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Legislators promise ground rent laws

An alliance of Maryland lawmakers pledged yesterday to push through emergency legislation to immediately halt the creation of new ground rents, as the first of several major proposed changes.

"The consensus is that ground rents serve no viable, good purpose at this time," said Del. Maggie L. McIntosh, a Baltimore Democrat and chairwoman of the House Environmental Matters Committee. "In fact, they sometimes impede people getting [mortgage] loans. What we're going to embark on is a modernization of the ground rent system in Maryland."

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This action came on a largely ceremonial opening day in Annapolis, full of pomp, as lawmakers arrived for the start of the 90-day legislative session.

Ground rent owners and the real estate industry have opposed less-reaching changes in the law in past years.

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"I think there's a lot of public will in the legislature to address ground rents and the abuse of ground rents," Gov.-elect Martin O'Malley said. "You know, people shouldn't lose their homes over failure to pay some $24 ground rent that they forgot about or weren't notified about. I think the time is right for some reform on that. ... Ground rents can be a pesky impediment to redeveloping our older areas and cities."

Tens of thousands of Baltimore homeowners, and some in Anne Arundel and Baltimore counties, pay nominal rent on the land under their houses, a system that dates to Colonial times. Calls for ground rent reform follow an investigative series in The Sun last month that documented how a small group of investors in recent years has used Maryland's antiquated law to seize homes or charge their owners thousands of dollars in fees over delinquent bills as small as $24.

Meeting in closed session hours before the Assembly opened, members of the House of Delegates and Senate and representatives from the office of the incoming Baltimore mayor, Sheila Dixon, and the O'Malley administration agreed on the outline of a package of bills to be cross-filed in both chambers.

The measures would:

End the ejectment process that allows ground rent owners to seize people's homes over unpaid rent. Owners would instead have powers closer to obtaining a lien on a house if ground rent isn't paid.

Reduce the legal and other fees that ground rent holders can charge in disputes over back rent. Those fees often are many times the amount of rent owed.

Set up a system that would make it easier for property owners to buy out their ground rents and eliminate the requirement that a homeowner wait five years before redeeming a newer ground rent. Lawmakers plan to look into expanding use of an existing loan program at the Department of Housing and Community Development to include financing of ground rent redemptions.

Require ground rent owners to register their holdings through the Department of Assessments and Taxation. There would be penalties for not registering, though the specifics have not been crafted. The series in The Sun found that homeowners often are unable to locate the owners of their ground rents but nonetheless are held responsible for overdue rent.

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McIntosh said she expected that the package of bills will be introduced by month's end.

"Today, we can say the ghost of Christmas past is done," said Sen. Lisa A. Gladden, a Democrat from Baltimore. " ... Ground rents are horrible."

Sen. George W. Della Jr., a Baltimore Democrat, said abolishing new ground rents is a quick way to prevent problems from getting worse.

"Who would be against it, now that the public is more educated about ground rent, and the leadership of the legislature is more educated about ground rents and the problems associated with them?" Della said.

R. Marc Goldberg, a Baltimore attorney whose family owns ground rents and who has served as a spokesman for the industry, declined to discuss the ground rent owners' position on the proposed changes. "There's silence, because the furor you [The Sun] have created calls for us to examine what's happening," Goldberg said. "There obviously is a lot of talk about reform. We're looking at making a rational, reasonable response. We are looking to make a positive contribution to this process."

James F.X. Cosgrove, vice president of North American Title and chairman of the legislative committee for the Maryland Land Title Association, said he expects "pretty significant" opposition by ground rent owners. "I don't think they're going to go quietly. It's big business to them," he said.

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The emergency legislation seeks to end a relatively recent practice by some investors and rehabbers of putting new ground rents on properties that are sold after undergoing renovations. A ground rent runs for 99 years and is renewable forever unless bought out by the homeowner.

Cosgrove, a critic of the ground rent system, said he is not convinced the emergency legislation solves the biggest problems, which he considers to be the fees and home seizures. If legislation bans new ground rents, "I don't think any of us would be too upset, but it's a knee-jerk reaction to a problem," he said.

The Greater Baltimore Board of Realtors is looking at offering two proposals, although nothing has been written, according to Carolyn Cook, the group's deputy executive vice president.

One would call for recording whether or not a property has a ground rent in the Department of Assessment and Taxation information system. This information would be simple to capture when a property is transferred, she said, because the deed is available at that moment.

The other proposal would seek to change the process that allows a ground rent owner to seize someone's home, resell it and keep all the proceeds.

Cook said she hopes that lawmakers are not too quick to take action. "A lot of people have a lot of good ideas," she said, "and we should create the opportunity for those ideas to be shared."

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Realtors and others have long argued that ground rents can reduce the cost of buying a home by taking out the cost of the land.

"People kind of laugh at this, but if it's structured properly, with the right safeguards, it could provide affordability," Cook said.

William Castelli, vice president of government affairs for the Maryland Association of Realtors, said it is unclear where his group's membership will stand on the proposal to eliminate new ground rents. "I think there are many things that we could support," he said. "I think some of our membership has been surprised by the [ejectment] process that exists currently."

Cosgrove, of the Maryland Land Title Association, said he believes that a reasoned approach would be to appoint a joint legislative task force that would report back in October with recommendations for legislation that could be proposed next year.

Della rejected that approach. "Rather than deal with it directly, they want to study it," he said. "No way."

june.arney@baltsun.com

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Sun reporter Justin Fenton contributed to this article.

To read previous stories, go to baltimoresun.com/groundrent.


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