Redeeming the Ground rent in Baltimore

14 Replies | Baltimore, Maryland

Hi I recently acquired 3 properties with ground rent.  One does not seem to be registered in the SDAT database, the other two I would like to redeem

According to the law: 
The amount to redeem your ground rent is set by Maryland Law and based on the original ground rent lease. Some ground rents state the redemption price. If the original ground rent lease is silent as to the redemption price then the following applies:

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.

To compute the redemption price, take the annual ground rent and divide by the capitalization rate. For example: if the ground rent is $100 and the lease started in 1935, the calculation is $100 divided by .06, and thus $1,666.67 to purchase the ground rent.

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I did the calculation and I pay $48 a year so it would be 48/0.12 that makes $400 and I have a paper here that says $400 to redeem

I called the owner of the ground rent but he asked me $1200 ( claiming that mine are not redeemable and cost more but I went on the Baltimore SDAT database and it says my ground rent are redeemable)  -   Any idea on how I should move from here?  Thanks  Paolo

Step by step instructions can be found here.

http://dat.maryland.gov/realproperty/Pages/Ground-Rent.aspx

@Michael Randle Essentially ground rent is an antiquated system whereby one person (or entity) owns the right to collect ground rent fees. They don't actually own the land or the improvements on the land, rather they just own the legal right to collect a fee from whoever owns the title deed. It is worth noting that the owner of the ground rent can foreclose on a home to collect unpaid ground rent (though I've heard that sale proceeds pay down the arrears and the rest goes to the homeowner). And as the OP suggested the owner of the deed can "redeem" the ground rent so that for one lump sum they (and any subsequent owner) never have to pay ground rent again.

I personally hate ground rent. But from what I've heard it seems that ground rent is largely limited to Maryland at this point and in particular Baltimore City (yay, another hoop for us to jump through).

When was the ground rent established? If before 1884 yours might not be redeemable. At a minimum you'd probably be looking at 4% (multiply annual rent by 25).

@Michael Randle with ground rent someone owns the ground (fee) and they lease the land for 99 years renewable in perpetuity. The fee interest can usually be redeemed (purchased) by the lessee and when done the two interests are merged and the ground rent extinguished. Ground rents are common in Baltimore and surrounding area.

So...basically what you are saying is that some Lord owns the land in which you live and till. As such you are charged for using the land, regardless of the improvements you make to it. If I get ground rent can I demand to be called at least a Duke? Landed Knight perhaps? /endsarcasim. 

This is just an odd concept to someone from the West Coast as generally land is included with the structures on top of it (certain exceptions for mining rights etc)

The best time to have redeemed them was when you bought them.  The title company could have handled it for you for minimal cost as they would be preparing the deed anyway.  Now you will need to have a new deed prepared and recorded etc  Best thing to do is ask the title company to contact the ground rent owner and ask for the redemption amount.  And decide if it is worth it to do.  On a side note St. Louis and I believe Philadelphia do have properties with ground rent.

Originally posted by @Beth H. :

The best time to have redeemed them was when you bought them.  The title company could have handled it for you for minimal cost as they would be preparing the deed anyway.  Now you will need to have a new deed prepared and recorded etc  Best thing to do is ask the title company to contact the ground rent owner and ask for the redemption amount.  And decide if it is worth it to do.  On a side note St. Louis and I believe Philadelphia do have properties with ground rent.

Same overall cost regardless of timing... still two deeds required. 

One way to lower the cost to buyer is to shift this burden and require the seller to convey in fee. 

Originally posted by @Eric Masi :

@Michael Randle Essentially ground rent is an antiquated system whereby one person (or entity) owns the right to collect ground rent fees. They don't actually own the land or the improvements on the land, rather they just own the legal right to collect a fee from whoever owns the title deed. It is worth noting that the owner of the ground rent can foreclose on a home to collect unpaid ground rent (though I've heard that sale proceeds pay down the arrears and the rest goes to the homeowner). And as the OP suggested the owner of the deed can "redeem" the ground rent so that for one lump sum they (and any subsequent owner) never have to pay ground rent again.

I personally hate ground rent. But from what I've heard it seems that ground rent is largely limited to Maryland at this point and in particular Baltimore City (yay, another hoop for us to jump through).

The ground rent owner owns the land... and improvements. But there is a 99 year lease in place.

In order for the fee owner to obtain possession of the property they would need to pursue that via the courts, including notifying interested parties (such as mortgagees) of the action. Doesn't happen often. Most would simply pay the past due ground rent to protect their interests.

@Tom Gimer I've read conflicting accounts of who owns the land in the case of ground rent. 

LiveBaltimore seems to indicate that the ground rent holder owns the land:

https://livebaltimore.com/city-living-essentials/g...

However this law firm in Maryland has written a conflicting article:

https://pricekeir.com/what-the-heck-is-ground-rent...

The people's law library which @Matthew Paul linked to says: "ground leaseholder who holds a reversionary interest in the property or 'ground' underneath a home." The key there being "reversionary interest," which would indicate that the home buyer owns the land conditionally.

Now I'm not a lawyer. And admittedly I'm just arguing semantics but at the end of the day you either pay the annual ground rent or you redeem and that's 80% of what anyone needs to know about ground rent in my opinion. Additionally I think this whole conversation just highlights how absurd ground rent is in the 21st century. But I'm biased against it so there's that. 

Happy investing everyone!

@Eric Masi I agree it is absurd. But we're a couple hundred years into it at this point.

If you review the chain of title to every property that is subject to ground rent, you will find that at some point back in time the fee simple owner of the land decided to create a ground lease. This creates 2 chains of title to research... one for the fee and one for the leasehold. Fun.

Prior to the laws that passed in 2007 for registering ground rent ownership and also prohibiting new ones from being created, there were a number of people who lost their homes to ground rent ejectment.  I personally like the new registration system.  Whenever I sell a house without a registered ground rent owner I have to track it for 3 years to collect my money that is sitting in escrow.

@Paolo Nascimbeni be aware that Ground Rent owners tend to be a  very tough type of person. They often ask for more than they are legally entitled to. This is why they created the new Laws the Beth Mentioned. 

Do you know when the ground rent was created? If it was created after July 2 1982 don't put up with their crap.

@Ned Carey  Thank you for using my name, this way I received an email.   After Russel gave me the page I started looking in there and I had forgotten to follow this thread.  I will start working on redeeming my ground rent next week following the link that Russel posted.  My cost of redeeming should be $400, the holder wants $1200 but the ground rent  was created in 1998 so I will follow the steps toward redeeming them ( there are 2 or 3  properties that I own that are affected by ground rent)