What is “Ground Rent,” and is it Still Something to Think About?

Paying Ground Rent in Baltimore is sometimes a necessary evil. See if your property requites ground rent!

Paying Ground Rent in Baltimore is sometimes a necessary evil. See if your property requites ground rent!

Ground rent is a relatively antiquated practice dating back to colonial times, and it still exists in Baltimore. The term describes the practice where a homeowner pays only for the physical building and then “rents” the land that it sits on. If you’re new to Baltimore and unfamiliar with the essentials of ground rent, here’s a guide to help you understand the stipulations behind it and where you stand.

The History of Ground Rent

The earliest references regarding the concept of ground rent come from the 1600s, when King Charles I gave the second Lord Baltimore the land that was to become Maryland. According to the charter, Lord Baltimore was owner of the soil of Maryland and could charge rent to the colonists who wanted to build on that soil. Shortly before the American Revolution, the concept evolved into a system of annual rents reserved on leases for 99 years, and renewable forever.

How Does Ground Rent Work?

As defined by the People’s Law Library of Maryland, ground rent is “a periodic monetary payment to a ground leaseholder who holds a reversionary interest in the property or ‘ground’ underneath a home.” Essentially, the homeowner pays the leaseholder of the land for the right to live on the property.

Check your individual ground lease for specific conditions. Most will require payment ranging from $50 to $150 per year, usually paid in semi-annual installments. Additionally, although the homeowner does not own the land, it is still his or her responsibility to maintain and take care of it.

Are There Consequences for Failing to Pay?

Seriously? This is Maryland. Failure to pay ground rents, which are typically nominal annual amounts, can result in huge consequences: Homeowners could potentially lose their homes through a process called “ejectment.” Be sure to double-check the terms of your lease and those listed in the MLS so you don’t find yourself in a similar situation.

Purchasing Your Ground Rent

You may purchase and thereby extinguish your ground rent if you choose to do so. By law, the ground rent’s owner  must sell or redeem the ground rent to the real property owner if requested. This price is determined by multiplying the redemption rate (which depends on the year the lease was created) by the annual fee. For more information on redeeming a ground rent, visit the Department of Assessments and Taxation’s website.

Let Simply Referable Help You Understand Real Estate Laws

There are any number of obscure and strange real estate laws in Maryland. The small team of realtors at Simply Referable will be happy to help guide you through the thicket. Each of our team members has an area of expertise, and we strive to form lasting bonds with each of our clients. We want to be your go-to realtors every time you or a friend wants to make a change. With local experience, our realtors can help you choose a house that is just the right fit for your family, now and forever. Contact us online or give us a call at 410-983-9045.