What is Ground Rent?
Ground rent is very common in Baltimore City. It means you own the house, but someone else owns the actual property that the house sits on, and with that you must pay the owner rent on that land.
History of Ground Rent.
Dating back to the 18th century, the ground system kept initial costs low on building housing as it allowed the developer to acquire the land on which to speculate for no cost. The house could be under construction and already sold to an owner before the first ground rent payment was due.
Baltimore ground rents quickly became highly negotiable investments, in a time when savings accounts paid 2-3 percent, ground rents were considered dependable 6 percent investments, secured by the land and a first lien. If a householder defaults on the ground rent, the landlord has the right to take both the land and house, although this did not happen often as an individual would not risk losing their house over a minor annual payment.
Who pays Ground Rent?
Whoever owns a structure on a property with a ground rent lease. When a property is listed on the Multiple Listing Service it should note if there are any additional fees with that house; fee simple (which means the property is included in the sale price) or ground rent (must be paid). In most cases the annual ground rent will range from $50-$150.
Finding the Ground Rent Owner
You can often find the ground rent owner from the seller or you can research the title to the property. At closing your title company might discover this information or you can go to the Clarence Mitchell court house in Baltimore City and check with the recorder of deeds, and they will manually look it up. Many of these records are very old and sometimes this “lease” paper work gets lost or the contact name cannot be identified. The additional paperwork should be attached to the recorded title. Trying to find the person can sometimes be the hardest part.
You obviously cannot pay a bill to someone you cannot find. If this person is still alive and they want to get paid, they will eventually come to you. Your property is the one address that does not change in this process.
If you buy a property that is noted as having ground rent, but you cannot find the person your mortgage company may still want to escrow that fee amount. The most back ground rent that can ever be collected is 3 years. This means if you have lived there for 10 years and suddenly the ground rent landlord demands payment they can only collect back 3 years and then ask you to pay forward. It is their responsibility to prove that they hold title to the property.
Want to Buy Your Ground Rent?
The owner of the ground must sell this to you 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)
April 8, 1884 to April 5, 1888 (.04 rate of redemption)
April 6, 1888 to July 1, 1982 (.06 rate of redemption)
July 2, 1982 or later (.12 rate of redemption)
There will also be nominal legal fees involved on filing these papers that you will be responsible for paying.
The State of Maryland passed the Residential Ground Rent Redemption law, effective January 1, 2004, that allows the owner of a single family residential property who is the tenant under a ground lease on that property to redeem the lease where there has been no communication from the landlord for three years. For an application link to www.dat.state.md.us/sdatweb/ground_rent.html.