Understanding Ground Rent In Maryland

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


Understanding Ground Rent in Maryland
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Topics on this page:


What is Ground Rent?
How do I know if a residential or commercial property undergoes ground rent?
What if I can not contact the ground lease holder?
What takes place if I fail to pay ground lease?
What does it suggest to redeem ground lease?
Just how much does it cost to redeem ground rent?


What is Ground Rent?


In certain situations, a property owner owns the house they reside in but not the land the house rests on. Someone else (the ground lease holder) owns the land and rents the land to the house owner. Under Maryland law, a ground lease holder is entitled to lease payments from the owner of the home that is situated on their land. These payments are called ground lease.


Ground rent is most typical in the Greater-Baltimore property market however exists throughout Maryland. Ground rent payments normally range from $50 to $150 annually and are normally paid semi-annually (twice a year). The language of the ground lease will set out the terms and conditions of payment. A ground rent lease is typically for 99 years and restores indefinitely.


Ground lease offers are different from typical landlord and tenant relationships. This is due to the fact that the ground lease owner has no right to take back any residential or commercial property unless the tenant does not pay lease. That is, the ground lease holder does not have a reversionary right to the residential or commercial property or any structures built on it unless the house owner stops working to make the required payments. If the leaseholder is present with their ground lease payments, the residential or commercial property remains under their control.


The property owner is responsible for upkeep of the land and any enhancements on the land, consisting of enhancements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The homeowner has the authority to alter, renovate, and reconstruct the residential or commercial property as they want, however they must ensure that their actions protect the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole responsibility of the property owner to obtain and make payment on any energies that service the residential or commercial property.


How do I understand if a residential or commercial property goes through ground lease?


When a residential or commercial property is listed for sale, the residential or commercial property description ought to list whether the residential or commercial property has any applicable ground rent. If the residential or commercial property is listed as "Fee Simple," the listing includes both your house and the residential or commercial property (ground) in the purchase price - there is no ground rent. If there is a sign of "Ground Rent" in a listing, it suggests that a fee should be paid to the owner of the ground on which the residential or commercial property sits.


If you own a home, or are wanting to purchase a home, you can determine if a residential or commercial property is subject to payment of a ground rent by looking 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 is located. In most cases, a deed for multiple ground leas owned by one owner will be composed. Land records can be found on the website mdlandrec.net.


Maryland law requires that ground lease holders sign up ground lease 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 see the registration status through SDAT's Real Residential or commercial property Search. (When viewing the residential or commercial property record, click on "View Ground Rent Redemption")


If a ground lease is registered for your residential or commercial property, you are obliged to pay the ground rent to the ground lease holder. You should contact the owner noted on the registration kind regarding payment of the ground rent or to notify the owner that you would like to redeem your ground lease. It is also your responsibility to alert the ground lease holder if you change your address or transfer ownership of the residential or commercial property. If you are a ground lease tenant (property owner) or leaseholder and you have a concern, it is an excellent idea to get in touch with an attorney.


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 till it is posted in the online pc registry of ground leases. Amendments must also be signed up. If a ground lease is not registered, the ground lease holder might not:


1. Collect or attempt to collect any ground rent payments, late fees, interest, collection costs, or other cost associated to the ground lease;
2. Bring a civil action versus the leasehold tenant to enforce any rights the ground lease holder might have under the ground lease; or
3. Bring an action against the leasehold tenant under the ground rent laws.


If a ground lease is not registered, and the holder of the lease gathers, or efforts to gather, ground rent payments, late fees, interest, collection expenses or other expenditures, the leasehold tenant may 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 gotten, the Department will alert the leaseholder of the supposed violation, and the leaseholder needs to send proof to reveal that their collection was not in infraction of the law. If the leaseholder fails to send proof within 45 days of being informed, 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 last choice.
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NOTE: If you discover that there is no ground lease registered on your residential or commercial property, there is nothing you need to do. If you are gotten in touch with by a business claiming that you owe them ground lease payments, it could be a scam, or the ground lease holder is trying to unlawfully collect 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 undergoes ground lease and are unable to contact the ground lease holder, your mortgage company might desire to set aside ground lease costs in escrow in case a ground lease holder appears and demands payment of rent. The maximum amount of back ground lease that can be gathered is restricted to 3 years. This means, if you have actually lived in house for 10 years, and all of a sudden a ground lease holder appears and requires payment, they can only gather 3 years of back ground lease and then ask you to pay the annual cost moving forward.


