Understanding Ground Rent In Maryland
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- Understanding Ground Rent in Maryland
Understanding Ground Rent in Maryland
Topics on this page:
What is Ground Rent?
How do I understand if a residential or commercial property undergoes ground rent?
What if I can not contact the ground lease holder?
What occurs if I stop working to pay ground lease?
What does it suggest to redeem ground lease?
How much does it cost to redeem ground rent?
What is Ground Rent?
In certain situations, a house owner owns your home they live in but not the land your home sits on. Someone else (the ground lease holder) owns the land and rents the land to the property owner. Under Maryland law, a ground lease holder is entitled to lease payments from the owner of the home that is located on their land. These payments are called ground rent.
Ground rent is most typical in the Greater-Baltimore real estate market but exists throughout Maryland. Ground rent payments usually range from $50 to $150 each year and are normally 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 generally for 99 years and renews indefinitely.
Ground rent offers are various from regular property owner and occupant relationships. This is because the ground lease owner has no right to take back any residential or commercial property unless the tenant 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 house owner stops working 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 house owner is accountable for maintenance of the land and any enhancements on the land, including improvements made to the home itself (Kolker v. Biggs, 203 Md. 137, 141 (1953 )). The homeowner has the authority to modify, remodel, and reconstruct the residential or commercial property as they wish, but they must make sure that their actions maintain the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole responsibility of the property owner to procure and make payment on any utilities that service the residential or commercial property.
How do I know if a residential or commercial property goes through ground rent?
When a residential or commercial property is noted for sale, the residential or commercial property description should list whether the residential or commercial property has any relevant ground rent. If the residential or commercial property is listed as "Fee Simple," the listing consists of both your house and the residential or commercial property (ground) in the purchase rate - there is no ground lease. If there is an indicator of "Ground Rent" in a listing, it suggests that a cost 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 seeking to purchase a home, you can figure out if a residential or commercial property goes through payment of a ground lease 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 numerous cases, a deed for numerous ground leas owned by one owner will be composed. Land records can be discovered on the site mdlandrec.net.
Maryland law requires that ground lease holders sign up 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 "View Ground Rent Redemption")
If a ground lease is signed up for your residential or commercial property, you are obliged to pay the ground rent to the ground lease holder. You need to contact the owner listed on the registration kind relating to payment of the ground lease 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 alter your address or transfer ownership of the residential or commercial property. If you are a ground lease occupant (property owner) or leaseholder and you have a question, it is an excellent 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 until it is posted in the online computer system registry of ground leases. Amendments must also be signed up. If a ground lease is not registered, the ground lease holder may not:
1. Collect or attempt to collect any ground lease payments, late fees, interest, collection costs, or other cost related to the ground lease;
- Bring a civil action versus the leasehold renter to implement any rights the ground lease holder may have under the ground lease; or
- Bring an action versus the leasehold occupant under the ground lease laws.
If a ground lease is not registered, and the holder of the lease gathers, or efforts to gather, ground lease payments, late costs, interest, collection costs or other costs, the leasehold tenant may send an affidavit to the State Department of Assessments and Taxation suggesting that the lease holder is in infraction of the law.
Once an affidavit has been received, the Department will alert the leaseholder of the alleged infraction, and the leaseholder must submit proof to show that their collection was not in infraction of the law. If the leaseholder stops working to submit evidence within 45 days of being informed, the Department might void the ground lease registration.
Either party may appeal the decision of the Department to the Circuit Court. Appeals must be filed within 45 days of notice of the last decision.
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 gotten in touch with by a company claiming that you owe them ground rent payments, it could be a scam, 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 buy a residential or commercial property that undergoes ground rent and are not able to call the ground lease holder, your mortgage company may desire to reserve ground rent charges in escrow in case a ground lease holder appears and requires payment of rent. The maximum quantity of back ground rent that can be collected is limited to 3 years. This means, if you have resided in house for 10 years, and all of a sudden a ground lease holder appears and requires payment, they can just gather 3 years of back ground lease and after that ask you to pay the yearly charge progressing.
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 may 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 gather the past due ground rent, you may be required to pay the ground lease holder for fees and expenses related to the collection of the past due ground rent.
If you fail to pay any back ground lease, 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 responsible for additional costs and expenses and eventually in your loss of the residential or commercial property. Prior to submitting an action for ownership, the ground lease holder must send out two notifications to you via first-rate and licensed mail.
NOTE: Under Maryland law, a ground lease holder might not demand more than 3 years of past due ground lease, and there are limitations on how much a ground lease holder might be repaid for charges and costs. Additionally, you would keep any equity you have in the home rather than forfeiting it to the 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 rent?
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 buy the land (or ground) your home rests on from the ground lease holder. Whether ground lease is redeemable or irredeemable depends on when the ground lease deed was produced. A ground lease created after April 8, 1884 is redeemable and the owner should sell you the ground rent if you wish to purchase it. If you redeem the ground rent you would have absolute ownership of the residential or commercial property in fee simple.
The owner of a ground lease developed after April 8, 1884 must sell 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 regards to the lease, the lease holder need to have filed a notification of intention to maintain irredeemability in the land records by December 31, 2010. If a notice was filed, irredeemability continues through the current fiscal year unless another ten years notice is filed. If the lease holder did not file notice prior to December 31, 2010, or if they fail to file additional ten years notifications, the ground lease becomes redeemable.
Ground rent owners need to supply property owners with all the information essential for the house owner to buy the ground lease. The ground lease holder should consist of a notification of your right to purchase the ground lease with each, and every, ground lease costs. Additionally, homebuyers must be informed that they can redeem their ground lease as part of the preliminary 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 unidentified, 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 currently controls the purchase prices for ground leas. The law accounts for both the leasehold value of the residential or commercial property in addition to the lessee's yearly revenues to avoid the leaseholder from developing excessive financial barriers to redeeming one's ground lease.
A purchase rate is identified by taking the annual ground lease cost 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 instance, if the ground lease is $100 and the lease began in 1945, the estimation is $100 divided by.06. Thus, the expense to purchase your ground rent would be $1,666.67. There will likewise be legal charges and taxes associated with buying ground lease. The purchase of ground rent is a private monetary deal, and it is advised that an attorney or title business be included to help with the research study, documentation, 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 funding 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 may be purchased, 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 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 someone else, the administrative jobs increase in the form of documentation, and often through assessments with legal representatives or through court looks. For this factor, ground lease leases sometimes become more troublesome than helpful for the new leaseholders.
When the leasehold interests alter hands, the new leaseholders sometimes may not look for the lessees for payment, and when no needs for payment arrive in the mail the homeowners are pleased to require. However, Maryland law prior to 2007 put the legal concern on the lessees to discover their ground leaseholders and pay.
