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 takes place if I stop working to pay ground rent?
What does it imply to redeem ground rent?
Just how much does it cost to redeem ground lease?

What is Ground Rent?

In particular situations, a homeowner owns your house they live in however not the land your house rests on. Someone else (the ground lease holder) owns the land and rents the land to the property 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 lease.

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

Ground lease deals are different from normal property manager and renter relationships. This is due to the fact that the ground lease owner has no right to reclaim 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 constructed on it unless the homeowner fails to make the needed payments. If the leaseholder is present with their ground rent payments, the residential or commercial property stays under their control.

The house owner is accountable 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 homeowner has the authority to modify, renovate, and reconstruct the residential or commercial property as they wish, however they must make sure that their actions maintain the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole responsibility of the homeowner to procure and pay on any energies that service the residential or commercial property.

How do I know if a residential or commercial property undergoes ground lease?

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 consists of both your house and the residential or commercial property (ground) in the purchase price - there is no ground rent. If there is an indication 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 looking to purchase a home, you can identify if a residential or commercial property undergoes payment of a ground lease by taking a look at the deed. Ground lease deeds are submitted in the land records of the Circuit Court in the county where the residential or commercial property is located. In many cases, a deed for several ground rents owned by one owner will be written. Land records can be found on the website mdlandrec.net.

Maryland law needs 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 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 viewing 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 obliged to pay the ground rent to the ground lease holder. You ought to get in touch with the owner listed on the registration kind regarding payment of the ground rent or to notify the owner that you want to redeem your ground rent. It is also your duty 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 rent tenant (homeowner) or leaseholder and you have a question, it is a great concept to contact 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 must likewise be signed up. If a ground lease is not registered, the ground lease holder might not:

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

If a ground lease is not registered, and the holder of the lease collects, or efforts to gather, ground lease payments, late fees, interest, collection expenses or other expenses, the leasehold occupant 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 actually been gotten, the Department will notify the leaseholder of the alleged offense, and the leaseholder must send evidence to reveal that their collection was not in infraction of the law. If the leaseholder fails to send proof within 45 days of being alerted, the Department might void the ground lease registration.

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

NOTE: If you find that there is no ground rent registered on your residential or commercial property, there is nothing you must do. If you are called by a service claiming that you owe them ground rent payments, it might be a fraud, or the ground lease holder is attempting to illegally 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 acquire a residential or commercial property that is subject to ground lease and are not able to get in touch with the ground lease holder, your mortgage company may wish to set aside ground lease charges in escrow in case a ground lease holder appears and demands payment of lease. The maximum amount of back ground rent that can be gathered is restricted to three years. This suggests, if you have actually resided in house for 10 years, and suddenly a ground lease holder appears and requires payment, they can just collect three years of back ground rent and after that ask you to pay the annual charge 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 rent on time, the ground lease holder can file a lien against the home on their land for the ground lease owed. The ground lease holder might foreclose on the lien, much like a bank can when you fail to pay your mortgage. If the ground lease holder files an action in court to collect the past due ground lease, you may be required to pay the ground lease holder for fees and costs related to the collection of the past due ground lease.

If you stop working to pay any back ground lease, the ground lease holder may likewise file an action in court to seize the residential or commercial property. If they do so, you might be accountable for additional costs and costs and ultimately in your loss of the residential or commercial property. Prior to submitting an action for ownership, the ground lease holder should send out two notifications to you via first-rate and licensed mail.

NOTE: Under Maryland law, a ground lease holder might not demand more than 3 years of overdue ground rent, and there are limits on how much a ground lease holder might 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 suggest to redeem ground rent?

If you don't own the ground your home is on, you might be able to buy it. To redeem ground rent is to acquire the land (or ground) your home sits on from the ground lease holder. Whether ground rent is redeemable or irredeemable depends upon when the ground lease deed was developed. A ground lease developed after April 8, 1884 is redeemable and the owner should offer you the ground lease if you desire to purchase it. If you redeem the ground lease 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 sell you the ground lease at an amount repaired by Maryland law if you wish to buy it. If the ground lease was developed as irredeemable in the terms of 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 filed, irredeemability continues through the present calendar year unless another ten years notice is submitted. If the lease holder did not file notice prior to December 31, 2010, or if they stop working to file extra 10 year notices, the ground rent ends up being redeemable.
Ground rent owners need to supply homeowners with all the information essential for the property owner to buy the ground rent. The ground lease holder must include a notice of your right to purchase the ground lease with each, and every, ground lease expense. Additionally, homebuyers must be informed that they can redeem their ground rent as part of the preliminary 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 supplies a procedure to redeem the ground lease when there has actually been no communication from the property owner for 3 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 manages the purchase prices for ground rents. The law accounts for both the leasehold worth of the residential or commercial property along with the lessee's yearly incomes to avoid the leaseholder from developing excessive monetary barriers to redeeming one's ground lease.

A purchase rate is figured out by taking the yearly ground rent cost 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 perhaps non-redeemable.

For example, if the ground lease is $100 and the lease started in 1945, the estimation is $100 divided by.06. Thus, the cost to purchase your ground lease would be $1,666.67. There will likewise be legal charges and taxes involved in buying ground lease. The purchase of ground rent is a personal financial deal, and it is suggested that a lawyer or title business be involved to help with the research, paperwork, and needed 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 offers unique loan financing available for income-eligible house 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 bought, offered, 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 individual estate (Myers v. Silljacks, 58 Md. 319, 330 (1882 )). Each time the ground leasehold interest is passed to another person, the administrative tasks increase in the form of paperwork, and sometimes through consultations with attorneys or through court appearances. For this reason, ground lease leases sometimes end up being more challenging than useful for the new leaseholders.

When the leasehold interests change hands, the brand-new leaseholders sometimes may not look for the lessees for payment, and when no needs for payment arrive in the mail the homeowners more than happy to oblige. However, Maryland law prior to 2007 put the legal problem on the lessees to discover their ground leaseholders and pay.