Understanding Ground Rent In Maryland
- Real Estate and Other Housing
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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 goes through ground lease?
What if I can not get in touch with the ground lease holder?
What takes place if I fail to pay ground lease?
What does it imply to redeem ground rent?
How much does it cost to redeem ground lease?
What is Ground Rent?
In specific circumstances, a homeowner owns the home they live in but not the land your home sits on. Another person (the ground lease holder) owns the land and leases 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 located on their land. These payments are referred to as ground rent.
Ground rent is most common in the Greater-Baltimore property market but exists throughout Maryland. Ground lease payments typically range from $50 to $150 each year and are typically 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 normally for 99 years and restores forever.
Ground rent offers are different from regular property owner and occupant relationships. This is since 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 developed on it unless the house owner stops working to make the needed payments. If the leaseholder is existing with their ground rent payments, the residential or commercial property remains under their control.
The property owner 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 homeowner has the authority to alter, remodel, and reconstruct the residential or commercial property as they want, however they should guarantee that their actions protect the value of the land (Crowe v. Wilson, 65 Md. 479, 484 (1886 )). Additionally, it is the sole responsibility of the property owner to obtain 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 lease?
When a residential or commercial property is noted for sale, the residential or commercial property description need to list whether the residential or commercial property has any appropriate ground lease. If the residential or commercial property is noted as "Fee Simple," the listing consists of both the home and the residential or commercial property (ground) in the purchase price - there is no ground rent. If there is an indication of "Ground Rent" in a listing, it shows that a fee 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 wanting to purchase a home, you can figure out if a residential or commercial property goes through payment of a ground rent by taking a look 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 situated. In a lot of 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 unsure that your residential or commercial property has a ground rent, you can see 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 obliged to pay the ground lease to the ground lease holder. You ought to contact the owner noted on the registration kind regarding payment of the ground rent or to notify the owner that you would like to redeem your ground rent. It is also your obligation 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 (homeowner) or leaseholder and you have a concern, it is an excellent idea to call 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 registered until it is posted in the online registry of ground leases. Amendments should likewise be registered. If a ground lease is not signed up, the ground lease holder may not:
1. Collect or attempt to gather any ground lease payments, late charges, interest, collection expenses, or other expense related to the ground lease;
- Bring a civil action against the leasehold tenant to enforce any rights the ground lease holder may have under the ground lease; or
- Bring an action versus the leasehold occupant under the ground rent laws.
If a ground lease is not registered, and the holder of the lease gathers, or efforts to gather, ground rent payments, late costs, interest, collection expenses or other costs, the leasehold renter may submit 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 been gotten, the Department will notify the leaseholder of the supposed violation, and the leaseholder must send evidence to reveal that their collection was not in violation of the law. If the leaseholder stops working to submit evidence within 45 days of being alerted, the Department might void the ground lease registration.
Either party may appeal the decision of the Department to the Circuit Court. Appeals should be submitted within 45 days of notification of the 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 gotten in touch with by a service claiming that you owe them ground rent payments, it could be a fraud, or the ground lease holder is trying 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 purchase a residential or commercial property that goes through ground rent and are not able to call the ground lease holder, your mortgage company might wish to set aside ground lease costs in escrow in case a ground lease holder appears and demands payment of lease. The maximum amount of back ground rent that can be collected is restricted to three years. This indicates, if you have actually lived in house for 10 years, and all of a sudden a ground lease holder appears and requires payment, they can only collect 3 years of back ground lease and after that ask you to pay the yearly charge moving on.
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 versus the home on their land for the ground rent owed. The ground lease holder might foreclose on the lien, just 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 might be needed to pay the ground lease holder for fees and costs related to the collection of the past due ground lease.
If you stop working to pay any back ground rent, the ground lease holder might also file an action in court to take ownership of the residential or commercial property. If they do so, you may be accountable for extra charges and costs and ultimately in your loss of the residential or commercial property. Prior to submitting an action for ownership, the ground lease holder should send out two notices to you via top-notch and licensed mail.
NOTE: Under Maryland law, a ground lease holder might not require more than 3 years of overdue ground rent, and there are limitations on just how much a ground lease holder might be reimbursed for charges and costs. Additionally, you would keep any equity you have in the home rather than 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 rent?
If you don't own the ground your home is on, you may be able to purchase 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 on when the ground lease deed was developed. A ground rent developed after April 8, 1884 is redeemable and the owner must sell you the ground lease if you want to 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 rent produced after April 8, 1884 should offer you the ground lease at an amount repaired by Maryland law if you wish to buy it. If the ground lease was developed as irredeemable in the regards to the lease, the lease holder should have filed a notification of objective to preserve irredeemability in the land records by December 31, 2010. If a notification was submitted, irredeemability continues through the present fiscal year unless another 10 year notification is submitted. If the lease holder did not submit notice prior to December 31, 2010, or if they stop working to submit extra ten years notices, the ground rent ends up being redeemable.
Ground rent owners must offer homeowners with all the info essential for the property owner to acquire the ground rent. The ground lease holder should include a notification of your right to purchase the ground lease with each, and every, ground rent costs. Additionally, homebuyers should be alerted that they can redeem their ground rent as part of the preliminary financing 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 process to redeem the ground lease when there has actually been no communication from the property manager for three 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 rates for ground rents. The law represent both the leasehold worth of the residential or commercial property as well as the lessee's annual earnings to avoid the leaseholder from producing extreme financial barriers to redeeming one's ground lease.
A purchase price is identified 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 created:
- 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 possibly 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 expense to buy your ground lease would be $1,666.67. There will likewise be legal fees and taxes associated with purchasing ground lease. The purchase of ground rent is a private monetary deal, and it is recommended that a lawyer or title business be included to assist with the research, paperwork, and needed filings.
If you can not manage to purchase your ground rent the Maryland Department of Housing and Community Development's Ground Rent Redemption Loan Program supplies special loan financing readily available for income-eligible homeowners.
Read the Law: Md. Code, Real Residential Or Commercial Property § 8-804
What if I acquire a ground lease residential or commercial property?
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Ground leas may be purchased, sold, and passed to next of kin through wills, like a home or a family heirloom. 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 another person, the administrative tasks increase in the form of documents, and sometimes through consultations with legal representatives or through court looks. For this factor, ground rent leases in some cases become more troublesome than useful for the brand-new leaseholders.
When the leasehold interests alter hands, the new leaseholders occasionally might not look for the lessees for payment, and when no needs for payment arrive in the mail the house owners enjoy to oblige. However, Maryland law prior to 2007 put the legal concern on the lessees to find their ground leaseholders and make payments.
