Understanding Ground Rent In Maryland

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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 call the ground lease holder?
What occurs if I stop working to pay ground lease?
What does it indicate to redeem ground lease?
How much does it cost to redeem ground rent?


What is Ground Rent?


In specific situations, a house owner owns your house they reside in however not the land the house 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 lease 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 property market however exists throughout Maryland. Ground rent payments typically 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 of payment. A ground rent lease is normally for 99 years and restores forever.


Ground rent deals are various from regular property manager and occupant relationships. This is because the ground lease owner has no right to take back any residential or commercial property unless the occupant does not pay rent. 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 homeowner fails to make the required payments. If the leaseholder is current with their ground lease payments, the residential or commercial property stays under their control.


The property owner is accountable for upkeep of the land and any improvements on the land, consisting of enhancements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The property owner has the authority to modify, remodel, and reconstruct the residential or commercial property as they want, however they should ensure that their actions protect 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 lease?


When a residential or commercial property is listed for sale, the residential or commercial property description should list whether the residential or commercial property has any suitable 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 rent. If there is a sign of "Ground Rent" in a listing, it shows that a fee 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 buy a home, you can identify if a residential or commercial property is subject to payment of a ground rent by looking 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 lies. In a lot of cases, a deed for numerous ground rents owned by one owner will be composed. Land records can be found on the website mdlandrec.net.


Maryland law requires that ground lease holders register 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 rent, you can view 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 registered for your residential or commercial property, you are bound to pay the ground rent to the ground lease holder. You ought to contact the owner listed on the registration kind relating to payment of the ground lease or to inform the owner that you would like to redeem your ground rent. It is likewise 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 tenant (property owner) or leaseholder and you have a concern, 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 registered till it is posted in the online registry of ground leases. Amendments should also be registered. If a ground lease is not signed up, the ground lease holder may not:


1. Collect or attempt to gather any ground lease payments, late costs, interest, collection expenses, or other expense related to the ground lease;
2. Bring a civil action versus 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 occupant under the ground rent laws.


If a ground lease is not signed up, and the holder of the lease gathers, or efforts to gather, ground rent payments, late charges, interest, collection costs or other expenditures, the leasehold renter might submit an affidavit to the State Department of Assessments and Taxation showing that the lease holder remains in violation 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 show that their collection was not in offense of the law. If the leaseholder stops working to submit proof within 45 days of being alerted, the Department may void the ground lease registration.


Either party might appeal the decision of the Department to the Circuit Court. Appeals needs to 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 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 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 buy a residential or commercial property that goes through ground lease and are unable to get in touch with the ground lease holder, your mortgage business may wish to reserve ground lease charges in escrow in case a ground lease holder appears and requires payment of lease. The optimum amount of back ground rent that can be collected is restricted to three years. This implies, if you have resided in house for 10 years, and all of a sudden a ground lease holder appears and requires payment, they can just collect 3 years of back ground lease and after that ask you to pay the annual cost moving forward.


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


What happens if I stop working to pay ground rent?


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 might 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 required 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 also file an action in court to acquire the residential or commercial property. If they do so, you might be responsible for extra fees and costs and ultimately in your loss of the residential or commercial property. Prior to submitting an action for possession, the ground lease holder should send out 2 notifications to you through first-rate and licensed mail.


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


If you do not own the ground your home is on, you may have the ability to purchase it. To redeem ground lease is to acquire 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 created after April 8, 1884 is redeemable and the owner should sell you the ground lease if you want to purchase it. If you redeem the ground rent you would have outright ownership of the residential or commercial property in fee simple.
The owner of a ground lease developed after April 8, 1884 must 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 filed a notice of intention to preserve 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 submitted. If the lease holder did not submit notification prior to December 31, 2010, or if they stop working to submit additional 10 year notifications, the ground lease ends up being redeemable.
Ground rent owners must supply house owners with all the info essential for the property owner to buy the ground rent. The ground lease holder must include a notice of your right to acquire the ground lease with each, and every, ground rent costs. Additionally, property buyers need to be notified that they can redeem their ground lease as part of the initial financing or refinancing of their residential or commercial property.
If you want to redeem the ground lease, get in touch with the ground lease holder. If the identity of the ground lease holder is unidentified, 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 rent?


The State of Maryland presently controls the purchase rates for ground leas. The law represent both the leasehold worth of the residential or commercial property as well as the lessee's annual incomes to avoid the leaseholder from developing extreme monetary barriers to redeeming one's ground lease.


A purchase price is determined by taking the annual ground lease fee 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 .


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 buy your ground rent would be $1,666.67. There will also be legal charges and taxes associated with purchasing ground lease. The purchase of ground rent is a personal monetary transaction, and it is recommended that an attorney or title company be included to help with the research, paperwork, and needed filings.


If you can not afford to buy your ground rent the Maryland Department of Housing and Community Development's Ground Rent Redemption Loan Program offers unique loan financing available 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 might be purchased, sold, and passed to near relative through wills, like a home or a family heirloom. The leasehold interest in the residential or commercial property is considered personalty, and is governed by the law that directs the administration of individual 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 form of documentation, and often through assessments with attorneys or through court looks. For this reason, ground lease leases in some cases become more burdensome than advantageous 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 show up in the mail the property owners enjoy to require. However, Maryland law prior to 2007 put the legal burden on the lessees to find their ground leaseholders and pay.