New ground rents are made illegal

O'Malley signs ban into law

legislators work on plan to phase out existing leases and end house seizures

Sun Follow-up

General Assembly

March 23, 2007|By Laura Smitherman | Laura Smitherman,SUN REPORTER

Gov. Martin O'Malley signed into law yesterday a ban on new ground rents in Maryland, while the General Assembly worked to pass a package of bills that would phase out existing ground rents and ensure that the system could no longer be used to seize the houses of unwitting homeowners.

In his first bill-signing since taking office in January, O'Malley sat in the governor's reception room, flanked by Senate President Thomas V. Mike Miller and House Speaker Michael E. Busch.

Vernon Onheiser, who almost lost his Canton home over what began as $24 in unpaid ground rent, also attended the event, along with state legislators and Attorney General Douglas F. Gansler.

"It felt good working together for the working people of our state so they won't have to lose their homes because of some unscrupulous efforts to twist around a ground rent and eject the family," O'Malley said, holding up the hands of Miller and Busch.

O'Malley and the legislature sought to reform the ground rent system after an investigative series in The Sun revealed that some ground rent holders had levied large fees and seized hundreds of homes of residents who had fallen behind on payments, in some instances over minimal debts.

The bill - the first in a package of ground rent bills that is expected to reach O'Malley's desk - prohibits new leases that require homeowners to pay rent on the land under their houses to a person, charity or business. Under a system that dates to Colonial times, Maryland has about 115,000 ground rents, most of them in Baltimore and some in a few counties.

The emergency legislation takes effect immediately.

"This has been a big problem in the city, and I think this brings the kind of relief we need," said Sen. Catherine E. Pugh, a Baltimore Democrat.

More controls sought

One floor below the governor's office, the legislature continued to push for more controls on ground rents.

The state Senate passed legislation that mirrored bills approved by the House of Delegates this week, among them measures to create a state ground rent registry; allow ground rent owners to put a lien on a home over back rent instead of seeking ejectment, a process by which residents can lose their houses; and to prevent holders of ground rents from selling the leases without giving homeowners a chance to purchase them.

The House and Senate bills were drafted to contain the same language, a move designed to get them to the governor faster. O'Malley has pledged to sign the other bills.

Gary R. Alexander, a lobbyist for the Ground Rent Owners Coalition, said the group didn't oppose several of the bills, including the prohibition on new ground rents. He said the group had hoped that the legislature would devise a mechanism by which residents pay off ground rents when they refinance a mortgage, or sell their homes. He said 80 percent of ground rents would be extinguished in a decade using that approach.

"All our people ever wanted was to get paid for their ground rents," he said.

Some ground rent owners contend that some of the legislation amounts to an unconstitutional taking of property rights. Alexander said they are reviewing the bills and might consider a lawsuit.

"We're waiting to see the exact finished product," he said.

The ground rent system enabled developers in the early 1900s to make rowhouses more affordable for working people. In the past six years, ground rent owners have filed nearly 4,000 lawsuits, and in more than 500 such cases, city Circuit Court judges awarded possession of houses to ground rent holders.

Many homeowners and legislators allege that some ground lease holders aimed to abuse the system and take homes that had risen in value through gentrification.

99-year leases

Gansler said that in addition to the prohibition on new ground rents, other legislation would provide several ways to diminish the number of leases, which run for 99 years and are renewable forever unless bought out by the homeowner.

For instance, if a ground rent holder doesn't register the lease with the state in three years, it is no longer valid.

"Obviously, this is an important step so that we don't create a bigger problem," Gansler said, referring to the ban on new ground rents. "This stops the bleeding."

The Senate also approved legislation yesterday that would convert 19th-century ground rents to allow homeowners to buy them out and limit the amount of back rent an owner can collect for a property owned by the city of Baltimore. Another measure would require that ground rent holders issue regular bills to homeowners.

The Senate is considering legislation that would extend low-interest loans to people who want to buy out the ground rents on their principal residences. That bill, which the House has passed, got a hearing in a Senate committee yesterday.

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