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 goes through ground rent?
What if I can not get in touch with the ground lease holder?
What happens if I stop working to pay ground rent?
What does it suggest to redeem ground rent?
Just how much does it cost to redeem ground lease?

What is Ground Rent?

In particular situations, a house owner owns your home they live in but not the land the home sits on. Another person (the ground lease holder) owns the land and leases the land to the house owner. Under Maryland law, a ground lease holder is entitled to rent payments from the owner of the home that is situated on their land. These payments are known as ground lease.

Ground rent is most typical in the Greater-Baltimore genuine estate market however exists throughout Maryland. Ground lease payments normally vary from $50 to $150 annually and are generally 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 typically for 99 years and renews forever.

Ground rent deals are various from regular 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 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 developed on it unless the property owner stops working to make the required payments. If the leaseholder is current with their ground rent payments, the residential or commercial property stays under their control.

The homeowner is responsible for upkeep 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 house owner has the authority to change, renovate, and rebuild the residential or commercial property as they wish, however they need to ensure that their actions preserve the worth of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole responsibility of the house owner to acquire and make payment on any energies that service the residential or commercial property.

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

When a residential or commercial property is noted for sale, the residential or commercial property description should note whether the residential or commercial property has any relevant ground lease. If the residential or commercial property is listed as "Fee Simple," the listing includes both your home and the residential or commercial property (ground) in the purchase price - there is no ground lease. If there is a sign of "Ground Rent" in a listing, it shows that a cost must 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 acquire a home, you can identify if a residential or commercial property goes through payment of a ground rent by looking 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 lies. Oftentimes, a deed for multiple ground leas owned by one owner will be composed. 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 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 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 rent to the ground lease holder. You must contact the owner noted on the registration form relating to payment of the ground lease or to notify the owner that you wish to redeem your ground rent. It is also your obligation to notify the ground lease holder if you alter your address or transfer ownership of the residential or commercial property. If you are a ground lease tenant (house owner) or leaseholder and you have a concern, it is a great idea 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 up until it is published in the online computer system registry of ground leases. Amendments need to likewise be registered. If a ground lease is not registered, the ground lease holder may not:

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

If a ground lease is not signed up, and the holder of the lease collects, or efforts to gather, ground lease payments, late costs, interest, collection costs or other expenses, the leasehold occupant may send an affidavit to the State Department of Assessments and Taxation indicating that the lease holder is in violation of the law.

Once an affidavit has been received, the Department will notify the leaseholder of the supposed infraction, and the leaseholder must send proof to show that their collection was not in infraction of the law. If the leaseholder stops working to send proof within 45 days of being informed, 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 filed within 45 days of notification of the decision.

NOTE: If you discover that there is no ground rent signed up on your residential or commercial property, there is absolutely nothing you should do. If you are gotten in touch with by a business claiming that you owe them ground rent payments, it might be a fraud, or the ground lease holder is attempting to unlawfully 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 not able to call the ground lease holder, your mortgage company might wish to reserve ground lease fees in escrow in case a ground lease holder appears and requires payment of rent. The maximum amount of back ground rent that can be collected is restricted to 3 years. This indicates, if you have actually lived in house for 10 years, and unexpectedly a ground lease holder appears and requires payment, they can only collect three years of back ground rent and then ask you to pay the yearly cost moving forward.

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 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 stop working 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 fail to pay any back ground rent, the ground lease holder may likewise submit an action in court to seize the residential or commercial property. If they do so, you may be accountable for additional costs and costs and ultimately in your loss of the residential or commercial property. Prior to submitting an action for belongings, the ground lease holder need to send out two notifications to you by means of superior and licensed mail.

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

If you do not own the ground your home is on, you may be able to purchase it. To redeem ground lease is to buy 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 developed. A ground lease produced after April 8, 1884 is redeemable and the owner must sell you the ground lease if you wish 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 created after April 8, 1884 need to sell you the ground rent at an amount fixed 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 need to have filed a notice of objective to maintain irredeemability in the land records by December 31, 2010. If a notice was submitted, irredeemability continues through the current fiscal year unless another 10 year notification is filed. If the lease holder did not submit notice prior to December 31, 2010, or if they stop working to file additional 10 year notices, the ground rent becomes redeemable.
Ground rent owners must offer house owners with all the details necessary for the property owner to purchase the ground rent. The ground lease holder should consist of a notice of your right to acquire the ground lease with each, and every, ground rent bill. Additionally, homebuyers should be alerted 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, call the ground lease holder. If the identity of the ground lease holder is unidentified, the State Department of Assessments and Taxation provides a procedure to redeem the ground lease when there has been no communication from the landlord for 3 years.

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

Just how much does it cost to redeem ground rent?

The State of Maryland presently regulates the purchase rates for ground rents. The law represent both the leasehold worth of the residential or commercial property in addition to the lessee's annual earnings to avoid the leaseholder from creating excessive monetary barriers to redeeming one's ground lease.

A purchase price is determined by taking the annual 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 possibly non-redeemable.

For instance, if the ground lease is $100 and the lease began in 1945, the computation is $100 divided by.06. Thus, the cost to purchase your ground lease would be $1,666.67. There will also be legal charges and taxes included in buying ground lease. The purchase of ground lease is a private financial transaction, and it is recommended that a lawyer or title business be involved to help with the research study, documentation, and required filings.

If you can not pay for to buy your ground lease the Maryland Department of Housing and Community Development's Ground Rent Redemption Loan Program offers unique loan funding readily available for income-eligible house 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 might be purchased, sold, and passed to next of kin through wills, like a home or a family 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 kind of documents, and sometimes through consultations with attorneys or through court looks. For this factor, ground lease leases in some cases end up being more challenging than beneficial for the new leaseholders.

When the leasehold interests change hands, the brand-new leaseholders sometimes might not look for the lessees for payment, and when no needs for payment show up in the mail the homeowners enjoy to oblige. However, Maryland law prior to 2007 put the legal problem on the lessees to find their ground leaseholders and pay.