Ground rent need be no barrier to selling house


April 29, 2001

Dear Mr. Azrael,

My 71-year-old mother is selling her home in Baltimore. The property is subject to a $90 annual ground rent. The woman who wants to buy it is from Georgia and is confused about ground rent. She wants to buy the property only if she can purchase the land with it. As I understand it, my mother has a legal right to purchase the land at any time. The price of the land is $1,500.

The person who owns the land is our elderly neighbor, who recently sold her house and moved to a condo. We reached her only to find out she is in the hospital, and that the land is jointly owned by her and her brother-in-law, who just passed away, and apparently that family is fighting over his assets, estate, etc.

My mother was supposed to go to settlement a few weeks ago and she really needs not only the money, but also to know that she no longer has this anchor of a house around her neck anymore.

The house is sitting empty and the insurance company says she will have to pay $800 quarterly to keep it insured. What can my mother do? The woman from Georgia is the only offer she has had on her home and she really needs to sell it, especially now since we can't afford to keep it insured.

Molly Lutz Baltimore

Dear Ms. Lutz,

With a little cooperation from the Georgia buyer, your mother's problem can be easily solved.

The ground rent, we know, can be purchased for $1,500. But the recent death of one of the co-owners of the ground rent makes it practically impossible to acquire title to the ground prior to the date scheduled for settlement.

In this situation, your mother could leave an agreed sum (say $2,000 to $2,500) of the sales proceeds in escrow with the title company or attorney handling settlement. The settlement attorney would agree to take the legal steps necessary to acquire title to the ground for the new buyer, using the escrow fund to pay the $1,500 price and any associated costs. The buyer could settle, for the home, with the assurance that the ground rent will be acquired as soon as possible, so she will own the property "in fee."

Escrow arrangements are often used in real estate transactions to handle a variety of situations.

Frequently, the seller will not have completed a repair that he promised to make before closing. Rather than delay settlement, the buyer will agree that the seller leave an agreed sum in escrow with the settlement agent until the repair is made and the bill is paid from the escrow money.

Occasionally, a seller will leave money in escrow with the settlement agent because of a possible lien against the property. For instance, a judgment may exist against the seller, which he claims has been paid. Rather than delay closing, the settlement agent holds sufficient money from the seller's proceeds in escrow to pay the judgment in full until the question of payment has been resolved with the judgment holder.

Escrow arrangements should be in writing. They should be signed not only by the buyer and seller, but also by the escrow agent (the person holding the money), so that everyone's rights and responsibilities are clearly understood. The escrow agreement also should spell out what happens if the buyer and seller have a dispute about whether the post-closing matter has been satisfied.

For example, $1,000 may be left in escrow to pay for a roof repair. The buyer and seller may disagree as to whether the repair was properly made. The parties may agree to have this type of dispute resolved by binding arbitration based on the decision of a neutral third party.

If the buyer will not agree to an escrow arrangement for your mother's situation, you should employ counsel and take the legal steps to purchase the ground rent for $1,500 as soon as possible.

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