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


What occurs if I fail to pay ground lease?


If you stop working to pay ground rent on time, the ground lease holder can submit a lien versus the home on their land for the ground rent owed. The ground lease holder might foreclose on the lien, just like a bank can when you fail to pay your mortgage. If the ground lease holder submits an action in court to collect the past due ground lease, you might be needed to pay the ground lease holder for fees and expenses related to the collection of the past due ground lease.


If you stop working to pay any back ground lease, the ground lease holder may also submit an action in court to acquire the residential or commercial property. If they do so, you may 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 must send out two notifications to you through first-rate and licensed mail.


NOTE: Under Maryland law, a ground lease holder may not require more than 3 years of overdue ground lease, and there are limits on how much a ground lease holder might be repaid for costs and expenses. Additionally, you would keep any equity you have in the home instead of forfeiting 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 indicate to redeem ground lease?


If you don't own the ground your home is on, you might be able to buy it. To redeem ground rent is to buy the land (or ground) your home sits on from the ground lease holder. Whether ground rent is redeemable or irredeemable depends upon when the ground rent deed was produced. A ground rent produced after April 8, 1884 is redeemable and the owner must offer you the ground rent if you want to buy it. If you redeem the ground lease you would have absolute ownership of the residential or commercial property in cost simple.
The owner of a ground rent produced after April 8, 1884 should sell you the ground lease at an amount fixed by Maryland law if you desire to buy it. If the ground lease was established as irredeemable in the regards to the lease, the lease holder need to have filed a notification of objective to maintain irredeemability in the land records by December 31, 2010. If a notice was filed, irredeemability continues through the existing fiscal year unless another 10 year notification is filed. If the lease holder did not file notification prior to December 31, 2010, or if they fail to file extra ten years notifications, the ground rent ends up being redeemable.
Ground lease owners must provide house owners with all the info necessary for the homeowner to acquire the ground rent. The ground lease holder should include a notification of your right to purchase the ground lease with each, and every, ground rent costs. Additionally, homebuyers need to be informed that they can redeem their ground rent as part of the preliminary funding or refinancing of their residential or commercial property.
If you want 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 provides a process to redeem the ground lease when there has been no communication from the property manager for three years.


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


How much does it cost to redeem ground rent?


The State of Maryland presently regulates the purchase rates for ground rents. The law accounts for both the leasehold value of the residential or commercial property as well as the lessee's annual incomes to prevent the leaseholder from developing excessive monetary barriers to redeeming one's ground lease.


A purchase price is identified by taking the yearly ground lease cost 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 potentially 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 expense to acquire your ground lease would be $1,666.67. There will also be legal fees and taxes involved in purchasing ground lease. The purchase of ground rent is a personal financial deal, and it is advised that a lawyer or title business be included to help with the research study, documents, and required filings.


If you can not pay for to purchase your ground lease the Maryland Department of Housing and Community Development's Ground Rent Redemption Loan Program provides unique loan financing offered for 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 leas may be bought, 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 thought about 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 somebody else, the administrative jobs increase in the form of documentation, and in some cases through consultations with lawyers or through court appearances. For this factor, ground rent leases often become more burdensome than useful for the new leaseholders.


When the leasehold interests change hands, the new leaseholders sometimes may not look for out the lessees for payment, and when no needs for payment show up in the mail the property owners more than happy to require. However, Maryland law prior to 2007 put the legal burden on the lessees to discover their ground leaseholders and pay.

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