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 lease?
What if I can not contact the ground lease holder?
What occurs if I fail to pay ground rent?
What does it indicate to redeem ground lease?
How much does it cost to redeem ground lease?
What is Ground Rent?
In particular circumstances, a property owner owns your house they live in however not the land your home rests on. Somebody else (the ground lease holder) owns the land and leases 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 known as ground lease.
Ground lease is most typical in the Greater-Baltimore realty market but exists throughout Maryland. Ground rent payments normally range from $50 to $150 per year 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 restores forever.
Ground rent offers are different from normal property manager and tenant 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 built on it unless the property 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 homeowner is accountable for maintenance of the land and any improvements on the land, consisting of enhancements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The property owner has the authority to modify, renovate, and reconstruct the residential or commercial property as they want, but they should make sure that their actions maintain the worth of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole obligation 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 undergoes ground lease?
When a residential or commercial property is noted for sale, the residential or commercial property description should note whether the residential or commercial property has any appropriate ground lease. If the residential or commercial property is listed as "Fee Simple," the listing includes both your home and the residential or commercial property (ground) in the purchase rate - there is no ground rent. If there is a sign of "Ground Rent" in a listing, it shows that a charge should be paid to the owner of the ground on which the residential or commercial property sits.
If you own a home, or are wanting to buy a home, you can determine if a residential or commercial property undergoes payment of a ground rent by taking a look 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 located. In numerous cases, a deed for numerous ground rents owned by one owner will be composed. 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 uncertain 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 signed up for your residential or commercial property, you are obligated to pay the ground lease to the ground lease holder. You ought to get in touch with the owner listed on the registration form concerning payment of the ground rent or to inform the owner that you want to redeem your ground lease. It is likewise your duty to inform the ground lease holder if you change your address or transfer ownership of the residential or commercial property. If you are a ground rent renter (house owner) or leaseholder and you have a concern, it is a good idea 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 signed up till it is posted in the online computer 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 attempt to gather any ground rent payments, late fees, interest, collection costs, or other expenditure associated to the ground lease;
2. Bring a civil action against the leasehold renter to implement any rights the ground lease holder might have under the ground lease; or
3. Bring an action versus the leasehold occupant under the ground rent laws.
If a ground lease is not signed up, and the holder of the lease gathers, or attempts to collect, ground lease payments, late charges, interest, collection costs or other costs, the leasehold renter may submit an affidavit to the State Department of Assessments and Taxation showing that the lease holder remains in offense of the law.
Once an affidavit has actually been received, the Department will notify the leaseholder of the alleged violation, and the leaseholder must submit evidence to show that their collection was not in offense of the law. If the leaseholder stops working to submit proof within 45 days of being alerted, the Department might void the ground lease registration.
Either party might appeal the decision of the Department to the Circuit Court. Appeals must be filed within 45 days of notification of the final decision.
NOTE: If you discover that there is no ground rent registered on your residential or commercial property, there is absolutely nothing you need to do. If you are called by a company claiming that you owe them ground lease payments, it might be a rip-off, 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 buy a residential or commercial property that is subject to ground rent and are not able to contact the ground lease holder, your mortgage business may wish to set aside ground rent fees in escrow in case a ground lease holder appears and demands payment of rent. The optimum quantity of back ground rent that can be collected is limited to 3 years. This means, if you have actually resided in home for 10 years, and unexpectedly a ground lease holder appears and requires payment, they can just gather 3 years of back ground rent and after that ask you to pay the yearly fee moving on.
Read the law: Md. Code, Real Residential Or Commercial Property § 8-806.
What happens if I stop working to pay ground lease?
If you stop working to pay ground lease on time, the ground lease holder can file a lien versus the home on their land for the ground rent owed. The ground lease holder may foreclose on the lien, just 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 expenses associated with the collection of the past due ground lease.
If you fail to pay any back ground rent, the ground lease holder may also file an action in court to acquire the residential or commercial property. If they do so, you may 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 need to send two notifications to you by means of first-rate and licensed mail.
NOTE: Under Maryland law, a ground lease holder might not demand more than 3 years of overdue ground lease, 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 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 might be able to acquire it. To redeem ground rent 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 lease deed was created. A ground rent developed after April 8, 1884 is redeemable and the owner needs to sell you the ground rent if you wish to purchase it. If you redeem the ground lease you would have absolute ownership of the residential or commercial property in charge simple.
The owner of a ground rent created after April 8, 1884 should offer you the ground lease at an amount repaired by Maryland law if you desire to buy it. If the ground lease was developed as irredeemable in the regards to the lease, the lease holder should have submitted a notice of intent to preserve irredeemability in the land records by December 31, 2010. If a notification was submitted, irredeemability continues through the present calendar year unless another ten years notification is filed. If the lease holder did not file notice prior to December 31, 2010, or if they stop working to submit additional 10 year notifications, the ground lease becomes redeemable.
Ground rent owners must offer property owners with all the info necessary for the property owner to purchase the ground rent. The ground lease holder should consist of a notice of your right to purchase the ground lease with each, and every, ground lease bill. Additionally, homebuyers need to be notified that they can redeem their ground lease 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 unknown, the State Department of Assessments and Taxation supplies a procedure to redeem the ground lease when there has actually been no communication from the proprietor for 3 years.
Read the law: Md
. Code, Real Residential Or Commercial Property § 8-805.
How much does it cost to redeem ground rent?
The State of Maryland currently manages the purchase costs for ground leas. The law represent both the leasehold worth of the residential or commercial property as well as the lessee's yearly profits to prevent the leaseholder from developing extreme financial barriers to redeeming one's ground lease.
A purchase cost is determined by taking the annual 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 potentially 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 rent would be $1,666.67. There will likewise be legal costs and taxes associated with purchasing ground rent. The purchase of ground rent is a private financial deal, and it is recommended that a lawyer or title business be involved to help with the research study, documentation, and required 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 provides special loan funding offered for income-eligible property 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 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 jobs increase in the type of documentation, and often through consultations with attorneys or through court looks. For this reason, ground rent leases in some cases end up being more burdensome than advantageous for the new leaseholders.
When the leasehold interests change hands, the new leaseholders periodically might not look for the lessees for payment, and when no needs for payment arrive in the mail the homeowners enjoy to oblige. However, Maryland law prior to 2007 put the legal concern on the lessees to discover their ground leaseholders and make payments.
