Selling a house with a ground rent in Baltimore: what the buyer, the title company and SDAT will ask

If you own a rowhome in Baltimore City or one of the older parts of Baltimore County, there is a fair chance you do not own the dirt under it. You own the house on a lease that renews forever, and somebody else, often an heir of an heir, holds the ground and collects a rent for it. The rent is usually a few dollars a month. The questions it raises when you go to sell are what cost people time. This is what a ground rent actually is under Maryland law, what a buyer and a title company will want to see, and what your options are if the holder has gone quiet or the rent has gone unpaid.

What a ground rent is

Maryland’s Real Property Article defines a ground lease as a residential lease for a term of years, renewable forever, subject to the payment of a periodic ground rent. You hold the leasehold, the ground lease holder holds the reversion, and the rent is fixed by the lease itself, which is why you see figures like $96 or $120 a year that have not changed since the house was built. Ground rents are not a mortgage, they do not amortize, and they do not go away when the house is paid off. They pass with the house every time it sells. Nearly all of them sit in Baltimore City and the inner Baltimore County neighborhoods that were built on the same pattern.

The SDAT registry, and why it matters to you

The State Department of Assessments and Taxation keeps a Ground Rent Registry, and SDAT’s own guidance is blunt about it: only ground rents listed on the registry are legally collectible by the ground lease owner. So the first thing to do before a sale is search the registry for your address. If the ground rent is registered you will see who holds it and where the bills come from. If it is not registered, the holder cannot lawfully collect it, which is a very different starting point for a negotiation than a title report that simply lists the ground rent as an exception.

A second protection is written into the statute. Under Section 8-806 of the Real Property Article, a ground lease holder is entitled to demand or recover not more than three years of past due ground rent. If nobody has billed you in a decade, the exposure is three years of a small number, not ten.

If the rent has gone unpaid

Owners worry that a missed ground rent means losing the house. Maryland moved that process behind a set of notices with capped costs. Under Section 8-807, the rent has to be at least six months in arrears before the holder can start an action. The holder then sends a first notice at least 60 days before filing, by first class and certified mail, on the state’s form, and a second notice at least 30 days after that with an itemized bill and the amount to cure. Costs the holder can add are capped at $100 after the first notice, $650 after the second, and attorney’s fees of $500 if an action is filed. Pay the arrears and the capped costs and the default is cured. When we buy a house with unpaid ground rent, the title company pulls the current bill from the holder and pays it out of the proceeds at settlement, the same way it handles a water bill.

Buying out the ground rent

Most ground rents in Maryland can be redeemed, which means you buy the reversion and the house becomes fee simple. The price is a set multiple of the annual rent that depends on when the lease was created, and the formula is printed on SDAT’s redemption application. For a typical rowhome rent the buyout runs to a modest sum, which is why many sellers do it before listing and why a lender on a financed buyer’s side sometimes asks for it.

If the holder is known and answers mail, you redeem directly with them and record the deed. If the holder has died, cannot be found, or has never sent you a bill, SDAT runs the redemption instead. The published process is an application with a $20 fee for regular processing, which SDAT lists at about nine weeks, or $70 for expedited processing at about five weeks. After SDAT approves the application there is a minimum 100 day wait, then you mail an affidavit and the lump sum by certified check. SDAT issues a Certificate of Redemption, and you record it with the county land records office. A duplicate certificate costs $20. Count the calendar: from application to a recorded certificate is several months even when nothing goes wrong, so if you want a fee simple sale, start early or sell with the ground rent in place.

What a buyer and a title company will ask

A title company will show the ground rent as an exception on the commitment and will want the holder’s name, the annual rent, the payment dates and a current balance. A financed buyer’s lender will want the same, and some lenders price or condition the loan on it. On the seller side, Maryland’s disclosure law in Section 10-702 has you hand the buyer either a property condition disclosure or a disclaimer statement, and even on the disclaimer you must disclose latent defects you know about. A ground rent is not a defect, but the standard Maryland contract addresses it directly, and a rent you knew was in arrears is the kind of thing that surfaces at the settlement table if you do not put it on paper first.

Selling as-is with a ground rent in place

We buy Baltimore rowhomes with the ground rent attached. You do not need to redeem it, locate the holder, or clear arrears before we sign. We check the SDAT registry ourselves, the title company orders the payoff or the current bill, anything owed comes out of the proceeds at closing, and if we want the house fee simple later, we run the redemption on our own time. The offer is written and shows the math against a listing, closing is usually two to three weeks through a licensed Maryland title company, and there is no inspection contingency to reopen the price. If the house is also carrying a vacant building notice or a water bill headed for tax sale, our Baltimore City page and tax lien page cover how those get cleared in the same settlement.

A ground rent is a small number with a long history. Look it up on the registry, know that back rent is capped at three years, decide whether a redemption is worth the months it takes, and put what you know in the contract. Or hand the whole thing to us and let the title company sort it at closing.