Easy money: the return of ground rent

Lord Baltimore's gift keeps giving for lucky ground rent owners

November 07, 2011|Dan Rodricks

If my grandpappy had turned over some Maryland ground leases to me — if he had not been a poverty-wage-earning immigrant who died before he had a chance to acquire any property in the United States except the cheap suit in which he was buried — would I be a ground-rent collector today?


Would I feel guilty about it?

No … OK, maybe a little bit, but that's just me, a former altar boy. Some of us have a hard time taking something for nothing (see recent columns on a stranger paying a $5 highway toll for me). But ground rent is not yet illegal in Maryland, so there's nothing to legally feel guilty about. If your grandpappy left you some leases, you're still entitled to this easy money.

Since a series in The Sun exposing ground rent abuses, I have tried to explain the concept and practice to men and women in a couple of Baltimore barrooms. One of these conversations took place in a Federal Hill saloon with people who had moved to the city within the last few years. They just couldn't believe that ground rent is still on the books.

It has been for a long time. Close to 400 years ago, King Charles I gave Cecilius Calvert, the second Lord Baltimore, the land that is Maryland today. Lord Baltimore charged rent to the colonists who wanted to build on his soil. So we have a fellow in a plumed hat to thank for this. He was Catholic but apparently felt no guilt about taking ground rent; it's what guys in silk pants did back then.

So, here in the 21st Century, ground rent owners are still allowed to collect an annual fee, in perpetuity, and that galls a lot of people.

Here's how a ground rent lawyer explained it to The Sun's Real Estate Wonk, Jamie Smith Hopkins:

"The ground rent owner has a 'reversionary' interest in the land and what's on it, and the leasehold owner has a 'leasehold interest' in the land and what's on it (the house). The homeowner owns the land and what's on it subject to the duty to pay this ground rent every six months. ... The term 'reversionary' is now imprecise, since the [Maryland] legislature outlawed ground rent ejectments in 2007. . . . The property can no longer 'revert' to the ground rent owner, although they can now obtain and record a lien for unpaid ground rent."

The legislature acted because, as The Sun series reported, people who don't pay ground rent (often because they didn't know they had to) have lost their properties to ground-rent owners. Since ground rents are often small, ranging from $24 to $240 a year, no other private debt collectors in Maryland had been able obtain rewards so disproportionate to what they were owed.

Despite the reforms, the whole thing strikes people as feudal because it requires nothing of the ground rent collectors except that they hold their hand out for the money.

"This antique law must be abolished. It is totally inappropriate," says John Holter of Butchers Hill in Baltimore. Ground-rent holders, he says, "do not have to provide a service or product ... I 'lease' a house from Miss XX and she fixes the roof when it leaks. What do I get when I pay I.M. Greedy my ground rent? Nothing!"

Mr. Holter has a point. If I lease land to a farmer, I have to make sure it doesn't flood so the farmer's crops can grow. If such conditions aren't in property leases, certainly they must be implied, and certainly they're in the best interest of future profit and value. Apparently no such conditions exist in the ground leases.

As archaic and as foolish as it all sounds, the Maryland Court of Appeals recently upheld the property rights of ground rent holders — even those who have not stepped forward (because they might be dead) to register with the state, the so-called "zombie" renters, or their heirs. Some of these people might not even know they have an opportunity to shamelessly collect ground rent off long-dormant leases.

I'd look into it, to see if I'm among them, but my people go back to steerage, not to the Ark or Dove. And, as far as I know, none of them believed in easy money.

Dan Rodricks' column appears Tuesdays, Thursdays and Sundays. He is the host of Midday on WYPR, 88.1 FM. His email is dan.rodricks@baltsun.com.

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