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Ground lease holders challenge state law

Issue in class action suit focuses on payment collection

By Andrea F. Siegel, The Baltimore Sun

7:56 PM EST, November 8, 2011

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Another challenge by ground rent holders to Maryland's 2007 reform laws has been revived, with lease holders claiming that a state law unconstitutionally diminished the value of their property by making collection of payments costly and difficult to enforce.

Attorneys for ground rent holders in a pending class action lawsuit say that a recent ruling by the Maryland Court of Appeals dooms the law being challenged, according to a recent motion. They are asking a judge in Anne Arundel County Circuit Court to invalidate the law.

But in a newly filed motion, the attorney general's office says otherwise. It contends that the recent ruling strengthens its position that laws for enforcing collections are valid. State lawyers maintain that because the laws provide ground rent holders with ways to collect past-due payments, the new law should be upheld.

Dating to Colonial times, ground rent splits ownership of homes from the land beneath them. Most of the remaining ground rents are in Baltimore, but others exist elsewhere. The annual rents typically are small, some less than $25.

Ground rent laws were overhauled four years ago, after articles in The Baltimore Sun and testimony before legislators described Marylanders losing their homes for failure to pay a pittance in ground rent. Lawmakers replaced that process, called "ejectment," four years ago with the process under attack in the Anne Arundel class action.

But last month, the state's highest court delivered a significant blow to the legislative reforms, which called for ground rents to be registered.

Even as the court upheld the registry that was created in 2007 — and that has about 85,000 properties — it said unregistered ground rents could not be canceled, or extinguished. That revived an estimated 30,000 to 40,000 unregistered ground rents.

In the pending challenge, ground rent owners argue in court papers that the new process is "a costly and complicated lien and foreclosure process, forcing ground lease holders to spend thousands of dollars in an effort to collect at most a couple hundred dollars of delinquent ground rent."

That, they contend, is unconstitutional for the same reasons the Court of Appeals decided to erase the cancellations of the thousands of unregistered ground rents.

In asking the judge to uphold the law, the Attorney General's Office maintains that lease holders have "at least two remedies" for seeking past-due ground rents. In addition to the lien and foreclosure, they can sue the renter.

In about two weeks, lawyers for lease holders and the attorney general's office are expected to meet with Anne Arundel County Circuit Judge Paul F. Harris Jr., who halted the case while waiting for the appeals court to rule on unregistered ground rents.

However, the case may not be resolved in a courthouse.

State legislators plan to meet in about two weeks with an eye toward new ground rent laws, addressing concerns raised in the Court of Appeals decision and in the Anne Arundel case.

"It would be a good time to look at all of them," said Del. Maggie McIntosh, a Baltimore Democrat and a sponsor of the 2007 measures.

andrea.siegel@baltsun.com

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