Cost to redeem ground rent

October 30, 2005

I purchased three Bolton Hill properties between 1989 and 1990. At that time the owner created three ground rents. They are $180 a year for two properties and $300 a year for the third.

Is it true that ground rents created after 1985 and redeemable at 6 percent may be redeemed at 12 percent after five years have passed? If this is so, where can I find this in the code to prove it to the owner of the ground rents? Your help will be greatly appreciated.

The law on redeeming ground rents in Maryland is codified in Section 8-110 of the Real Property Article. When the owner of the leasehold property redeems the ground rent, he is relieved from paying any more rent and owns the property in fee.

The statute applies to leases for longer than 15 years on property that is primarily residential. The tenant (leasehold owner) has the option to redeem the ground, after a notice of one month to the owner of the ground rent, for an amount equal to the annual rent multiplied by: 25 ( a 4 percent capitalization) if the lease was executed from April 8, 1884, to April 5, 1888; 8.33 (a 12 percent capitalization) if the lease was or is created after July 1, 1982; 16.66 (a 6 percent capitalization) if the lease was created at any other time.

Ground leases created before April 8, 1884, are not redeemable by the lessee unless the original lease expressly permits it.

Because the leases on your three properties were created after July 1, 1982, they are redeemable at 8.33 times the annual rent: $1,500 for each of the two $180 annual ground rents and $2,500 for the $300 annual rent.

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