Residential ground rent can be bought at 16.66 times the annual charge, by law


March 21, 2004

A reader inherited three ground rents from her grandmother.

The annual rent payments are $54, $72 and $90, respectively. The owner of the leasehold property - who pays $54 - wants to buy the ground rent.

The reader asks what her ground rents are worth. She also wants to know whether the buyer or seller has to hire a lawyer to prepare the property deed and file it with the court land records.

Dear Reader:

For residential ground rents created between April 5, 1888, and July 1, 1982, the leasehold owner has a right to redeem the ground rent for 16.66 times the annual rent. This equals a capitalization rate of 6 percent.

For a $54 annual ground rent, the redemption price is $900. A $72 annual ground rent may be bought for $1,200. The leasehold owner may purchase a $90 annual ground rent for $1,500.

A ground rent owner has no right to force the leasehold property owner to purchase the ground rent. So sometimes, ground rent owners are willing to accept less than the redemption price.

Absent an agreement between the parties, the seller is customarily responsible to prepare the property deed - although often the buyer will hire a lawyer or title company to search the title and prepare the deed to make sure the conveyance is legally correct.

Recording and transfer taxes must be paid to record the deed. These taxes vary among Maryland jurisdictions but usually amount to about 2.5 percent of the purchase price. They are divided equally between the buyer and seller. The buyer pays the cost of recording the deed, which is $40.

Since these ground rents were formerly owned by your grandmother, it's important to make sure they have been legally registered in your name by a recorded deed.

If you don't have a deed granting you title to the ground rent, you will not be able to convey legally sufficient title to the buyer until a deed is obtained from your grandmother's estate.

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