Ground Rent dates back to the 18th Century and was originally introduced to keep home purchasing costs low. Homeowners were given an opportunity to buy a house without the additional expense of the property, which was then leased to them at a fixed and affordable rate.
How Much Is Ground Rent?
Ground rent usually ranges from $50-$150 per year, and is typically paid semi-annually. When a property is listed for sale, the property description should let folks know if ground rent is wrapped up in the deal.
Fee Simple means the listing includes both the house and the property in the purchase price. Ground Rent on a listing indicates a fee that will be paid to the owner of the ground.
Maryland's Ground Rent Registry
Ground rent owners are required to register their ground rents in the database maintained by the Maryland Department of Assessment and Taxation. Homeowners can use this database to locate their current ground rent owner.
Lost Ground Rent Holders
If you buy a property that is noted as having ground rent, but you can’t seem to 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’ve lived in house for ten years, and suddenly the ground rent landlord appears and demands payment, they can only collect three years’ worth of rent and then ask you to pay the annual fee moving forward.
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. If ever you find yourself in ground rent debacle, remember, it is the landlord’s responsibility to prove they hold the title to the property.
Failing to Pay Your Ground Rent
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?
Ground rent owners must provide homeowners with all of the information necessary for the homeowner to purchase the ground rent. These notices must accompany each, and every, ground rent bill. Additionally, homebuyers must be notified that they can redeem the ground rent as part of the initial financing or refinancing of the property.
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; the standard rates of redemption, depending on the year the lease was created. There will also be legal fees and taxes involved in filing these papers that you will be responsible for paying. The purchase of ground rent is a private financial transaction, and as with most transactions such as this it is recommended that an attorney or title company be involved to assist with the research, paperwork, and required filings. Live Baltimore's partner title companies are familiar with the ground rent redemption process; check out their profiles here.
If you want to redeem your ground rent and cannot locate the owner, the State of Maryland offers an opportunity to redeem the lease through the Department of Assessment and Taxation, where there has been no communication from the landlord for three years. Fill out your application to redeem your ground rent or call Residential Ground Rent Redemption Program at 410.767.1353.
If You Cannot Afford to Buy Your Ground Rent
The Maryland Department of Housing and Community Development now has special loan financing available for income-eligible homeowners to redeem ground rent. The income limits are based on household size and cannot exceed 80 percent of the statewide median income. Fill out the Redemption Loan application or by calling 410.767.1151.