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

What is Ground Rent?

In particular scenarios, a homeowner owns your home they reside in but not the land the house rests on. Another person (the ground lease holder) owns the land and leases the land to the property owner. 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 rent.

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

Ground rent offers are various from typical landlord and occupant 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 homeowner fails to make the required payments. If the leaseholder is present 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 enhancements on the land, including enhancements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The property owner has the authority to modify, renovate, and rebuild the residential or commercial property as they want, however they should ensure that their actions preserve the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole responsibility of the property 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 goes through ground lease?

When a residential or commercial property is noted for sale, the residential or commercial property description ought to note whether the residential or commercial property has any applicable ground rent. If the residential or commercial property is listed as "Fee Simple," the listing consists of both your home and the residential or commercial property (ground) in the purchase cost - there is no ground lease. If there is a sign of "Ground Rent" in a listing, it indicates 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 looking to purchase a home, you can determine if a residential or commercial property goes through payment of a ground rent by looking at the deed. Ground lease deeds are filed in the land records of the Circuit Court in the county where the residential or commercial property is situated. In a lot of cases, a deed for numerous ground leas 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 uncertain 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 viewing 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 obligated to pay the ground lease to the ground lease holder. You should get in touch with the owner listed on the registration type relating to payment of the ground lease or to inform the owner that you want to redeem your ground rent. It is also your obligation to notify the ground lease holder if you change 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 concern, it is an excellent idea to call 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 up until it is posted in the online pc registry of ground leases. Amendments should also be signed up. If a ground lease is not signed up, the ground lease holder might not:

1. Collect or attempt to gather any ground rent payments, late fees, interest, collection expenses, or other cost associated to the ground lease;
2. Bring a civil action versus the leasehold renter 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 signed up, and the holder of the lease collects, or attempts to gather, ground rent payments, late fees, interest, collection costs or other expenses, the leasehold renter 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 actually been received, the Department will alert the leaseholder of the alleged violation, and the leaseholder should send proof to show that their collection was not in offense of the law. If the leaseholder fails to send evidence within 45 days of being alerted, the Department may void the ground lease registration.

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

NOTE: If you find that there is no ground rent registered on your residential or commercial property, there is absolutely nothing you need to do. If you are contacted by a company declaring that you owe them ground lease payments, it might be a rip-off, or the ground lease holder is trying 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 purchase a residential or commercial property that undergoes ground rent and are unable to contact the ground lease holder, your mortgage business may want to reserve ground lease charges in escrow in case a ground lease holder appears and demands payment of rent. The maximum amount of back ground lease that can be collected is restricted to three years. This means, if you have actually lived in house for 10 years, and unexpectedly a ground lease holder appears and requires payment, they can just collect 3 years of back ground lease and then ask you to pay the annual fee moving on.

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

What takes place if I fail to pay ground rent?

If you stop working to pay ground rent on time, the ground lease holder can submit a lien against 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 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 needed 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 rent, the ground lease holder may also file an action in court to seize the residential or commercial property. If they do so, you might be accountable for extra charges and costs and eventually in your loss of the residential or commercial property. Prior to filing an action for belongings, the ground lease holder must send two notices to you via first-class and certified mail.

NOTE: Under Maryland law, a ground lease holder might not demand more than 3 years of unpaid ground rent, and there are limits on just how much a ground lease holder may be repaid for costs and costs. 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 indicate to redeem ground rent?

If you don't own the ground your home is on, you may have the ability to buy it. To redeem ground rent 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 lease deed was developed. A ground lease created after April 8, 1884 is redeemable and the owner must sell you the ground lease if you wish to buy it. If you redeem the ground rent 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 sell you the ground rent at a quantity fixed by Maryland law if you wish to purchase it. If the ground lease was established as irredeemable in the regards to the lease, the lease holder must have submitted a notice of intent to preserve irredeemability in the land records by December 31, 2010. If a notice was filed, irredeemability continues through the current calendar year unless another 10 year notice is submitted. If the lease holder did not file notice prior to December 31, 2010, or if they stop working to submit extra ten years notices, the ground lease becomes redeemable.
Ground rent owners must provide house owners with all the info needed for the house owner to buy the ground lease. The ground lease holder should include a notification of your right to purchase the ground lease with each, and every, ground rent bill. Additionally, property buyers need to be notified 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 offers a process to redeem the ground lease when there has been no communication from the property owner for 3 years.

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

Just how much does it cost to redeem ground lease?

The State of Maryland currently regulates the purchase prices for ground rents. The law accounts for both the leasehold worth of the residential or commercial property in addition to the lessee's annual incomes to prevent the leaseholder from creating extreme financial barriers to redeeming one's ground lease.

A purchase price is determined by taking the yearly ground lease 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 example, if the ground lease is $100 and the lease began in 1945, the estimation is $100 divided by.06. Thus, the cost to buy your ground lease would be $1,666.67. There will likewise be legal fees and taxes included in buying ground lease. The purchase of ground rent is a private financial deal, and it is advised that a lawyer or title business be included to help with the research, paperwork, and needed 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 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 rents may be purchased, sold, and passed to near relative through wills, like a home or a household treasure. The leasehold interest in the residential or commercial property is considered 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 someone else, the administrative tasks increase in the type of paperwork, and sometimes through consultations with legal representatives or through court appearances. For this reason, ground rent leases sometimes end up being more difficult than helpful for the new leaseholders.

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