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No 'injustice' in ground rent ruling [Letter]

In your recent editorial, "Injustice reinstated," Feb. 28), you label the Maryland Court of Appeals decision striking down a statute removing ground rent owners' right to ejectment as "a manifest injustice." Your editorial is factually and legally inaccurate.

A ground rent lease is like any other lease, but instead of renting a house, a building or a farm, the lease is for a lot of land. With a ground lease, the original homeowner never actually paid for the land, as is true for any succeeding owners so it is less expensive to acquire a house, making ground rents the original form of affordable housing. Although ground leases began in 1750 when the Fells family developed the area now known as Fell's Point, they are not a "vestige of Maryland's colonial past." Baltimore's affordable housing shortage after World War II was solved through the ground rent system enabling working class families to afford to buy homes because they leased land instead of having to pay for it.

While current homeowners may be "galled" by having to pay annual ground rent, they have the right to redeem (purchase) the land at any time by paying a modest, legally regulated purchase price thereby extinguishing the ground rent. If the homeowner is unable to afford it, Maryland offers a Ground Rent Redemption Loan Program for income-eligible homeowners to purchase their ground rents. If a ground rent owner can't be located, despite the registration system currently in place, a state escrow fund will hold the redemption payment.

In short, someone else owns the land and the homeowner has the option of buying the land or continuing to pay rent. If the homeowner does neither, the ground rent owner has the right to evict them, just as with any other lease.

Your claim that ground rent owners "seized" hundreds of homes is utter nonsense. In the lawsuit, the state could not identify a single homeowner — not one — who lost a home solely due to nonpayment of ground rent. The court called your claims "anecdotal" and lacking in foundation. People who ostensibly lost their homes for nonpayment of ground rent, including the infamous Onheiser family, in reality did so because they failed to pay several years of real estate taxes on their homes. A proper investigation by your reporters would have uncovered this inconvenient truth. You ignore the fact that the former ground rent ejectment process took two full years before a homeowner was evicted and that during that period the homeowner could stop the process by paying the rent. You complain that "fines and fees" ballooned amounts owed, yet fees and costs were highly regulated by statute, at amounts below what it actually cost the ground rent owner and never allowed "fines." Of the 541 homes you claimed were "seized," most were abandoned properties which were repaired and returned to the market by the ground rent owners who obtained possession of them. Instead of applauding these efforts, you have inexplicably chosen to vilify all ground rent owners.

You fail to grasp the legal and economic issues. The Court of Appeals ruled that property and contract rights are protected. This is known simply as "the rule of law." The works of Peruvian economist Hernando de Soto Polar explain why countries without business and property rights have failed economies. It is perilous economic policy to ignore this rule.

Lastly, you conclude with a defeatist comment that "the legislature [has] few further avenues to protect the property interests of homeowners in ground rent cases." Beware! Our legislature is again hastily drafting legislation solely designed to punish ground rent owners. This failed approach, twice rebuked by the Court of Appeals, does nothing more than substitute one perceived injustice with an equally unjust law. Instead, you must urge lawmakers to create a balanced system of notice and opportunity for payment by homeowners, banks and other interested parties which protects the property interests of homeowners and ground rent owners alike.

Katherine Kelly Howard, Baltimore

The writer is general counsel for Regional Management, Inc.

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