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Understanding Ground Rent In Maryland

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 undergoes ground rent?
What if I can not call the ground lease holder?
What takes place if I fail to pay ground rent?
What does it imply to redeem ground rent?
How much does it cost to redeem ground lease?

What is Ground Rent?

In specific situations, a house owner owns your home they reside in however not the land your home sits on. Somebody else (the ground lease holder) owns the land and leases the land to the property owner. 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 understood as ground rent.

Ground rent is most typical in the Greater-Baltimore property market however exists throughout Maryland. Ground rent payments generally vary from $50 to $150 per year and are generally 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 usually for 99 years and renews forever.

Ground lease deals are various from regular property manager and occupant relationships. This is since the ground lease owner has no right to reclaim 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 constructed on it unless the property owner stops working to make the needed payments. If the leaseholder is existing 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 improvements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The property owner has the authority to alter, redesign, and rebuild the residential or commercial property as they wish, but they should guarantee that their actions preserve the worth of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole duty of the house owner to acquire and pay on any energies that service the residential or commercial property.

How do I understand if a residential or commercial property is subject to ground lease?

When a residential or commercial property is listed for sale, the residential or commercial property description must list whether the residential or commercial property has any appropriate ground lease. If the residential or commercial property is noted as “Fee Simple,” the listing consists of both your home and the residential or commercial property (ground) in the purchase rate – there is no ground rent. If there is an indication of “Ground Rent” in a listing, it suggests that a charge needs to 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 identify if a residential or commercial property undergoes payment of a ground lease by taking a look at the deed. Ground lease deeds are filed in the land records of the Circuit Court in the county where the residential or commercial property lies. Oftentimes, a deed for numerous ground rents owned by one owner will be written. 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 lease, you can see the registration status through SDAT’s Real Residential or commercial property Search. (When seeing the residential or commercial property record, click “View Ground Rent Redemption”)

If a ground lease is registered for your residential or commercial property, you are obligated to pay the ground rent to the ground lease holder. You should contact the owner listed on the registration type concerning payment of the ground rent or to inform the owner that you want to redeem your ground rent. It is also your obligation 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 rent occupant (property owner) or leaseholder and you have a question, it is a great 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 up until it is posted 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 might not:

1. Collect or attempt to gather any ground lease payments, late costs, interest, collection expenses, or other expenditure related to the ground lease;
2. Bring a civil action versus the leasehold occupant to impose any rights the ground lease holder might have under the ground lease; or
3. Bring an action against the leasehold tenant under the ground lease laws.

If a ground lease is not signed up, and the holder of the lease gathers, or efforts to gather, ground lease payments, late costs, interest, collection costs or other expenses, the leasehold renter might submit an affidavit to the State Department of Assessments and Taxation indicating that the lease holder is in offense of the law.

Once an affidavit has actually been gotten, the Department will inform the leaseholder of the supposed violation, and the leaseholder should send evidence to reveal that their collection was not in violation of the law. If the leaseholder stops working to submit evidence within 45 days of being informed, the Department may void the ground lease registration.

Either celebration may appeal the decision of the Department to the Circuit Court. Appeals should be filed within 45 days of notification of the last choice.

NOTE: If you find that there is no ground lease registered on your residential or commercial property, there is absolutely nothing you need to do. If you are gotten in touch with by a business claiming that you owe them ground rent payments, it could be a rip-off, or the ground lease holder is attempting 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 purchase a residential or commercial property that goes through ground lease and are unable to get in touch with the ground lease holder, your mortgage company may wish to reserve ground rent costs in escrow in case a ground lease holder appears and demands payment of rent. The maximum quantity of back ground lease that can be gathered is limited to three years. This means, if you have actually resided in house for 10 years, and unexpectedly a ground lease holder appears and requires payment, they can just gather three years of back ground rent 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 fail to pay ground rent?

If you fail to pay ground lease on time, the holder can file a lien versus the home on their land for the ground rent 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 submits an action in court to gather the past due ground lease, you may be needed to pay the ground lease holder for charges and expenses associated with the collection of the past due ground rent.

If you stop working to pay any back ground rent, the ground lease holder might also submit an action in court to take belongings of the residential or commercial property. If they do so, you might be accountable for extra costs and expenses and ultimately in your loss of the residential or commercial property. Prior to filing an action for ownership, the ground lease holder must send two notifications to you through first-rate and certified mail.

NOTE: Under Maryland law, a ground lease holder may not demand more than 3 years of unpaid ground lease, and there are limits on just how much a ground lease holder may be compensated for charges 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 rent?

If you don’t own the ground your home is on, you may have the ability 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 lease deed was created. A ground rent created after April 8, 1884 is redeemable and the owner should sell you the ground lease if you desire to purchase it. If you redeem the ground lease you would have absolute ownership of the residential or commercial property in fee simple.
The owner of a ground lease produced after April 8, 1884 must sell you the ground rent at an amount fixed by Maryland law if you wish to buy it. If the ground lease was developed as irredeemable in the terms of the lease, the lease holder need to have filed a notification of intention to protect irredeemability in the land records by December 31, 2010. If a notice was filed, irredeemability continues through the current fiscal year unless another ten years notice is submitted. If the lease holder did not submit notification prior to December 31, 2010, or if they fail to file additional 10 year notices, the ground lease becomes redeemable.
Ground rent owners must provide property owners with all the information essential for the house owner to buy the ground lease. The ground lease holder should include a notification of your right to acquire the ground lease with each, and every, ground lease bill. Additionally, homebuyers need to be notified that they can redeem their ground lease 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 supplies 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 prices for ground rents. The law represent both the leasehold value of the residential or commercial property in addition to the lessee’s yearly earnings to avoid the leaseholder from creating excessive monetary barriers to redeeming one’s ground lease.

A purchase rate is figured out by taking the yearly ground rent charge and dividing it by a capitalization rate. The capitalization rate is based upon the year the lease was developed:

– 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 lease 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 likewise be legal charges and taxes associated with buying ground rent. The purchase of ground lease is a personal monetary transaction, and it is advised that a lawyer or title company be involved to help with the research, documentation, and needed filings.

If you can not afford to buy your ground lease the Maryland Department of Housing and Community Development’s Ground Rent Redemption Loan Program provides special loan funding available for income-eligible property owners.

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

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

Ground rents may be bought, sold, and passed to next of kin through wills, like a home or a household heirloom. 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 tasks increase in the type of documentation, and sometimes through assessments with lawyers or through court appearances. For this reason, ground rent leases in some cases end up being more challenging than useful for the new leaseholders.

When the leasehold interests alter hands, the new leaseholders sometimes may not look for the lessees for payment, and when no needs for payment show up in the mail the property owners are delighted to oblige. However, Maryland law prior to 2007 put the legal burden on the lessees to find their ground leaseholders and pay.