Photo by Phylicia Ghee for Live Baltimore
If you’re new to Baltimore City you may be unfamiliar with ground rent.
Ground Rent is a condition in which you own your home, but someone else owns the land on which your home sits. Ground rent is fairly common in the local real estate market and rents are typically low. Additionally, if you don’t own the ground your home is on, you can purchase it.
Ground Rent might sound like an odd arrangement, but there is a logical explanation. The origin of ground rent dates back to the 18th century and was originally introduced to keep home costs low. Homebuyers were given the opportunity to purchase a house without the additional expense of the property underneath it. This property was then leased to them at a fixed and affordable rate.
When a property is listed for sale, the property description should list whether ground rent is wrapped up in the deal.
- “Fee Simple” means the listing includes both the house and the property in the purchase price. (In other words, there is no ground rent.)
- “Ground Rent” on a listing indicates that a fee must be paid to the owner of the ground.
Ground rent usually ranges from $50 to $150 per year and it is typically paid semi-annually.
Ground rent owners are required to register their ground rents in a database maintained by the Maryland Department of Assessment and Taxation. Homeowners can use this database to locate their current ground rent owner.
If you buy a property that is noted as having ground rent, but you can’t find the ground owner, your mortgage company may still want to escrow a ground rent fee. The most back ground rent that can be collected is three years.
This means, if you’ve lived in house for ten years, and suddenly a ground rent landlord appears and demands payment, they can only collect three years of back ground rent and then ask you to pay the annual fee moving forward.
While the landlord can only collect three years of back ground rent, you can face substantial charges on top of the overdue ground rent 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 dispute, remember, it is the landlord’s responsibility to prove they hold the title to the property.
Ground rent owners are entitled to a lien against the home on their land 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.
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 their ground rent as part of the initial financing or refinancing of their 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 financial transactions it is recommended that an attorney or title company be involved to assist with the research, paperwork, and required filings. Live Baltimore’s partners are familiar with the ground rent redemption process.
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. Call the Maryland Residential Ground Rent Redemption Program at 410-767-1353 or redeem your ground rent by submitting your application online.
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. To find out if you qualify, call 410-767-1151 or submit your online Redemption Loan application.
Have more questions about ground rent?
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