Overdue ground rent collectible in spite of foreclosure by bank

MAILBAG

July 25, 2004

Dear Mr. Azrael:

I own a ground rent that is past due. A bank that held a mortgage foreclosed the property. The bank's representatives are telling me that since the property was foreclosed, the ground rent is no longer collectible.

Is this true?

Dear Reader:

The bank's representatives are almost certainly wrong. Generally, a bank's mortgage lien applies only to the leasehold interest. Your ground rent was never subject to the mortgage.

Therefore, when the bank foreclosed, it could sell only the leasehold property. The foreclosure and subsequent sale were subject to your ground rent. At the time the property is conveyed in the foreclosure sale, the title company should ask the bank who owns the ground rent and make sure the past due ground rent is paid.

To protect your interest, you should find out the name and address of the trustee who is conducting the foreclosure sale and send the trustee a ground rent bill. If the property has been conveyed by the trustee, find out the name of the new owner and send the bill to him.

Your ground rent is still valid and should be fully collectible.

Dear Mr. Azrael:

I inherited a ground rent on a property in Baltimore and received $120 a year up until last August.

When payments stopped, I located the owner of the leasehold property through the tax department and sent a letter to him at the address listed in the tax records.

The letter came back "Attempted not Known."

I don't live in Baltimore and don't know much about ground rent. Can you please tell me what I must do either to collect the ground rent or sell it.

Dear Reader:

If you want to sell the ground rent to a third party, you can advertise it for sale. There are investors who purchase ground rents, although they often will buy only at a discount. Your $120 annual ground rent has a redemption value of $2,000, but don't expect an investor to offer that sum.

To collect the ground rent, you can file a personal action in Baltimore District Court against the leasehold owner (tenant) for the past due ground rent.

Or you can hire a lawyer to file an ejectment action in Circuit Court to obtain ownership of the leasehold property and evict the tenant. If successful, you can end up owning the property, which might be worth much more than the ground rent. That outcome is rare because everyone with an interest in the property must be given notice.

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