The concept of ground rent in Baltimore and surrounding counties may be traced back to colonial times when investors bought tracts of land from the newly sovereign colonial governments and allowed tenants who otherwise could not purchase land for themselves to make small, incremental rent payments as a less-expensive alternative to land ownership.
This practice may be out of date in today’s market yet most leases renew in perpetuity. Some ground rent holders are registered with the State Department of Assessment & Taxation, many leases holders are unknown.
In the past, If the owner of the ground leases couldn’t be identified, we’d have to hold from the seller 3 years’ worth of estimated ground rent payments, plus attorney’s fees, in the event that the ground rent holder suddenly appeared and made a claim.
That typically meant that we’d collect an average of about $700 from the seller to hold in escrow for three years.
Now the state of Maryland has changed its statute and noted that if the ground rent owner has not registered the ground rent with the state, past due amounts may not be demanded.
That means we no longer have to hold estimated ground rent payments or attorney fees, and your sellers’ net proceeds just increased by $700!
Contact us for more information on identifying registered ground rents and how to extinguish an existing ground rent.