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 know if a residential or commercial property is subject to ground rent?
What if I can not contact the ground lease holder?
What occurs if I stop working to pay ground rent?
What does it mean to redeem ground lease?
Just how much does it cost to redeem ground lease?

What is Ground Rent?

In particular scenarios, a property owner owns the house they reside in however not the land the house sits on. Someone 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 known as ground lease.

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

Ground lease deals are different from typical property manager and tenant relationships. This is because the ground lease owner has no right to take back any residential or commercial property unless the renter does not pay lease. That is, the ground lease holder doesn't have a reversionary right to the residential or commercial property or any structures developed on it unless the house owner fails to make the required payments. If the leaseholder is existing with their ground lease payments, the residential or commercial property remains under their control.

The homeowner is responsible for maintenance of the land and any enhancements on the land, including enhancements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The property owner has the authority to change, remodel, and reconstruct the residential or commercial property as they want, but they must make sure that their actions maintain the worth of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole obligation of the homeowner to procure and make payment on any utilities that service the residential or commercial property.

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

When a residential or commercial property is listed for sale, the residential or commercial property description must note whether the residential or commercial property has any suitable ground rent. If the residential or commercial property is listed as "Fee Simple," the listing consists of both the home and the residential or commercial property (ground) in the purchase price - there is no ground lease. If there is an indication of "Ground Rent" in a listing, it shows 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 looking to acquire a home, you can determine if a residential or commercial property goes through payment of a ground rent by looking 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. In most cases, a deed for numerous ground leas owned by one owner will be written. Land records can be discovered on the website 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 uncertain 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 signed up for your residential or commercial property, you are obligated to pay the ground rent to the ground lease holder. You must get in touch with the owner listed on the registration kind concerning payment of the ground rent or to inform the owner that you would like to redeem your ground rent. It is also your responsibility to alert the ground lease holder if you alter 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 good concept to contact 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 until it is posted in the online registry of ground leases. Amendments must also be signed up. If a ground lease is not signed up, the ground lease holder might not:

1. Collect or try to gather any ground lease payments, late charges, interest, collection costs, or other cost associated to the ground lease;
2. Bring a civil action against the leasehold tenant to enforce any rights the ground lease holder may 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 signed up, and the holder of the lease gathers, or attempts to gather, ground rent payments, late costs, interest, collection costs or other expenditures, the leasehold occupant may submit an affidavit to the State Department of Assessments and Taxation suggesting that the lease holder remains in violation of the law.

Once an affidavit has actually been gotten, the Department will notify the leaseholder of the supposed offense, and the leaseholder needs to send proof to show 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 might void the ground lease registration.

Either party may appeal the decision of the Department to the Circuit Court. Appeals should be filed within 45 days of notice of the decision.

NOTE: If you find that there is no ground rent signed up on your residential or commercial property, there is absolutely nothing you need to do. If you are called by a business declaring that you owe them ground lease payments, it might be a rip-off, 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 acquire a residential or commercial property that is subject to ground rent and are unable to contact the ground lease holder, your mortgage business may wish to set aside ground lease charges in escrow in case a ground lease holder appears and demands payment of lease. The optimum quantity of back ground rent that can be gathered is restricted to three years. This suggests, if you have lived in house for 10 years, and all of a sudden a ground lease holder appears and demands payment, they can only gather three years of back ground lease and after that ask you to pay the yearly cost moving on.

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

What occurs if I stop working to pay ground lease?

If you fail to pay ground lease on time, the ground lease 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 files an action in court to gather the past due ground lease, you might be needed to pay the ground lease holder for charges and expenses related to the collection of the past due ground rent.

If you fail to pay any back ground rent, the ground lease holder may also file an action in court to acquire the residential or commercial property. If they do so, you might be responsible for additional costs and costs and ultimately in your loss of the residential or commercial property. Prior to filing an action for ownership, the ground lease holder must send 2 notices to you by means of superior and qualified mail.

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

If you do not own the ground your home is on, you may have the ability to buy it. To redeem ground lease is to purchase the land (or ground) your home rests on from the ground lease holder. Whether ground rent is redeemable or irredeemable depends upon when the ground rent deed was created. A ground lease created after April 8, 1884 is redeemable and the owner needs to sell you the ground rent if you wish to purchase 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 lease developed after April 8, 1884 need to offer you the ground lease at a quantity repaired by Maryland law if you want to purchase it. If the ground lease was developed as irredeemable in the terms of the lease, the lease holder must have submitted a notice of objective to preserve irredeemability in the land records by December 31, 2010. If a notice was submitted, irredeemability continues through the existing calendar year unless another ten years notice is filed. If the lease holder did not file notice prior to December 31, 2010, or if they fail to file additional 10 year notifications, the ground rent ends up being redeemable.
Ground lease owners must provide house owners with all the details necessary for the homeowner to acquire the ground rent. 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 must be notified that they can redeem their ground rent as part of the initial funding or refinancing of their residential or commercial property.
If you wish to redeem the ground lease, get in touch with the ground lease holder. If the identity of the ground lease holder is unknown, the State Department of Assessments and Taxation offers a process to redeem the ground lease when there has been no communication from the landlord 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 leas. The law represent both the leasehold value of the residential or commercial property along with the lessee's yearly profits to avoid the leaseholder from creating excessive monetary barriers to redeeming one's ground lease.

A purchase price is figured out 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 produced:

- 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 example, if the ground rent is $100 and the lease started in 1945, the estimation is $100 divided by.06. Thus, the expense to buy your ground rent would be $1,666.67. There will likewise be legal costs and taxes involved in buying ground rent. The purchase of ground rent is a private monetary transaction, and it is advised that a lawyer or title business be involved to assist with the research, documents, and required 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 offers special loan financing 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 leas might be bought, sold, and passed to next of kin through wills, like a home or a family 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 paperwork, and often through consultations with legal representatives or through court looks. For this factor, ground rent leases in some cases become more burdensome than beneficial for the new leaseholders.

When the leasehold interests alter hands, the brand-new leaseholders occasionally may not look for the lessees for payment, and when no needs for payment arrive in the mail the property owners are happy to oblige. However, Maryland law prior to 2007 put the legal concern on the lessees to discover their ground leaseholders and make payments.