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 happens if I stop working to pay ground rent?
What does it imply to redeem ground rent?
How much does it cost to redeem ground rent?

What is Ground Rent?

In particular scenarios, a property owner owns the home they reside in but not the land your home sits on. Somebody else (the ground lease holder) owns the land and rents the land to the homeowner. Under Maryland law, a ground lease holder is entitled to rent payments from the owner of the home that is situated on their land. These payments are known as ground rent.

Ground lease is most typical in the Greater-Baltimore realty market however exists throughout Maryland. Ground rent payments typically vary from $50 to $150 per year and are usually paid semi-annually (two times 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 renews indefinitely.

Ground rent deals are various from regular landlord and renter 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 constructed 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 homeowner is accountable for upkeep of the land and any enhancements on the land, consisting of enhancements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The house owner has the authority to modify, renovate, and rebuild the residential or commercial property as they want, but they must make sure that their actions preserve the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole duty of the house owner to acquire and pay on any energies that service the residential or commercial property.

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

When a residential or commercial property is listed for sale, the residential or commercial property description need to list whether the residential or commercial property has any applicable ground rent. 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 lease. If there is an indicator of "Ground Rent" in a listing, it shows that a fee 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 buy a home, you can identify if a residential or commercial property goes through payment of a ground lease by looking at the deed. Ground rent deeds are filed 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 numerous ground leas owned by one owner will be written. Land records can be discovered on the site mdlandrec.net.

Maryland law needs 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 lease, you can view the registration status through SDAT's Real Residential or commercial property Search. (When seeing the residential or commercial property record, click "View Ground Rent Redemption")

If a ground lease is signed up 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 type concerning payment of the ground rent or to inform the owner that you want to redeem your ground lease. It is likewise 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 lease renter (house owner) or leaseholder and you have a concern, it is a great 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 signed up till it is posted in the online windows registry of ground leases. Amendments should likewise be signed up. If a ground lease is not registered, the ground lease holder may not:

1. Collect or try to gather any ground rent payments, late fees, interest, collection expenses, or other expense 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 rent laws.

If a ground lease is not registered, and the holder of the lease gathers, or efforts to collect, ground rent payments, late fees, interest, collection expenses or other expenses, the leasehold tenant may send an affidavit to the State Department of Assessments and Taxation suggesting that the lease holder remains in violation of the law.

Once an affidavit has actually been gotten, the Department will inform the leaseholder of the alleged offense, and the leaseholder needs to submit evidence to reveal that their collection was not in violation of the law. If the leaseholder fails to send evidence within 45 days of being notified, the Department may void the ground lease registration.

Either party may appeal the final decision of the Department to the Circuit Court. Appeals should be filed within 45 days of notice of the final decision.

NOTE: If you discover that there is no ground lease registered on your residential or commercial property, there is nothing you need to 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 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 acquire a residential or commercial property that undergoes ground lease and are not able to call the ground lease holder, your mortgage business might want to set aside ground lease fees in escrow in case a ground lease holder appears and requires payment of lease. The maximum amount of back ground lease that can be gathered is restricted to 3 years. This indicates, if you have actually lived in home for 10 years, and suddenly a ground lease holder appears and demands payment, they can only gather 3 years of back ground rent and then ask you to pay the annual charge moving on.

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

What happens if I fail to pay ground lease?

If you fail to pay ground lease on time, the ground lease holder can file a lien against the home on their land for the ground rent owed. The ground lease holder may 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 rent, you might be required to pay the ground lease holder for costs and costs related to the collection of the past due ground rent.

If you stop working to pay any back ground lease, 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 additional fees and costs and ultimately in your loss of the residential or commercial property. Prior to filing an action for belongings, the ground lease holder should send out 2 notices to you via first-rate and qualified mail.

NOTE: Under Maryland law, a ground lease holder may not demand more than 3 years of past due ground lease, and there are limitations on just how much a ground lease holder may be compensated for charges and expenses. Additionally, you would keep any equity you have in the home instead of surrendering 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 mean to redeem ground lease?

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 purchase the land (or ground) your home sits on from the ground lease holder. Whether ground lease is redeemable or irredeemable depends upon when the ground lease deed was developed. A ground lease produced after April 8, 1884 is redeemable and the owner should offer you the ground lease if you want to buy 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 created after April 8, 1884 should offer you the ground rent at a quantity repaired by Maryland law if you wish to purchase it. If the ground lease was established as irredeemable in the terms of the lease, the lease holder should have submitted a notification of intention to maintain irredeemability in the land records by December 31, 2010. If a notice was submitted, irredeemability continues through the present calendar year unless another 10 year notification is filed. If the lease holder did not submit notification prior to December 31, 2010, or if they fail to submit additional 10 year notifications, the ground rent ends up being redeemable.
Ground rent owners need to offer homeowners with all the information essential for the house owner to acquire the ground lease. The ground lease holder must include a notice of your right to purchase the ground lease with each, and every, ground lease costs. Additionally, homebuyers need to be alerted that they can redeem their ground rent as part of the initial funding or refinancing of their residential or commercial property.
If you want to redeem the ground lease, contact the ground lease holder. If the identity of the ground lease holder is unidentified, the State Department of Assessments and Taxation provides a procedure to redeem the ground lease when there has actually been no interaction 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 lease?

The State of Maryland currently manages the purchase rates for ground leas. 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 financial barriers to redeeming one's ground lease.

A purchase price is determined by taking the annual ground rent fee and dividing it by a capitalization rate. The capitalization rate is based upon the year the lease was produced:

- 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 instance, if the ground lease is $100 and the lease began in 1945, the calculation is $100 divided by.06. Thus, the cost to acquire your ground lease would be $1,666.67. There will likewise be legal fees and taxes associated with acquiring ground rent. The purchase of ground rent is a private monetary deal, and it is recommended that a lawyer or title business be included to help with the research study, paperwork, and needed filings.

If you can not pay for to buy your ground rent the Maryland Department 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 inherit a ground lease residential or commercial property?

Ground leas might be purchased, 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 personal estate (Myers v. Silljacks, 58 Md. 319, 330 (1882 )). Each time the ground leasehold interest is passed to somebody else, the administrative tasks increase in the type of documents, and often through consultations with lawyers or through court appearances. For this reason, ground lease leases in some cases end up being more challenging than advantageous for the brand-new leaseholders.

When the leasehold interests change hands, the new leaseholders occasionally might not seek out the lessees for payment, and when no demands for payment get here in the mail the property owners more than happy to oblige. However, Maryland law prior to 2007 put the legal concern on the lessees to discover their ground leaseholders and pay.