Understanding Ground Rent In Maryland
- Real Estate and Other Housing
- Homeownership
- Understanding Ground Rent in Maryland
Understanding Ground Rent in Maryland
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Topics on this page:
What is Ground Rent?
How do I understand if a residential or commercial property is subject to ground rent?
What if I can not contact the ground lease holder?
What happens if I fail to pay ground lease?
What does it imply to redeem ground rent?
How much does it cost to redeem ground lease?
What is Ground Rent?
In specific scenarios, a property owner owns your home they live in however not the land your house rests on. Somebody else (the ground lease holder) owns the land and rents the land to the house owner. Under Maryland law, a ground lease holder is entitled to rent payments from the owner of the home that is located on their land. These payments are referred to as ground rent.
Ground rent is most common in the Greater-Baltimore property market however exists throughout Maryland. Ground lease payments normally vary from $50 to $150 each year and are usually paid semi-annually (two times a year). The language of the ground lease will set out the terms and conditions of payment. A ground rent lease is usually for 99 years and renews indefinitely.
Ground rent offers are different from normal property owner and renter relationships. This is since the ground lease owner has no right to take back any residential or commercial property unless the renter 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 house owner fails to make the required payments. If the leaseholder is present 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 improvements on the land, consisting of improvements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The homeowner has the authority to alter, remodel, and reconstruct the residential or commercial property as they wish, but they need to ensure that their actions protect the worth of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole obligation of the property owner to obtain and make payment on any utilities that service the residential or commercial property.
How do I understand if a residential or commercial property goes through ground rent?
When a residential or commercial property is listed for sale, the residential or commercial property description must note whether the residential or commercial property has any suitable ground lease. If the residential or commercial property is noted as "Fee Simple," the listing includes both your home and the residential or commercial property (ground) in the purchase cost - there is no ground rent. If there is an indicator of "Ground Rent" in a listing, it indicates that a charge 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 determine 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 lots 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 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 unsure 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 "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 need to call the owner listed on the registration kind relating to payment of the ground lease or to notify the owner that you wish to redeem your ground lease. It is likewise your responsibility to alert 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 concern, it is a great concept 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 registered up until it is published in the online computer system registry of ground leases. Amendments must also be registered. If a ground lease is not registered, the ground lease holder may not:
1. Collect or try to collect any ground rent payments, late costs, interest, collection expenses, or other expenditure related to the ground lease;
- Bring a civil action versus the leasehold occupant to enforce any rights the ground lease holder might have under the ground lease; or
- Bring an action against 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 fees, interest, collection expenses or other costs, the leasehold tenant might send an affidavit to the State Department of Assessments and Taxation suggesting that the lease holder remains in infraction of the law.
Once an affidavit has been gotten, the Department will alert the leaseholder of the alleged infraction, and the leaseholder must send evidence to reveal that their collection was not in offense of the law. If the leaseholder fails to submit proof within 45 days of being notified, the Department may void the ground lease registration.
Either celebration may appeal the decision of the Department to the Circuit Court. Appeals needs to be submitted within 45 days of notice of the decision.
NOTE: If you find that there is no ground lease signed up on your residential or commercial property, there is absolutely nothing you must do. If you are gotten in touch with by a service claiming that you owe them ground rent payments, it could be a rip-off, or the ground lease holder is trying to unlawfully 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 undergoes ground rent and are unable to get in touch with the ground lease holder, your mortgage business may desire to reserve ground rent costs in escrow in case a ground lease holder appears and demands payment of rent. The maximum amount of back ground rent that can be gathered is restricted to three years. This implies, if you have actually resided in house for 10 years, and suddenly a ground lease holder appears and requires payment, they can just collect 3 years of back ground rent and then 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 lease?
If you fail to pay ground lease on time, the ground lease holder can submit a lien versus 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 submits an action in court to collect the past due ground rent, you might be needed to pay the ground lease holder for fees and costs associated with the collection of the past due ground rent.
If you fail to pay any back ground lease, the ground lease holder might likewise file an action in court to take belongings of the residential or commercial property. If they do so, you might be responsible for additional charges and expenses and eventually in your loss of the residential or commercial property. Prior to submitting an action for possession, the ground lease holder need to send 2 notices to you via first-rate and qualified mail.
NOTE: Under Maryland law, a ground lease holder might not require more than 3 years of past due ground lease, and there are limits on just how much a ground lease holder may be repaid for charges and costs. Additionally, you would keep any equity you have in the home instead of 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 do not own the ground your home is on, you might 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 upon when the ground lease deed was created. A ground rent produced after April 8, 1884 is redeemable and the owner should sell you the ground rent if you wish to buy it. If you redeem the ground rent you would have absolute ownership of the residential or commercial property in cost simple.
The owner of a ground rent produced after April 8, 1884 need to offer you the ground rent at an amount fixed by Maryland law if you desire to purchase it. If the ground lease was established as irredeemable in the terms of the lease, the lease holder should have filed a notification of intent to preserve irredeemability in the land records by December 31, 2010. If a notice was filed, 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 file extra 10 year notices, the ground rent becomes redeemable.
Ground lease owners need to offer property owners with all the info necessary for the house owner to purchase the ground rent. The ground lease holder must include a notification of your right to purchase the ground lease with each, and every, ground lease costs. Additionally, homebuyers should 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 wish to redeem the ground lease, call the ground lease holder. If the identity of the ground lease holder is unidentified, the State Department of Assessments and Taxation provides a process to redeem the ground lease when there has been no interaction from the landlord 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 controls the purchase costs for ground leas. The law represent both the leasehold worth of the residential or commercial property along with the lessee's yearly profits to avoid the leaseholder from creating extreme monetary barriers to redeeming one's ground lease.
A purchase price is determined by taking the annual ground rent charge and dividing it by a capitalization rate. The capitalization rate is based on 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 rent is $100 and the lease started in 1945, the calculation is $100 divided by.06. Thus, the expense to acquire your ground lease would be $1,666.67. There will also be legal costs and taxes associated with buying ground rent. The purchase of ground lease is a personal financial deal, and it is recommended that a lawyer or title business be included to assist with the research, documentation, and required filings.
If you can not manage to purchase your ground lease the Maryland of Housing and Community Development's Ground Rent Redemption Loan Program supplies special loan financing offered for income-eligible house owners.
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 purchased, 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 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 lawyers or through court appearances. For this factor, ground lease leases in some cases become more troublesome than helpful for the new leaseholders.
When the leasehold interests alter hands, the new leaseholders periodically may not look for the lessees for payment, and when no needs for payment get here in the mail the property owners enjoy to require. However, Maryland law prior to 2007 put the legal concern on the lessees to find their ground leaseholders and pay.
