Ground rent bills advance

The Baltimore Sun

The Maryland House of Delegates unanimously approved eight bills yesterday aimed at modernizing the state's antiquated system of ground rents and stemming reported abuses of homeowners.

The General Assembly acted quickly this session on the legislation, spurred largely by cases of ground rent holders who levied hefty fees and seized hundreds of homes of residents who had fallen behind on payments, in some instances over minimal debts.

Legislators also said the overhaul was needed to bring transparency to a system, mostly used in Baltimore, that dates to Colonial times. The system, in which homeowners must pay rent on the land under their houses, was the subject of an investigation by The Sun last year.

Passage of the bills in the House drew spurts of applause when the final votes were read. Meanwhile, the state Senate tentatively approved identical versions of most of the bills yesterday, while action on one measure was delayed for a day in a routine procedural move.

The House approved bills that would create an online registry of ground rents and overhaul the process for ejectments, the mechanism by which homeowners can lose their houses over back ground rent. Other bills would prevent ground rent holders from selling leases without first giving homeowners a chance to purchase them and would extend low-interest loans to people who want to buy out the ground rents on their principal residence.

The Senate is expected to cast final votes this week, sending the bills to Gov. Martin O'Malley, who has pledged to sign them. He has repeatedly called the ground rent system "unfair and unjust."

The legislature had already approved a bill to prohibit the creation of new ground rents, and O'Malley has scheduled a signing ceremony for that bill for tomorrow.

"This is what good journalism and good government is about," said Sen. Lisa A. Gladden, a Baltimore Democrat, who sponsored her chamber's version of the ground rent bills.

R. Marc Goldberg, an attorney who owns ground rents and acts as a spokesman for the Ground Rent Owners Coalition, referred questions to Gary R. Alexander, a lobbyist the group retained.

Alexander said that his clients support many of the provisions in the bills considered this year but that he is looking at some of the measures to see whether they can be made fairer.

"There's no sense in leaving intact ground rents if the method of enforcement and the cost of enforcing delinquent ground rent is impossible to do," Alexander said. "That has always been a big concern."

Vernon Onheiser, who become a face of the movement to reform the ground rent system, has been invited to the bill-signing ceremony by the governor, whose office will dispatch a car to drive him and his sons to Annapolis because they have no other transportation. Onheiser almost lost the Canton home where he has lived for nearly five decades over what began as $24 in unpaid ground rent; his sister eventually paid the ground rent owner nearly $18,000 to satisfy the debt.

"I never asked the government for anything at all, but they have really helped a lot, and they are helping a lot of other people too," Onheiser said. "They are doing a very good job."

Some ground rent owners argued that parts of the legislation amount to an unconstitutional usurping of their property rights, while others defended the ground rents as legitimate investments. The origins of ground rent can be traced to the 1600s. More recently, developers used ground rents to make rowhouses more affordable for working people.

Alexander said ground rent holders had hoped the legislature would enact a system to phase out ground rents entirely by requiring that homeowners redeem them - that is, buy them out - whenever a property is sold or re-financed.

"All our people ever wanted was to get paid for their ground rents," Alexander said. "Unfortunately, we haven't reached that solution yet. We're hopeful that the General Assembly will consider some form of redemption."

In the past six years, ground rent owners have filed nearly 4,000 lawsuits; in more than 500 such cases, Baltimore City Circuit Court judges awarded possession of houses to ground rent holders. Many homeowners and legislators suspect that some of the ground lease holders aimed to abuse the system and take homes that had risen in value through gentrification.

Legislators said they sought to balance the interests of homeowners with the interests of ground rent owners, and Attorney General Douglas F. Gansler said the bills appeared to pass constitutional muster.

The legislation "does not eliminate ground rents. People can still have them as investments," said Del. Maggie L. McIntosh, a Baltimore Democrat, who chairs the Environmental Matters Committee that crafted the bills. "Let's watch it and let it work ... and hopefully we'll see a complete elimination of the mishaps, if you will, regarding ground rent."

Gladden said she worked with the House to ensure the bills contained the same language, a move that will get them to the governor's desk faster. "We should be able to get them out like greased lightning," she said.

But Sen. Robert Garagiola, a Montgomery County Democrat, used a procedural move to delay for a day what is probably the most significant of the ground rent bills - one that would eliminate ejectments. Garagiola said he doesn't necessarily have objections but wanted more time to study the bill before it came up for discussion and possible amendment on the Senate floor.

The bill he delayed would allow ground rent owners to put a lien on a home instead of seeking ejectment, a change that the leaseholders have fought.

Sen. J. Lowell Stoltzfus, an Eastern Shore Republican, questioned whether the change would make it impossible for the owners to collect what they're owed.

"Ground rents and what they do are a problem," Stoltzfus said. "But will anybody pay them if they know it will just go to a lien?"

Sen. Brian E. Frosh, the chairman of the committee that considered the bills, said ground rent owners would still have powerful remedies in cases where people don't pay their bills. The change wouldn't necessarily prevent people from losing their homes because lien holders could force their sale. But in those cases, the Montgomery Democrat said, homeowners at least would be entitled to keep some of the equity they have built up in the property, which they now lose under ejectment.

Other bills that are awaiting final passage in the Senate would allow homeowners to buy out ground rents that are not now redeemable; establish a notification process for homeowners of their rights and responsibilities under the ground rent system; and limit ground rent owners' rights to back payments on properties acquired by Baltimore City.

Lawmakers originally proposed charging ground rent owners a one-time fee of $20 per ground rent to establish a state registry, but owners objected, saying that could be onerous, especially for large investors who can own thousands of the rents.

"I have a little old lady in my district who lives in a retirement home, and this is her income," said Sen. Katherine A. Klausmeier, a Baltimore County Democrat. "I just worry this is going to eat up her livelihood."

Frosh said that after his committee heard objections like those, it reduced the fees to $10 for the first ground rent an owner records and $3 for each additional rent. The fee is a one-time expense, he said.

Sun reporter Jennifer Skalka contributed to this article.

Reform proposals

The General Assembly is moving forward with bills to reform Maryland's ground rent system. They include:

A prohibition on new ground rents. Passed the General Assembly; to be signed by Gov. Martin O'Malley tomorrow.

A ban on the use of ejectment, a process by which ground rent owners can take ownership of houses where homeowners owe back ground rent. Passed the House; delayed by a procedural move in the Senate.

Conversion of 19th-century ground rents to allow homeowners to buy them out. Passed the House; due for a final vote in the Senate this week.

Requirement that ground rent holders issue regular bills to homeowners. Passed the House; due for a final vote in the Senate.

Creation of a state ground rent registry. Passed the House; due for a final vote in the Senate.

Financial help for homeowners seeking to buy out ground rent. Passed the House; yet to clear Senate committee.

Requirement that home purchasers be notified of the existence of a ground rent at the time of sale. Passed the House; no companion bill exists in the Senate.

Limits on the amount of back rent an owner can collect for a property owned by Baltimore City. Passed the House; due for a final vote in the Senate.

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