Property ground rents are always paid `in arrears'

Mailbag

January 05, 2003

Dear Mr. Azrael: Please advise if property ground rent should be billed and paid in advance or after the given time period. Thank you very much.

Bruce and Elaine Chilcote

Baltimore

Dear Mr. and Mrs. Chilcote:

Property ground rent is paid "in arrears."

Here's an example: Suppose a property is subject to a $120 annual ground rent, payable semi-annually on the first days of January and July of each year.

On Jan. 1, $60 in ground rent is due for the period July 1, 2002, through Dec. 31, 2002.

On July 1, 2003, the remaining $60 annual ground rent is due for the period Jan. 1, 2003, through June 30, 2003.

The ground rent holder customarily sends a bill for the semiannual payment 30 to 45 days before the due date. So, a bill for a $60 payment due Jan. 1, 2003, normally would be mailed to the property owner prior to Dec. 1.

When a leasehold property (subject to a ground rent) is sold, ground rent customarily is adjusted between the buyer and seller as of the settlement date.

Using the example above, if the property was settled on Sept. 30, the buyer would be credited with $30, representing three months' ground rent from July 1 through Sept. 30.

The seller or settlement agent often will notify the ground rent holder of the new owner (and the mortgage company which will pay the ground rent).

The bill for the $60 ground rent due Jan. 1 should be sent to the new owner and/or his mortgage company, which is responsible for paying the entire amount.

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