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 get in touch with the ground lease holder?
What takes place if I fail to pay ground lease?
What does it suggest to redeem ground rent?
How much does it cost to redeem ground lease?

What is Ground Rent?

In certain scenarios, a homeowner owns your home they live in however not the land your house rests on. Somebody else (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 lease payments from the owner of the home that is located on their land. These payments are referred to as ground rent.

Ground lease is most typical in the Greater-Baltimore real estate market but exists throughout Maryland. Ground rent payments normally vary from $50 to $150 per year and are usually 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 usually for 99 years and renews indefinitely.

Ground lease deals are different from regular property owner and tenant relationships. This is because the ground lease owner has no right to reclaim 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 property owner fails to make the required payments. If the leaseholder is current with their ground lease payments, the residential or commercial property remains under their control.

The property owner is accountable for maintenance of the land and any enhancements 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 change, remodel, and rebuild the residential or commercial property as they want, but they should guarantee that their actions maintain the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole duty of the property owner to procure and make payment on any energies that service the residential or commercial property.

How do I know 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 list whether the residential or commercial property has any relevant ground lease. 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 aiming to buy a home, you can identify if a residential or commercial property is subject to payment of a ground lease by taking a look at the deed. Ground rent 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 discovered on the website mdlandrec.net.

Maryland law needs 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 unsure that your residential or commercial property has a ground rent, you can view 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 bound to pay the ground lease to the ground lease holder. You ought to call the owner noted on the registration kind relating to payment of the ground rent or to notify the owner that you wish to redeem your ground lease. It is also your responsibility 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 (property owner) or leaseholder and you have a question, it is a good 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 until it is published in the online windows registry of ground leases. Amendments need to likewise be signed up. If a ground lease is not registered, the ground lease holder might not:

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

If a ground lease is not registered, and the holder of the lease gathers, or attempts to gather, ground rent payments, late fees, interest, collection costs or other expenditures, the leasehold tenant may send an affidavit to the State Department of Assessments and Taxation showing that the lease holder remains in offense of the law.

Once an affidavit has been received, the Department will notify the leaseholder of the supposed offense, and the leaseholder must submit proof to reveal that their collection was not in infraction 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 celebration might appeal the decision of the Department to the Circuit Court. Appeals must be submitted within 45 days of notification of the decision.

NOTE: If you discover that there is no ground lease signed up on your residential or commercial property, there is absolutely nothing you should do. If you are contacted by a company claiming that you owe them ground rent payments, it could be a fraud, 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 undergoes ground lease and are unable to contact the ground lease holder, your mortgage company might wish to set aside ground rent charges in escrow in case a ground lease holder appears and demands payment of rent. The maximum quantity of back ground lease that can be collected is limited to 3 years. This indicates, if you have lived in home 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 then ask you to pay the yearly fee progressing.

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

What occurs if I stop working to pay ground rent?

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 lease 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 collect the past due ground rent, you may 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 rent, the ground lease holder might likewise 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 costs and eventually in your loss of the residential or commercial property. Prior to submitting an action for ownership, the ground lease holder must send two notices to you through top-notch and licensed mail.

NOTE: Under Maryland law, a ground lease holder may not demand more than 3 years of overdue ground rent, and there are limitations on just how much a ground lease holder might be compensated for charges 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 imply to redeem ground lease?

If you don't own the ground your home is on, you may be able to buy it. To redeem ground lease is to buy the land (or ground) your home sits on from the ground lease holder. Whether ground rent is redeemable or irredeemable depends on when the ground lease deed was created. A ground rent created after April 8, 1884 is redeemable and the owner needs to sell you the ground rent if you desire to buy it. If you redeem the ground rent 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 need to offer you the ground lease at a quantity repaired by Maryland law if you wish to purchase it. If the ground lease was developed as irredeemable in the regards to the lease, the lease holder should have filed a notice of intent to maintain irredeemability in the land records by December 31, 2010. If a notification was submitted, irredeemability continues through the present calendar year unless another 10 year 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 becomes redeemable.
Ground lease owners must supply property owners with all the info essential for the house owner to purchase the ground lease. The ground lease holder must 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 initial financing or refinancing of their residential or commercial property.
If you wish to redeem the ground lease, contact 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 actually been no interaction from the proprietor for three 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 currently regulates the purchase costs for ground leas. The law represent both the leasehold worth of the residential or commercial property in addition to the lessee's yearly revenues to prevent the leaseholder from producing extreme monetary barriers to redeeming one's ground lease.

A purchase rate is identified by taking the annual ground rent 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 perhaps non-redeemable.

For example, if the ground lease is $100 and the lease began 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 involved in buying ground lease. The purchase of ground rent is a personal monetary transaction, and it is advised that an attorney or title company be included to help with the research, 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 supplies special loan funding readily available for income-eligible homeowners.

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 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 another person, the administrative jobs increase in the form of paperwork, and often through consultations with attorneys or through court appearances. For this reason, ground rent leases often end up being more difficult than helpful for the new leaseholders.

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