Ground rent bill expected to pass

The Baltimore Sun

An emergency bill to ban new ground rents appeared headed yesterday for easy passage in the General Assembly, with even the ground rent owners agreeing to support the measure.

"Times have changed, and they no longer serve a public purpose," Sen. George W. Della Jr., a Baltimore Democrat and sponsor of the bill, said at the first legislative hearing on ground rent reform. "Do away with new residential ground rents and we will have begun to deal with the problem head on."

It is not yet clear whether proposals to change broader aspects of the existing ground rent system will sail through as easily as the bill discussed yesterday at the Senate Judicial Proceedings Committee. But support for change is gaining among legislators beyond the Baltimore region.

"The ground rent system is obviously very broken," House Speaker Michael E. Busch said yesterday in a statement. "It is incumbent upon the legislature to protect the residents and their property across Maryland."

The proposed emergency bill follows an investigative series in The Sun last month that documented how a few of the largest ground rent owners in Baltimore City have used state laws rooted in Colonial practices to seize homes or charge homeowners thousands of dollars in fees over delinquent bills as small as $24.

The emergency legislation, which is co-sponsored by the governor's office, 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.

"Hopefully, in the next week or so you'll see a whole host of reforms. But do no more harm. Stop the bleeding," Joseph C. Bryce, top policy and legislative aide to Gov. Martin O'Malley, testified yesterday. "Don't put more families in this state in the situation that some families have found themselves in."

Sheila Dixon, who earlier this month succeeded O'Malley as Baltimore mayor, testified that ground rent is "being used in a predatory way."

"An estimated $3 million of wealth transfer takes place each year from our homeowners to ground rent owners," she said.

"I'm optimistic about this one," Sen. Brian E. Frosh, chairman of the Senate committee, said in an interview after the hearing. "I'm hoping we'll have a complete package. But, this one, to me, seems to be a no-brainer."

"There are so many glaring examples of inequity that I think that folks who are not affected by ground rents are sympathetic."

A companion emergency bill is set for a hearing before the House Environmental Matters Committee next week.

Sen. Jamie Raskin, like Frosh a Montgomery County Democrat, said that legislators from outside the Baltimore area were "aghast" to learn how the system works.

"The economic logic for ground rents is obsolete in 2007," he said. "There are a lot of us being educated for the first time, but it's quite a scandalous state of affairs."

The Ground Rent Owners Coalition, a group of some of the largest owners, filed a statement in support of the bill, though it did not address new ground rents specifically.

"The Coalition supports efforts to modernize the administration of ground rents in a way that does not endanger the constitutional protection of existing property rights," the statement said.

R. Marc Goldberg, a ground rent owner and attorney who has spoken on behalf of the group, declined to comment after the hearing, as did an attorney working on behalf of the organization.

An alliance of lawmakers has pledged additional measures to reform ground rent law. Those include steps to:

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

Reduce 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.

Make it easier for property owners to buy out ground rents and eliminate the waiting period before they can redeem newer ones.

Require ground rent owners to register their holdings through the Department of Assessments and Taxation.

"There are a lot of people who have a vested interest in existing ground rents, so that debate will be more expansive," said Paul T. Graziano, commissioner of the Baltimore Department of Housing and Community Development.

Only one speaker, Katherine Kelly Howard, testified against the emergency bill yesterday. She is general counsel for Regional Management Inc., which manages ground rents and residential and commercial properties in Baltimore City and Baltimore County.

Howard said her organization doesn't oppose the elimination of new ground rents in principle, but wants to make sure that the broader topic is thoughtfully studied before any action is taken.

"No, I'm not taking the position that we need to create new ground rents," she said in response to a question from Frosh during the hearing. "If you want to stop ground rents dead in their tracks, that's up to you. ... But everyone needs to take a step back from the Sun articles."

Howard recommended the creation of a legislative task force to study the issue and "make recommendations in a measured and less emotionally charged atmosphere."

Because there is no central registry of ground rents, nobody knows for certain how many there are. City officials last week released research indicating that they exist on about one-third of the city's 235,000 homes, most of them occupied by their owners or tenants in lower-income areas. The number was based on an analysis of property transaction records dating to the early 1980s. There are lesser numbers of ground rents in Baltimore and Anne Arundel counties.

The ground leasing system may have helped working class families afford homes in the previous century, but today it hinders efforts to rebuild troubled neighborhoods, according to a city Department of Planning report prepared for state legislators.

About half of the city's 16,000 vacant houses have ground rents, which requires the city to negotiate with two sets of property owners per building before condemning properties, the report said.

City officials also are concerned that "the added fear created by the ground rents now serves as a potential impediment to home purchase in the City of Baltimore," the report said.

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