Legal strategies for collecting ground rents from owners

MAILBAG

April 02, 2000

Dear Mr. Azrael:

My husband and I received many ground rents as the result of an estate settlement. Some ground rents have been delinquent for over three years even though I have sent numerous certified letters. (Most have been returned.)

Without costing me a lot of money, what can I do to collect what is owed to us? I have tried to sell these ground rents without much success. I am finding that they are more trouble than they are worth.

We do collect some monies each month, but the majority are delinquent. I was told that we could go to small claims court and file a foreclosure against the property owner for nonpayment or foreclose against the property/dwelling itself (the filing fee would be minimal). How true is this?

If this is true and I would take these property owners to court for nonpayment or file to foreclose against the dwelling/property, what happens if they decide to then pay after I have filed a court claim?

Debra and Robert Barnett Baltimore

Dear Mr. and Mrs. Barnett:

Collecting ground rents can be a headache, as you've found out. Here are some suggestions:

Make sure you have the current name and correct mailing address of the owner of the leasehold property. You can get access to state real property tax assessment records on the Internet at www.dat.state.md.us.

Ground rents are paid in arrears. In other words, a ground rent due in July covers the period from Jan. 1 through June 30. You should send a bill for the ground rent 30 to 45 days before the due date. If the leasehold property is mortgaged, often the mortgage company will pay the ground rent directly to you. You should ask the property owner to advise you of the name and address of the mortgage holder as well as the mortgage account number.

When you have this information, you should bill the mortgage holder directly. If the ground rent is not paid by the due date, do more than simply send another bill. Look up the property owner's phone number and call them to request payment. When a phone call doesn't work, some ground rent owners visit the property and talk to the occupants -- or at least they drive by the property to see if it is vacant or damaged.

A ground rent owner has two basic remedies for nonpayment. First, he can sue the property owner in district court for up to three years of back ground rent. Because this is a small claim, neither party is required to have an attorney. The court costs are minimal. It is necessary to serve the suit on the property owner, however. Service can be made by certified mail or by personal delivery of the lawsuit and court summons to the defendant or an adult living in the defendant's residence.

The second remedy is to file a suit in the local circuit court to repossess the property. The object of a suit for repossession is to eject the owner of the leasehold and foreclose the rights of the leasehold owner and any mortgage holder.

Legal requirements for an ejectment suit are complex. The ground rent owner is well advised to hire an attorney to file and prosecute the legal action. The leasehold owner and mortgagees must be given adequate notice of the suit and have ample time to "save" their interest in the property by paying the past-due ground rent and all costs and damages sustained by the ground rent owner.

Proper management of a ground rent portfolio requires systematic billing and follow-up procedures to make sure payments have been received.

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