Boarded up or burned out? Ground rent may be worthless

MAILBAG

May 02, 1999

Dear Mr. Azrael:

I own two ground rents in the city. One of the houses is boarded up and the other is burned out. Before this came about, I spent considerable money to try and collect the moneys due. However, it was to no avail. What becomes of the rents if the city condemns the houses or they are sold for taxes?

Lourdes Strum Towson

Dear Mr. Strum:

Unfortunately, your ground rents probably are worthless.

The owner of a burned out or boarded up property has no incentive to pay the ground rent. You have a right, through legal action, to sue the owner (which may be a "shell" corporation) or obtain ownership of the burned or boarded improvement. But neither of these legal options is likely to benefit you.

If you are very lucky, the city may buy the property as part of an urban renewal project. When the city acquires legal title, it must pay "fair market value" for your ground rent. This may put a few hundred dollars into your pocket.

If the city or a private investor acquires title to the property through a tax sale and subsequent court proceeding, your ground rent could be legally wiped out. The tax sale purchaser would be required to name the property owner and the ground rent owner as defendants in the court proceeding and serve them with copies of the court papers.

The defendants then have an opportunity to answer the suit and pay the outstanding taxes, plus interest, attorney's fees and court costs. If none of the defendants elects to pay the taxes and fees to redeem the property, the city will convey the entire property to the tax sale purchaser, and the ground rent will be legally eliminated.

While many conservative investors own ground rents, they are not always a sure thing.

Questions?

Real estate questions will be answered by Jonathan A. Azrael. Questions -- including name, address and daytime telephone number -- may be sent in the following ways:

Mailing address: Real Estate Mailbag, Fifth Floor, 501 N. Calvert St., Baltimore, MD 21278-0001. Fax: 410-783-2517. E-mail: real.estate@baltsun.com

Call our Sundial audio-response number, 410-783-1800. Enter code 6170 after the greeting.

Pub Date: 5/02/99

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