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 contact the ground lease holder?
What occurs if I stop working to pay ground lease?
What does it imply to redeem ground lease?
Just how much does it cost to redeem ground lease?
What is Ground Rent?
In particular scenarios, a homeowner owns your house they reside in but not the land your home rests on. Somebody else (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 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 normally range from $50 to $150 each year and are typically 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 restores indefinitely.
Ground rent offers are various from typical property owner and renter relationships. This is since the ground lease owner has no right to reclaim any residential or commercial property unless the tenant does not pay rent. 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 house owner fails to make the required payments. If the leaseholder is existing with their ground lease payments, the residential or commercial property remains under their control.
The property owner is accountable for upkeep of the land and any improvements on the land, consisting of improvements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The property owner has the authority to change, redesign, and reconstruct the residential or commercial property as they want, however they must 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 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 ought to note whether the residential or commercial property has any suitable 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 cost - 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 aiming to purchase a home, you can figure out if a residential or commercial property goes through payment of a ground lease 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 lies. In a lot of cases, a deed for several ground leas owned by one owner will be written. Land records can be found on the site 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 lease, 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 bound to pay the ground lease to the ground lease holder. You must contact the owner noted on the registration kind relating to payment of the ground lease or to inform the owner that you wish to redeem your ground lease. It is also your responsibility 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 rent occupant (property owner) or leaseholder and you have a concern, it is an excellent concept to contact 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 published in the online windows registry of ground leases. Amendments must likewise be signed up. If a ground lease is not signed up, the ground lease holder may not:
1. Collect or try to collect any ground rent payments, late fees, interest, collection expenses, or other expenditure associated to the ground lease;
2. Bring a civil action versus the leasehold renter to enforce any rights the ground lease holder may have under the ground lease; or
3. Bring an action versus the leasehold tenant under the ground rent laws.
If a ground lease is not registered, and the holder of the lease collects, or efforts to collect, ground lease payments, late charges, interest, collection costs or other expenses, the leasehold renter may send 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 alert the leaseholder of the alleged violation, and the leaseholder needs to submit evidence to show that their collection was not in violation of the law. If the leaseholder fails to submit evidence within 45 days of being notified, the Department might void the ground lease registration.
Either party might appeal the decision of the Department to the Circuit Court. Appeals needs to be submitted within 45 days of notice of the last choice.
NOTE: If you discover that there is no ground rent signed up on your residential or commercial property, there is absolutely nothing you must do. If you are called by a service claiming that you owe them ground rent payments, it could be a fraud, or the ground lease holder is attempting 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 purchase a residential or commercial property that is subject to ground rent and are unable to call the ground lease holder, your mortgage business might desire to set aside ground lease fees in escrow in case a ground lease holder appears and requires payment of lease. The optimum quantity of back ground rent that can be collected is restricted to 3 years. This suggests, if you have resided in house for 10 years, and all of a sudden a ground lease holder appears and demands payment, they can just collect 3 years of back ground lease and after that ask you to pay the yearly fee progressing.
Read the law: Md. Code, Real Residential Or Commercial Property § 8-806.
What takes place if I stop working to pay ground rent?
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 may foreclose on the lien, much like a bank can when you stop working to pay your mortgage. If the ground lease holder submits an action in court to collect the past due ground lease, you might be required to pay the ground lease holder for costs and costs associated with the collection of the past due ground rent.
If you fail to pay any back ground rent, the ground lease holder might likewise file an action in court to acquire the residential or commercial property. If they do so, you may be accountable for extra charges and expenses 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 via top-notch and certified mail.
NOTE: Under Maryland law, a ground lease holder might not demand more than 3 years of overdue ground rent, and there are limitations on how much a ground lease holder might be repaid for fees 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 don't own the ground your home is on, you may have the ability to purchase it. To redeem ground lease is to purchase the land (or ground) your home rests on from the ground lease holder. Whether ground rent is redeemable or irredeemable depends on when the ground rent deed was developed. A ground lease developed after April 8, 1884 is redeemable and the owner needs to offer you the ground lease if you desire to buy it. If you redeem the ground rent you would have outright ownership of the residential or commercial property in charge simple.
The owner of a ground lease created after April 8, 1884 need to offer you the ground rent at an amount repaired by Maryland law if you wish to buy it. If the ground lease was established as irredeemable in the regards to the lease, the lease holder should have filed a notice of objective to maintain irredeemability in the land records by December 31, 2010. If a notification was filed, irredeemability continues through the existing 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 fail to file extra ten years notifications, the ground lease becomes redeemable.
Ground rent owners must provide house owners with all the details necessary for the property owner to purchase the ground rent. The ground lease holder must include a notice of your right to buy the ground lease with each, and every, ground rent expense. Additionally, property buyers need to be notified that they can redeem their ground lease as part of the initial funding or refinancing of their residential or commercial property.
If you wish to redeem the ground lease, get in touch with the ground lease holder. If the identity of the ground lease holder is unknown, the State Department of Assessments and Taxation provides a procedure 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.
Just how much does it cost to redeem ground rent?
The State of Maryland presently regulates the purchase costs 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 avoid the leaseholder from producing excessive monetary barriers to redeeming one's ground lease.
A purchase cost is determined by taking the annual ground lease charge 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 potentially 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 purchase your ground rent would be $1,666.67. There will also be legal fees and taxes involved in buying ground rent. The purchase of ground lease is a personal monetary deal, and it is recommended that a lawyer or title company be included to help with the research, paperwork, and needed filings.
If you can not afford to purchase your ground lease the Maryland Department of Housing and Community Development's Ground Rent Redemption Loan Program provides special loan financing offered for income-eligible homeowners.
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 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 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 kind of documentation, and in some cases through assessments with legal representatives or through court appearances. For this reason, ground lease leases often end up being more troublesome than helpful for the brand-new leaseholders.
When the leasehold interests alter hands, the new leaseholders occasionally might not look for the lessees for payment, and when no demands for payment show up in the mail the homeowners are pleased to oblige. However, Maryland law prior to 2007 put the legal problem on the lessees to discover their ground leaseholders and make payments.
