Ground rent at top of agenda

Key legislators to meet to seek consensus on phasing out system

Sun follow-up

January 05, 2007|By Fred Schulte and June Arney | Fred Schulte and June Arney,SUN REPORTERS

Key state lawmakers plan to meet Wednesday morning, hours before the General Assembly session opens, to try to hammer out consensus on phasing out the state's arcane system of ground rents.

"The time has come for us to sunset this ground rent business," Senate president pro tempore Nathaniel J. McFadden said yesterday.

Lawmakers from both chambers plan in their morning session to figure out which concepts to draft into bills, said Del. Maggie L. McIntosh, a Baltimore Democrat and chairwoman of the House Environmental Matters Committee.

Proposals being discussed include:

Prohibiting ground rent owners from taking someone's house over unpaid rent. They would be allowed to collect only back rent and "reasonable fees."

Phasing out existing ground rents through a system by which they either are redeemed by homeowners or disappear if the ground rent owners don't register their ownership within a certain time period. Tens of thousands of Baltimore City homeowners pay rent on the land under their houses, and ground rents also exist in Baltimore and Anne Arundel counties.

Prohibiting property owners from creating new ground rents.

"I don't know what position the real estate industry will take," said Sen. George W. Della Jr., a Baltimore Democrat who proposed reform last year that failed. "They may just lay off. If they were wise, that's what they'd do, 'cause the train is coming down the track."

The legislative proposals follow an investigative series in The Sun last month that documented how a small number of ground rent investors have increasingly used the antiquated laws to seize homes or charge their owners thousands of dollars in fees over delinquent bills as small as $24.

The series also found that homeowners often are unable to locate owners of ground rents on their homes but nonetheless are held responsible for overdue rent. Meanwhile, investors and rehabbers have put new 99-year ground leases on many properties that are sold after undergoing renovations - leases that are renewable forever.

McFadden said he hopes to work with ground rent owners to protect their interests, but noted: "We have to get some controls in place."

R. Marc Goldberg, a Baltimore attorney whose family owns ground rents and who has served as a spokesman for the industry, did not return calls for comment yesterday.

State Sen. Brian E. Frosh, a Montgomery County Democrat who is chairman of the Judicial Proceedings Committee, said it is "nuts" that state law allows property owners to create new ground rents.

Frosh said his first priority is to eliminate "windfall" profits a ground rent owner can make by seizing a home. "The system is being abused," he said. "You shouldn't be able to take somebody's home."

He is proposing a new program within the state Department of Housing and Community Development to offer low-interest loans to help homeowners buy out their ground rent. "That ought to make redeeming ground rents very attractive," he said.

State law sets redemption amounts for ground rents. For instance, a $90-a-year rent is valued at $1,500. Ground rent owners must redeem a rent if a homeowner requests it.

Frosh said he anticipates that lawmakers "ought to be able to reach a consensus" on the need to reform the system, and that both the House and Senate will likely hold hearings on ground rent reform early in the session.

Della said it remains to be seen how the ground rent owners will respond to the proposed changes. In the past, some have argued that ground rent could again serve its original purpose of reducing the cost of buying a home.

"They can wiggle all they want, and they can argue all they want about eliminating affordable housing: Something's going to happen, and it's going to be positive," Della said.

"I don't know what arguments [opponents of reform] can make that the continuation of the current law is in the public interest," he said. "I don't see how they can prevail."

Greg Cantori, executive director of the Marion I. and Henry J. Knott Foundation, which owns about 1,600 ground rents, said he "totally agrees" with proposals to phase out ground rents - as long as lawmakers provide "fair compensation" to their owners.

"These abuses have got to stop," Cantori said. As a result of The Sun's series, Cantori said, the foundation no longer sells ground rent deeds to people who don't already own the house on the property.

Calls for ground rent reform also have come from Baltimore Circuit Court Clerk Frank M. Conaway, who calls the situation "a crisis." He has organized a public meeting for Monday to help homeowners guard against losing their property over unpaid ground rent or city taxes.

That meeting will be held at 6 p.m. at the Polytechnic Institute/Western High auditorium at 1400 W. Cold Spring Lane.

Conaway also has ordered a review of the legal practices of a real estate attorney who has filed at least 10 lawsuits to seize homes owned by dead people over unpaid ground rent, and of other attorneys who might conduct similar practices. He also is reviewing fees charged by lawyers who specialize in buying the rights to collect delinquent property taxes and later file foreclosure actions.

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