Ground rent curb urged

Gansler backs gradually ending leases

critics fear loss of property rights

sun followup

General Assembly

February 23, 2007|By Laura Smitherman | Laura Smitherman,sun reporter

Attorney General Douglas F. Gansler urged Maryland lawmakers yesterday to gradually eliminate ground rents and to back a legislative package aimed at strengthening homeowner protections while fairly considering the interests of land lease-holders.

Ground rent owners and a legal scholar testified at a hearing that some of the proposals amount to an unconstitutional usurping of property rights. And lobbyists, including representatives of the Maryland Bankers Association, said they support the measures but asked for changes that they said would ease the burden of the reforms on business.

"The bills are written in a punitive fashion as opposed to the balanced fashion they've been talking about," said Amy Macht, who owns 150 ground rents and manages 3,500 of the leases for Regional Management Inc. "These are honorable investments. ... The people who own them are honorable people."

Macht suggested that legislators place a moratorium on ejectments - a court process in which lease owners sue to seize the property of homeowners - while they take more time to study the complicated system.

In particular, critics objected to provisions that would compel owners to register ground rents at a cost of $20 each by September 2010. Otherwise, the leases would be extinguished. They also opposed provisions that would eliminate the option to eject a delinquent homeowner and instead allow a lien to be put in place.

"They're trying to shoot a fly with a shotgun," said Charles Muskin, whose family owns 300 ground rents. "The problems are minimal and can be easily solved without the draconian bills that have been suggested."

The bills to create a registry of ground rents and to overhaul the process for ejectments are among a number of legislative proposals being considered by the General Assembly.

Another bill would prevent ground rent holders from selling leases without first giving homeowners a chance to buy them, and it calls for the state to study the feasibility of a program to help low-income people obtain loans to buy out their ground rents.

Last week, the General Assembly voted unanimously to ban the creation of new ground rents.

The ground rent system dates to Colonial times and later enabled developers to make rowhouses more affordable for working people. Legislators are acting after a series in The Sun detailed cases in which ground rent owners were able to take the homes of residents who had fallen behind on payments, in some cases over minimal debts.

Ground rent owners have filed nearly 4,000 lawsuits in the past six years, and in more than 500 such cases, city Circuit Court judges awarded possession of houses to ground rent holders.

Gansler, the former top prosecutor in Montgomery County who was elected attorney general last fall, said the system should be reformed. He backed a package that has the support of Gov. Martin O'Malley.

"Nobody is suggesting that anyone was acting outside the bounds of the law, which is why we're here in the legislature to change the law," Gansler said after testifying before the House Environmental Matters Committee.

Nonetheless, Gansler called the actions of some ground rent owners "unconscionable" and said it could be inferred that they had "insidious" motives to abuse the system and take homes that had risen in value through gentrification. He said the bills before the committee seem to pass constitutional muster.

Ground rent owners and Byron L. Warnken, a University of Baltimore law professor, said legislators may be overstepping. Some critics said the plans would diminish the value of their ground rent holdings.

Muskin said his grandfather bought the ground rents as investments for his retirement. Macht said she came to own ground rents through her grandfather, Morton Macht, a homebuilder who passed them down, upon his death, to family members, employees and charitable foundations.

Kathleen M. Murphy, president of the state bankers association, said registering ground rents could become too costly, especially when some of the ground rents bring in as little as $80 a year. About a dozen of the group's 120 members hold portfolios of ground rents, including a community bank that owns $4 million worth.

The ground rent bills have strong support in both chambers. Del. Maggie L. McIntosh, who chairs the House committee, said she had a problem with ground rent on her first home in Charles Village, which she bought in 1972. Her sister spent seven years looking for the ground rent holder's heirs, and recently a lawyer contacted McIntosh. She said she agreed to pay three years of back rent.

laura.smitherman@baltsun.com

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