Just getting started

February 19, 2007

State lawmakers struck the first blow against the abuse of ground rents last week by unanimously approving legislation to ban the creation of any more of them. That's a welcome development, but it's a modest start toward the needed reforms. Banning their creation won't put an immediate end to the seizures and outrageous fees that have plagued hundreds of homeowners in recent years.

As Sun reporters Fred Schulte and June Arney documented last year, a person can lose a home over as little as $24 in back rent. Ground rents can no longer be viewed as Baltimore's benign little real estate eccentricity. Certain investors have wielded their right of seizure like modern-day Simon Legrees, taking the opportunity to extract far more money than they are owed.

This week, the House Environmental Matters Committee, chaired by Baltimore Del. Maggie L. McIntosh, will take up a host of bills aimed at correcting the system. One would make it easier for homeowners to find out how to contact ground rent owners; another would make it easier for property owners to purchase their ground rent (and for new owners at least to know they have that option).

But the most important of these proposals would end the practice known as ejectment. It would mean the holder of a ground rent could no longer so easily take someone's home - or be reimbursed for an outrageous amount in legal fees and expenses.

That addresses the root of the problem, and it's going to be far more controversial than the legislation the House and Senate approved last week. Instead of ejectment, ground rent owners would have the right to establish a lien against a property. The process would be supervised by the courts, and a judge would have a say over the proper remedies for nonpayment - whether, for instance, legal fees should be collected.

Admittedly, this will require a balanced approach. Legislators have to be careful to preserve the legitimate rights of investors. It would be unfortunate if, in protecting homeowners, lawmakers made it so difficult to collect ground rents that the value of those investments plummeted. That's merely trading one set of victims for another.

But that leaves plenty of room for a thoughtful compromise, assuming legislators hold to this fundamental goal: Unpaid ground rents should never again cause homeowners to lose their rightful equity. It's fine to make sure debts are paid, but it's time to take the potential for windfall profits out of the business of ground rents.

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