Unquestionably the ground rent system in Maryland has been abused by a small number of investors. However, the fact that many ground rents may now have been "extinguished" by the state legislation in my opinion amounts to taking of private property without just compensation ("Goodbye, ground rent," Oct. 1).
Ground rents can best be understood as being like a mortgage on which the property owner pays interest only at a fixed rate semi-annually and is never obligated to pay the principal, but has the right to pay the principal ("redeem the rent") at any time on 30 days written notice to the ground rent owner.
In order of priority, the ground rent represents a first lien on the property coming in front of any mortgages and is only subordinate to property taxes. Perhaps if they were known as "ground mortgages" instead of "ground rents" leasehold owners would have a better understanding of their legal obligation and exposure.
Like in a mortgage, the ground rent owner has the right to foreclose on the property for non payment after due process. The cost of "foreclosure" far exceeds the small amount of the typical ground rent, and it is this fact which creates an out of proportion burden on an unknowing property owner.
Similarly the law enacted several years ago further regulating the collection process of ground rents in Maryland created such a burden on the ground owner it resulted in a significant loss in market value of ground rents, a legislative loss to private property without just compensation.
While having outlived their original purpose as a financial aid to home ownership, ground rents have represented a secure, fixed 6 percent income to individuals and endowments.
Benedict Frederick Jr., Pasadena