Paying
Ground Rent is Common in Baltimore, Maryland
Courtesy of
http://www.livebaltimore.com/hb/info/GroundRent/
Ground rent is common in Baltimore City’s residential real estate market.
The term "ground rent" means you own the house, but someone else owns the
actual property that the house sits on; therefore, you must pay the owner
rent on that land. The good news is that if you don’t own the ground rent,
you can purchase it.
History of Ground Rent
Dating back to the 18th century, the ground rent system kept initial
homeownership costs low because the buyer only paid for the building and
just rented the land at a fixed cost.
Who Pays Ground Rent
Whoever owns the home on a property with a ground rent lease pays the ground
rent fee. In most cases, ground rent can range from $50-$150 annually and is
usually paid in two installments per year.
When a property is listed for sale on the “Multiple Listing Service,” the
property description should note if there ground rent is applicable – “fee
simple” means you’ll own the house and the ground when paying the purchase
price, while “ground rent” means you’ll pay a fee to the owner of the
ground.
Maryland's New Ground Rent Registry
Under new 2007 regulations, ground rent owners will be required to register
their ground rents into a new database maintained by the Maryland Department
of Assessment and Taxation before September 30, 2010. Homeowners will be
able to use this database to locate their current ground rent owner.
New Ground Rent Notices
Ground rent owners must now
provide homeowners with all of the information necessary for the homeowner
to redeem (or purchase) the ground rent. These notices must be provided with
each ground rent bill. Additionally, home purchasers must be given notice
that they can redeem the ground rent as part of the initial financing or
refinancing of the property. Similar information must now also be disclosed
in a contract of sale.
Lost Ground Rent Holders
If you buy a property that is noted as having ground rent, but you cannot
find the ground owner, your mortgage company may still want to escrow the
fee amount. The most back ground rent that can ever be collected is three
years. This means if you have lived there for ten years and suddenly the
ground rent landlord demands payment, they can only collect three years’
worth of rent and then ask you to pay the annual fee moving forward.
It is their responsibility to prove they
hold title to the property. While the landlord can only collect three years
of back rent, you can face substantial charges on top of the overdue ground
rent, especially if you ignore demands for payment. Ground rent holders can
bill up to $500 before filing suit for non-payment, $700 in attorney’s fees
in connection with a suit, $300 for a title search, plus other costs, all of
which can add up to thousands of dollars.
Failing to Pay Your Ground
Rent
Prior to July 1, 2007, a ground
rent owner could take both the house and the land as payment for rent due,
leaving the homeowner with nothing. Today, ground rent owners are entitled
to a lien against the property for the amount of past ground rent owed and
are able to foreclose on this lien just like a bank can when you fail to pay
your mortgage. The difference today, however, is that the homeowner keeps
any equity he has in his home rather than forfeiting it to the ground rent
owner.
Want to Buy Your Ground Rent?
The owner of a ground rent created after April 8, 1884 must sell you the
ground rent at an amount fixed by Maryland law if you want to buy it. A
purchase price is determined by taking the annual ground rent fee and
dividing it by a range of .04–.12; there are standard rates of redemption,
depending on the year the lease was created. There will also be nominal
legal fees involved in filing these papers that you will be responsible for
paying.
If you want to redeem your ground rent and
cannot locate the owner, the State of Maryland offers the opportunity redeem
the lease through the Department of Assessment and Taxation where there has
been no communication from the landlord for three years. For an application,
go to
www.dat.state.md.us/sdatweb/ground_rent.html.
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