Bills to tackle ground rents


Legislators drafting several measures to curb abuses in Md.'s arcane system

Sun Follow-up

December 13, 2006|By Fred Schulte and June Arney | Fred Schulte and June Arney,SUN STAFF

Several state legislators said yesterday that they are drafting legislation to change Maryland's arcane ground rent system, including bills to prevent homes from being seized over missed rent payments and to ban the creation of new land leases.

"We're just going to do what we did with flipping and other scams. We're going to get rid of it," said Del. Maggie L. McIntosh, a Baltimore Democrat who is chairwoman of the House Environmental Matters Committee, which handles matters of real property and housing. "We're going to stop it right where it began."

Tens of thousands of Baltimore City residents as well as some in Baltimore and Anne Arundel counties pay rent on the land under their houses, a practice that can be traced to Colonial times. A series of articles in The Sun this week documented that in recent years a small group of ground rent investors increasingly has exercised its power under state law to gain possession of homes or to extract thousands of dollars in fees from their owners over back rent as little as $24.

FOR THE RECORD - Ground rent must be paid on newly created leases for five years before they can be redeemed. A box in Wednesday's editions misstated the duration of required rent payments.
The Sun regrets the error.

Ground rent owners in the past six years have filed nearly 4,000 lawsuits, called ejectments, in Baltimore City - more than half of them brought by entities associated with four investment groups or families. In more than 500 such cases, city Circuit Court judges awarded ground rent holders possession of houses. In many of those cases, the ground rent holders sold the houses for tens of thousands of dollars. Some homeowners regained their houses by paying off their obligations, though court records don't make clear how often that happens.

"It clearly wasn't intended for the owners of the ground rent to get hundreds of thousands of dollars of improved property," state Attorney General-elect Douglas F. Gansler said yesterday. "That's what people are finding outrageous."

The system has "outlived its usefulness," Gansler said.

Baltimore Mayor and Gov.-elect Martin O'Malley said through a spokesman yesterday that during the transition he would be "looking at the issue and talking with many of the legislators to see how we can best address this."

The city had previously taken the issue to Annapolis, but in many years, proposed legislation ran into strong lobbying and fell short, said the spokesman, Rick Abbruzzese.

"The mayor was aware of the ground rent problem, but it was something that had to be addressed at the state level," Abbruzzese said. "This is a matter of simple fairness, and people should not lose their homes over small debts."

McIntosh said her staff is working with city officials to draft three bills she said would curb ground rent abuses. "We just ordered it up," she said yesterday.

One bill would eliminate new ground rents. Another would protect people who fall behind in their ground rent from losing their house. A third would assure that people receive information about the system when they close on the purchase of a home. This might require a new registry to make sure ground rent holders and their tenants can locate one another, McIntosh said.

Gansler said that his office "will collect as much information from a legislative standpoint as we can and work with lawmakers to determine how this can be fixed legislatively."

Ground rents in Baltimore became widespread with the construction of large numbers of rowhouses in the 19th century. Selling houses without the land was considered a way to keep home prices affordable for the working class. Most ground rents are $120 a year or less, payable twice a year.

But in recent years, investors have often created new rents of $240 or more when they sell a property - a practice several lawmakers said they would seek to end.

"I don't think that we ought to be creating more ground rents," said Sen. Brian E. Frosh, a Montgomery Democrat who is chairman of the Senate Judicial Proceedings Committee. He said ground leases no longer play a useful role in financing home purchases.

R. Marc Goldberg, a ground rent owner who acts as a spokesman for about two dozen others, could not be reached for comment yesterday. In the Sun series, he stressed that ground rent owners are only seeking to collect rents and fees allowed under state law and that they go to court to seize properties only when repeated collection efforts fail.

Frosh said the legislature must prevent ground rent owners from keeping all proceeds from selling the houses that they seize. No other private debt collectors can reap such windfalls. In a foreclosure, for example, the mortgage company gets to keep only the amount it is owed.

"It's especially outrageous that someone can come in and take the property, and they don't pay [the homeowner] the surplus" after its sale, Frosh said. "It's ridiculous."

Sen. George W. Della Jr., a Baltimore Democrat who unsuccessfully proposed a bill this year to ban new ground rents, said that legislation passed in 2003 to limit attorneys' fees and other costs in ejectment actions might have inspired ground rent lawyers to file more lawsuits to recoup the maximum fees allowed.

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.