Top Md. court airs challenge to ground rent registry law

Owners had until last September to register properties or lose them

June 06, 2011|By Andrea F. Siegel, The Baltimore Sun

Judges on Maryland's highest court questioned Monday a new law that requires people owning ground rents to register or lose them, an attempt by lawmakers to end the antiquated property laws.

Charles J. Muskin, whose grandfather's estate had about 300 ground rents, contends that losing ground rents for failing to register them amounts to an unconstitutional taking of private property. Muskin, an attorney arguing the case on his own behalf, registered between half and two-thirds of his ground rents during the three-year window allotted in the 2007 law, calling the process cumbersome.

"They just can't take away a property right if you fail to register, when you've got a perfectly valid deed," Muskin told the Court of Appeals. Deeds contain ground rent information.

New ground rent laws were enacted after a series of articles in The Baltimore Sun indicated that some people were losing their homes for failing to pay small sums in ground rents.

The reform measures signed by Gov. Martin O'Malley abolished the legal process that ground rent owners used to seize houses, barred the creation of new ground rents and required ground rent owners to register their holdings with the state by September 2010 or lose them. The interest in the land not registered essentially went to the homeowner.

The state registered 85,095 ground rents by the deadline, most of them in Baltimore.

Three of the seven judges on the appellate court questioned whether the penalty stripping people of their holdings for failing to register the ground rents was reasonable.

"One remedy might be if you didn't register your ground rent, you can't throw anybody off the property for not paying $25," Judge Joseph F. Murphy Jr. said as he questioned Assistant Attorney General Matthew J. Fader.

But Chief Judge Robert M. Bell added, "It isn't that you lose it, it is that the other person gets it."

Judge Lynne A. Battaglia, comparing the law on ground rent to the law on rental property, said the court has not told landlords that failure to have a license to rent the property would result in losing it.

But Fader said legislators didn't take anything away from ground rent owners because the law was neither retroactive nor focused on past actions. It looked ahead and gave ground rent holders three years to register properties.

"It's within the ground lease holder's full control," he said. The procedural burden on ground rent owners was "minimal" and the fees low. "What we are dealing with here is a prospective consequence," Fader said.

The ground rent system dates to Colonial times, when ownership of the land and of the house on it could be separated.

Judges wondered how anybody knew they were supposed to pay ground rent or to whom. Since some ground rent ownerships were passed down through generations and deeds were lost, they wondered how people knew or kept track of ground rents they owned.

Although land records trace property's lineage and show ground rent details, they can be difficult to use, leading people to hire title searchers at costs that can top $100 a property. The registry was a move to add ground rent information to the State Department of Assessment and Taxation's property records so that state officials would know which properties were subject to ground rent.

But, Muskin argued, if you didn't know when a ground rent was created, you didn't know which box to check on the state form, and several of his were rejected for that reason. That section required ground rent owners to answer to the best of their knowledge. Fader said they could get an idea from assessment records that have a date the property was created. The information is used to determine how much a homeowner should pay if he wants to buy out the ground rent.

The new laws were designed to protect owners of houses on land with ground rents. But since the laws took effect, owners of small numbers of ground rents have complained that they didn't know of or understand the requirement; some said they had moved out of state and didn't hear about the law in news reports or receive a Maryland tax booklet that explained the registry.

The court has no timeline for issuing a ruling and opinion.

A separate challenge to another part of the ground rent package of laws is working its way through lower courts. Lawyers in that case are also contending the laws are an unconstitutional taking of property because they made ground rents as worthless as junk bonds.

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