Redeeming ground rent

Sun Reporter

December 10, 2006

Under state law, most people who are required to pay ground rent can redeem -- or buy out -- their leases. The rent holder must honor such a request.

Redeeming makes economic sense only if the homeowner plans to own the house for a long time, though it also buys the security of never having to face an ejectment lawsuit if a payment doesn't get made.

The person paying the rent must send both a certified letter and a first-class letter to the ground lease holder's last known address. The mortgage company should have the address if it pays the ground rent out of an escrow account. It should be listed on a bill if the homeowner is billed directly. As a fallback, the name and address of the ground rent owner's registered agent -- if it is a corporation -- can be found on the Maryland Department of Assessments and Taxation Web site.

Leases negotiated between April 5, 1888, and July 1, 1982, can be redeemed by paying 16.66 times the annual rent. Buying out a $96-a-year rent, for example, would cost about $1,600. A ground rent payer usually needs a lawyer to do a deed transfer, which could cost an additional several hundred dollars.

Only leases written before July 1, 1969, are redeemable at any time. After that date, leases must be in effect for either three or five years, depending on when they were executed, before they can be redeemed. For example, someone buying a property today with a newly established ground rent on it would have to pay rent for three years before redeeming it.
Leases negotiated before April 8, 1884, generally are not redeemable unless there is a redemption provision written into the lease. One exception is on properties that have been condemned by Baltimore.

A homeowner who has not received a bill or any other communication from the ground rent holder in three years, and does not get a response from the holder within 30 days after asking to redeem the lease, may apply to the state Department of Assessments and Taxation for the redemption. Information and the required forms may be found on the Internet.

The homeowner must apply for the buyout in person at the department's charter division office on Preston Street in Baltimore. He or she must provide documentation that the ground rent holder received proper notification. The department then posts a notice on its Web site that it has received an application to redeem the ground rent. That notice must stay up for 90 days.

After 90 days, if there is still no response, the homeowner can complete the buyout by supplying an affidavit saying there has been no communication from the ground rent holder in three years, and paying the redemption amount plus overdue rent, up to three years' worth. The money is held in a separate state fund; the ground rent holder has up to 20 years to claim it. If he does not, then the state keeps the money.