Understanding Ground Rent In Maryland
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- 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 know if a residential or commercial property is subject to ground rent?
What if I can not get in touch with the ground lease holder?
What occurs if I fail to pay ground lease?
What does it imply to redeem ground rent?
Just how much does it cost to redeem ground rent?
What is Ground Rent?
In particular situations, a homeowner owns your home they reside in but not the land your house rests on. Another person (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 called ground lease.
Ground rent is most common in the Greater-Baltimore property market but exists throughout Maryland. Ground rent payments typically range from $50 to $150 each year and are usually 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 deals are various from typical property owner and renter relationships. This is due to the fact that 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 built on it unless the house owner fails to make the required payments. If the leaseholder is current with their ground rent payments, the residential or commercial property stays under their control.
The property owner is accountable for maintenance of the land and any improvements on the land, including 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 wish, but they need to guarantee 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 homeowner to acquire and make payment on any utilities that service the residential or commercial property.
How do I understand 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 suitable ground rent. If the residential or commercial property is listed as "Fee Simple," the listing consists of both your home and the residential or commercial property (ground) in the purchase rate - there is no ground lease. If there is an indication of "Ground Rent" in a listing, it suggests that a charge must 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 acquire a home, you can figure out if a residential or commercial property goes through payment of a ground rent by looking 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 composed. Land records can be found on the site mdlandrec.net.
Maryland law requires that ground lease holders register ground rent 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 on "View Ground Rent Redemption")
If a ground lease is signed up for your residential or commercial property, you are obligated to pay the ground rent to the ground lease holder. You ought to contact the owner noted on the registration type concerning payment of the ground rent or to inform the owner that you would like to redeem your ground lease. It is likewise your duty to notify the ground lease holder if you alter your address or transfer ownership of the residential or commercial property. If you are a ground lease renter (property owner) or leaseholder and you have a concern, it is an excellent 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 till it is published in the online pc registry of ground leases. Amendments should 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 charges, interest, collection costs, or other expense related to the ground lease;
- Bring a civil action against the leasehold tenant to implement any rights the ground lease holder may have under the ground lease; or
- Bring an action versus the leasehold tenant under the ground rent laws.
If a ground lease is not signed up, and the holder of the lease collects, or attempts to collect, ground lease payments, late costs, interest, collection expenses or other costs, the leasehold renter may send an affidavit to the State Department of Assessments and Taxation suggesting that the lease holder is in violation of the law.
Once an affidavit has been received, the Department will inform the leaseholder of the alleged offense, and the leaseholder needs to submit proof to show that their collection was not in offense of the law. If the leaseholder stops working to send evidence within 45 days of being alerted, the Department may void the ground lease registration.
Either party might appeal the decision of the Department to the Circuit Court. Appeals must be submitted within 45 days of notification of the final choice.
NOTE: If you discover that there is no ground rent signed up on your residential or commercial property, there is absolutely nothing you need to do. If you are called by a company declaring that you owe them ground lease payments, it could be a scam, or the ground lease holder is trying to unlawfully 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 purchase a residential or commercial property that undergoes ground lease and are unable to contact the ground lease holder, your mortgage company might want to set aside ground rent fees in escrow in case a ground lease holder appears and requires payment of rent. The optimum amount of back ground rent that can be collected is limited to 3 years. This indicates, if you have resided in house for 10 years, and unexpectedly a ground lease holder appears and requires payment, they can just collect three years of back ground lease and then ask you to pay the yearly cost progressing.
Read the law: Md. Code, Real Residential Or Commercial Property § 8-806.
What happens if I fail to pay ground rent?
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 might foreclose on the lien, simply 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 lease, you may be required to pay the ground lease holder for charges and costs connected with the collection of the past due ground lease.
If you fail to pay any back ground rent, the ground lease holder may likewise submit an action in court to acquire the residential or commercial property. If they do so, you may be accountable for additional charges and expenses and eventually 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 through top-notch and certified mail.
NOTE: Under Maryland law, a ground lease holder may not require more than 3 years of unpaid ground lease, and there are limits on just how much a ground lease holder may be reimbursed for costs and expenses. 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 mean to redeem ground rent?
If you don't own the ground your home is on, you might have the ability to acquire it. To redeem ground rent is to acquire 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 developed after April 8, 1884 is redeemable and the owner should offer you the ground rent if you wish to purchase 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 rent developed after April 8, 1884 should offer you the ground lease at a quantity fixed by Maryland law if you want to buy it. If the ground lease was developed as irredeemable in the regards to the lease, the lease holder need to have filed a notification of intent to preserve 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 filed. If the lease holder did not submit notification prior to December 31, 2010, or if they stop working to submit additional 10 year notifications, the ground rent becomes redeemable.
Ground rent owners must supply property owners with all the info required for the homeowner to buy the ground lease. The ground lease holder should consist of a notice of your right to buy the ground lease with each, and every, ground rent bill. Additionally, property buyers should 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 wish to redeem the ground lease, contact the ground lease holder. If the identity of the ground lease holder is unknown, the State Department of Assessments and Taxation supplies a process to redeem the ground lease when there has actually been no interaction from the property manager for 3 years.
Read the law: Md
. Code, Real Residential Or Commercial Property § 8-805.
How much does it cost to redeem ground lease?
The State of Maryland presently regulates the purchase prices for ground rents. The law accounts for both the leasehold worth of the residential or commercial property along with the lessee's annual profits to avoid the leaseholder from producing excessive monetary barriers to redeeming one's ground lease.
A purchase cost is figured out by taking the yearly ground rent charge 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 potentially non-redeemable.
For example, if the ground rent is $100 and the lease began in 1945, the calculation is $100 divided by.06. Thus, the cost to acquire your ground rent would be $1,666.67. There will also be legal charges and taxes associated with purchasing ground lease. 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 study, paperwork, and required filings.
If you can not manage to purchase your ground lease the Maryland Department of Housing and Community Development's Ground Rent Redemption Loan Program provides special loan funding available for 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 might be bought, sold, and passed to next of kin through wills, like a home or a family treasure. 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 another person, 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 challenging than beneficial for the brand-new leaseholders.
When the leasehold interests change hands, the new leaseholders occasionally might not look for out the lessees for payment, and when no demands for payment get here in the mail the house owners more than happy to oblige. However, Maryland law prior to 2007 put the legal problem on the lessees to discover their ground leaseholders and pay.
