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 lease?
What if I can not call the ground lease holder?
What occurs if I stop working to pay ground lease?
What does it indicate to redeem ground rent?
Just how much does it cost to redeem ground lease?

What is Ground Rent?

In specific circumstances, a property owner owns the house they reside in but not the land the house sits on. Another person (the ground lease holder) owns the land and rents 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 referred to as ground lease.

Ground rent is most typical in the Greater-Baltimore property market however exists throughout Maryland. Ground lease payments usually range 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 of payment. A ground rent lease is normally for 99 years and restores indefinitely.

Ground rent deals are different from normal landlord 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 rent. That is, the ground lease holder does not have a reversionary right to the residential or commercial property or any structures developed on it unless the homeowner fails to make the needed payments. If the leaseholder is existing with their ground rent payments, the residential or commercial property stays under their control.

The house owner is responsible for upkeep 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 modify, renovate, and reconstruct the residential or commercial property as they wish, however they need to ensure that their actions maintain the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole obligation of the house owner to obtain and pay on any energies that service the residential or commercial property.

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

When a residential or commercial property is noted for sale, the residential or commercial property description need to note whether the residential or commercial property has any applicable ground rent. If the residential or commercial property is noted as "Fee Simple," the listing includes both your house and the residential or commercial property (ground) in the purchase rate - there is no ground rent. If there is a sign 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 seeking to buy a home, you can figure out if a residential or commercial property undergoes payment of a ground lease by taking a look at the deed. Ground rent deeds are filed in the land records of the Circuit Court in the county where the residential or commercial property is located. In a lot of cases, 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 sign up ground lease 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 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 bound to pay the ground rent to the ground lease holder. You should call the owner listed on the registration form regarding payment of the ground lease or to inform the owner that you would like to redeem your ground lease. 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 lease occupant (property owner) or leaseholder and you have a question, it is an excellent concept to call 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 computer system registry of ground leases. Amendments must likewise be registered. 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 costs, interest, collection expenses, or other cost related 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 rent laws.

If a ground lease is not registered, and the holder of the lease collects, or efforts to gather, ground rent payments, late charges, interest, collection expenses or other costs, the leasehold renter might send 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 actually been gotten, the Department will notify the leaseholder of the supposed offense, and the leaseholder should send evidence to show that their collection was not in violation of the law. If the leaseholder fails to submit proof within 45 days of being alerted, the Department might void the ground lease registration.

Either party may appeal the final choice of the Department to the Circuit Court. Appeals should be submitted within 45 days of notification of the decision.

NOTE: If you find that there is no ground lease registered on your residential or commercial property, there is absolutely nothing you must do. If you are contacted by an organization declaring that you owe them ground rent payments, it could be a rip-off, or the ground lease holder is attempting 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 undergoes ground rent and are unable to contact the ground lease holder, your mortgage company might want to reserve ground rent charges in escrow in case a ground lease holder appears and demands payment of rent. The optimum amount of back ground lease that can be collected is limited to 3 years. This implies, 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 collect 3 years of back ground rent and after that ask you to pay the annual cost progressing.

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 file a lien versus the home on their land for the ground rent owed. The ground lease holder may 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 gather the past due ground rent, you might be needed to pay the ground lease holder for costs and costs related to the collection of the past due ground rent.

If you stop working to pay any back ground lease, the ground lease holder may likewise submit an action in court to acquire the residential or commercial property. If they do so, you might be accountable for extra 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 should send out 2 notices to you through first-rate and qualified mail.

NOTE: Under Maryland law, a ground lease holder might 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 fees 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 might be able to acquire it. To redeem ground lease is to buy 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 lease produced after April 8, 1884 is redeemable and the owner should 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 charge simple.
The owner of a ground rent developed after April 8, 1884 need to offer you the ground lease at a quantity fixed by Maryland law if you want to buy it. If the ground lease was established as irredeemable in the terms of the lease, the lease holder should have submitted a notice of objective to protect irredeemability in the land records by December 31, 2010. If a notice was submitted, irredeemability continues through the present calendar year unless another ten years notification is submitted. If the lease holder did not file notification prior to December 31, 2010, or if they fail to file extra ten years notices, the ground lease ends up being redeemable.
Ground lease owners must offer property owners with all the information required for the house owner to buy the ground lease. The ground lease holder should consist of a notification of your right to buy the ground lease with each, and every, ground rent costs. Additionally, property buyers need to be alerted that they can redeem their ground rent as part of the preliminary financing 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 actually been no communication from the proprietor for three 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 presently controls the purchase costs for ground leas. The law accounts for both the leasehold value of the residential or commercial property in addition to the lessee's yearly incomes to prevent the leaseholder from creating excessive financial barriers to redeeming one's ground lease.

A purchase rate is determined by taking the annual ground lease charge and dividing it by a capitalization rate. The capitalization rate is based on 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 possibly non-redeemable.

For example, if the ground lease is $100 and the lease started in 1945, the computation is $100 divided by.06. Thus, the expense to buy your ground rent would be $1,666.67. There will also be legal charges and taxes included in purchasing 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 help with the research, paperwork, and required filings.

If you can not manage 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 income-eligible property 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 purchased, sold, and passed to near relative 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 form of paperwork, and often through consultations with attorneys or through court looks. For this factor, ground lease leases sometimes become more difficult than advantageous for the new leaseholders.

When the leasehold interests change hands, the brand-new leaseholders sometimes might not look for out the lessees for payment, and when no needs for payment get here in the mail the property owners are happy to oblige. However, Maryland law prior to 2007 put the legal concern on the lessees to find their ground leaseholders and pay.