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Senate sends ground-rent restrictions to House

ANNAPOLIS — By a vote of 46-0, the Senate gave final approval Thursday to legislation that would limit the ability of ground-rent owners to collect the costs of ejecting a defaulting homeowner.

Senate Bill 1095 now moves to the House of Delegates for its consideration of the measure.

Under the bill, ground-rent owners would be able to collect attorneys’ fees and other costs of ejectment only if such expenses are authorized in the ground lease itself. Ground-rent owners would also have to provide 30 days’ notice before starting the ejectment proceedings, or risk forfeiting any claim to attorneys’ fees, court costs, photocopying fees and postage.

Under an amendment also approved by voice vote on Wednesday, the ground-rent owner will have to include all other lienholders on the property as parties to the ejectment proceeding, giving them a chance to assert their claims.

The Senate in 2007 had eliminated ejectment as a remedy against non-paying homeowners, requiring the ground-rent holder to establish a lien for the unpaid amount and then foreclose on it. However, Maryland’s top court found the 2007 reform unconstitutional. Senate Judicial Proceedings Committee Chairman Brian E. Frosh introduced SB 1095 a few days later.

In its Feb. 26 decision in Maryland v. Goldberg, the Court of Appeals said the lien-and-foreclosure law deprived the ground-rent owners of a settled property right “in mindful ignorance of clear, strong language describing this unique property interest.”

Frosh has said he was “disappointed” by the 5-2 decision, and that ground-rent owners enjoy “a right to a windfall” through the recovery and re-entry of the property when the building owner fails to make payment. Displaced homeowners should not have to shoulder the costs of their own removal, the Montgomery County Democrat added.

Ground-rent owners grant inexpensive 99-year leases under an investment model that dates to colonial times. The investment was seen as safe and remained popular since payment was largely guaranteed by the threat of ejectment.

But the General Assembly, amid Baltimore Sun articles documenting ejectment for small sums and with little notice, passed the since-invalidated 2007 law requiring owners to secure a lien and foreclose in order to gain possession of the property.

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