court to collect the past due ground rent, you may be required to pay the ground lease holder for costs and costs connected with the collection of the past due ground lease.

If you stop working to pay any back ground rent, the ground lease holder may also file an action in court to take ownership of the residential or commercial property. If they do so, you might be accountable for additional charges and costs and eventually in your loss of the residential or commercial property. Prior to filing an action for possession, the ground lease holder need to send out 2 notifications to you via first-rate and qualified mail.

NOTE: Under Maryland law, a ground lease holder may not demand more than 3 years of unpaid ground rent, and there are limits on how much a ground lease holder might be compensated for charges and costs. Additionally, you would keep any equity you have in the home instead of surrendering it to the ground lease holder.

Read the Law: Md. Code, Real Residential Or Commercial Property § 8-402.2; § 8-806; § 8-807.

What does it mean to redeem ground lease?

If you don't own the ground your home is on, you may be able to buy it. To redeem ground rent is to purchase the land (or ground) your home rests on from the ground lease holder. Whether ground lease is redeemable or irredeemable depends upon when the ground rent deed was developed. A ground rent developed after April 8, 1884 is redeemable and the owner must sell you the ground lease if you want to purchase it. If you redeem the ground lease you would have outright ownership of the residential or commercial property in cost simple.
The owner of a ground rent created after April 8, 1884 must sell you the ground lease at an amount repaired by Maryland law if you want to purchase it. If the ground lease was established as irredeemable in the regards to the lease, the lease holder should have submitted a notice of intent to maintain irredeemability in the land records by December 31, 2010. If a notification was submitted, irredeemability continues through the existing fiscal year unless another 10 year notice is submitted. If the lease holder did not file notification prior to December 31, 2010, or if they stop working to submit extra 10 year notices, the ground lease becomes redeemable.
Ground rent owners should supply house owners with all the information necessary for the house owner to purchase the ground lease. The ground lease holder should consist of a notice of your right to purchase the ground lease with each, and every, ground rent bill. Additionally, property buyers need to be informed that they can redeem their ground lease as part of the initial financing or refinancing of their residential or commercial property.
If you wish to redeem the ground lease, call the ground lease holder. If the identity of the ground lease holder is unknown, the State Department of Assessments and Taxation supplies a procedure to redeem the ground lease when there has been no communication from the property manager for 3 years.

Read the law: Md
. Code, Real Residential Or Commercial Property § 8-805.

How much does it cost to redeem ground lease?

The State of Maryland currently manages the purchase prices for ground rents. The law represent both the leasehold worth of the residential or commercial property in addition to the lessee's annual profits to prevent the leaseholder from creating excessive monetary barriers to redeeming one's ground lease.

A purchase rate is identified by taking the annual ground rent fee and dividing it by a capitalization rate. The capitalization rate is based upon the year the lease was created:

- July 2, 1982 - Present - 12%.
- April 6, 1888 - July 1, 1982 - 6%.
- April 8, 1884 - April 5, 1988 - 4%.
- Prior to April 9, 1884 - Negotiable and possibly non-redeemable.

For instance, if the ground rent is $100 and the lease started in 1945, the calculation is $100 divided by.06. Thus, the cost to buy your ground lease would be $1,666.67. There will also be legal costs and taxes included in buying ground lease. The purchase of ground lease is a private monetary transaction, and it is suggested that an attorney or title business be included to assist with the research, documents, and required filings.

If you can not afford to buy your ground rent the Maryland Department of Housing and Community Development's Ground Rent Redemption Loan Program provides unique loan financing readily available for income-eligible house owners.

Read the Law: Md. Code, Real Residential Or Commercial Property § 8-804

What if I inherit a ground lease residential or commercial property?

Ground rents might be purchased, sold, and passed to next of kin through wills, like a home or a household treasure. The leasehold interest in the residential or commercial property is considered personalty, and is governed by the law that directs the administration of personal estate (Myers v. Silljacks, 58 Md. 319, 330 (1882 )). Each time the ground leasehold interest is passed to someone else, the administrative jobs increase in the type of paperwork, and sometimes through consultations with legal representatives or through court appearances. For this reason, ground rent leases sometimes become more troublesome than helpful for the new leaseholders.

When the leasehold interests alter hands, the new leaseholders occasionally may not seek out the lessees for payment, and when no demands for payment arrive in the mail the property owners more than happy to oblige. However, Maryland law prior to 2007 put the legal problem on the lessees to discover their ground leaseholders and make payments.