Problems arise when owner of ground rent can't be found

MAILBAG

January 11, 2004

What should you do if you owe ground rent on your leasehold property but can't find the owner of the ground rent?

One reader paid off her home mortgage several years ago and has never received a bill or statement for the ground rent. She does not know who the ground-rent owner is.

Another mailed his payment to the ground-rent owner, but the payment was returned by the post office as undeliverable. His efforts to find the owner's current address have been unsuccessful.

A third reader is selling leasehold property he has owned since 1996. He is unable to find the owner of the ground rent and has been told that he will have to leave three years ground rent plus $500 in escrow with the title company in case a claim for past-due ground rent is made.

Dear readers:

Usually, ground rents are paid semiannually.

Many ground-rent owners send bills to leasehold owners or to their mortgage companies, so there is no question about whom and how much to pay.

Where there's a mortgage on the leasehold property, the mortgage company often pays the bill from the borrower's escrow account. When a mortgage is paid off, the leasehold owner should find out the name and address of the ground rent owner from the mortgage company and should notify the owner where to send ground-rent bills.

A leasehold owner is responsible to pay ground rent even though no bill is sent or received.

However, under a state law that became effective Oct. 1, a ground-rent owner cannot recover collection expenses unless a notice is sent by first-class mail to the leasehold owner's last address as shown on the records of the State Department of Assessments. The notice must give the leasehold owner 30 days to pay past-due ground rent. If the ground rent is not paid within 30 days, collection expenses may be charged.

If a ground rent owner sends no bill, a leasehold owner may choose not to pay and to wait until a legal notice is sent. The ground-rent owner usually will be limited to collecting three years past-due rent because the statute of limitations in Maryland is a defense to claims for rent more than three years past due.

A problem arises when the leasehold owner sells the property.

To protect the new leasehold purchaser from a possible claim for back ground rent and collection expenses, many title companies require the leasehold owner to leave three years' ground rent plus $500 (the allowable collection expense) in escrow.

If no claim for back ground rent is made within three years of settlement, the title company will refund the escrowed money to the seller.

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