Dual billing for ground rent can be rectified

MAILBAG

May 09, 2004

Dear Mr. Azrael:

In October 2002, I purchased an investment property in Baltimore.

On Oct. 16, I paid a ground rent of $75 to "Mr. X," who claimed to be the ground rent owner.

In November 2003, I received a letter from my mortgage company that they had paid $667.80 from by escrow account to "Y Company," who had sent a bill for seven years ground rent ($630) plus $37.80 as a penalty.

After more than 17 calls to my mortgage company, I still am not able to find out:

What proof "Y Company" has of ground rent ownership.

Is it legal for a mortgage company to withdraw funds from my escrow account when I am not escrowing funds for ground rent because I pay out of pocket?

Why seven years of ground rent was paid for a property I have owned for only one year.

How do I collect the $75 paid to the first claimant, Mr. X?

I have called the settlement company and the mortgage broker, but both deny involvement. Now I have two parties who claim to be the ground rent owner and a mortgage that has increased by $107.40 a month.

Dear reader:

I hope you purchased owner's title insurance.

If you have a title policy, you should file a claim with the title insurance company. The policy should guarantee against unpaid ground rent for any period before October 2002, when you bought the property.

Without title insurance, you have legal rights against the prior owner of the leasehold who should have paid ground rent before your settlement date. The prior leasehold owner also had a legal duty to advise the holder of the ground rent that the property had been transferred to you.

As to who is the legal owner of the ground rent, I suggest that you write to both parties who claim ownership and ask both to supply copies of their deeds to the land.

An attorney or title company can help you resolve which party, if either, has valid title and is entitled to collect ground rent. Clearly, you have a legal claim for reimbursement from a party that collected ground rent without a right to do so. Further, under a law that went into effect Oct. 1, the legal ground rent holder may be liable for failing to send a bill to you as the registered owner and for collecting an illegal penalty of $37.80.

You also have a valid issue with your mortgage company as to why it made payment. Although your loan documents may authorize the mortgage holder to pay past due ground rent, the mortgage company, in my opinion, should have notified you in advance that seven years of back ground rent was being claimed.

There may be valid reasons why all - or some - of the ground rent was not legally owed. You may choose to file a complaint about with practice with the Maryland Commissioner of Consumer Credit.

Purchasers of leasehold property should make sure at or before settlement that they find out the name and address of the ground rent owner. They also should make sure the ground rent is current as of the closing date.

If the current ground rent owner cannot be found or if payment cannot be verified, the seller should put sufficient funds into escrow at settlement to protect against claims like the ones made against your property.

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