Collecting ground rents can be tough


July 14, 2002|By Jonathan Azrael

Collecting ground rents many times can turn out to be a headache for those who own them. So here are some suggestions to get payment on ground rents.

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

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 him or her 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 drive by the property to see whether 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 lawsuit 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 suit in the local circuit court to repossess the property. The object of a lawsuit 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 lawsuit 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 lawsuit 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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