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Lawmakers revisit ground rent remedies

Lawmakers revisit ground rent remedies

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ANNAPOLIS — A ground rent holders’ representative squared off against a state senator Thursday over his legislation to permit holders to collect the costs of ejecting the homeowner — such as attorney’s fees — only if the ground lease specifically authorizes it.

Limiting the ability to recover ejectment costs imposes “a hardship on the ground lease holder” not shared by other Maryland landlords, Katherine Kelly Howard, general counsel of Regional Management Inc., told the Senate Judicial Proceedings Committee. The legislation would usurp the court’s discretion to award costs to the prevailing party, added Howard, whose Baltimore company owns and manages properties, including ground rentals.

Sen. Brian E. Frosh, D-Montgomery, who chairs the committee, said ground-rent holders already enjoy “a right to a windfall” through recovery and re-entry of the property when the ground-rent tenant — the homeowner — fails to make payment. Displaced homeowners should not also have to shoulder the costs of their removal, he added.

“It doesn’t seem to me that the legislature should be in the business of expanding upon those rights,” Frosh said. “I don’t believe it’s fair to the ground-rent tenant.”

Frosh introduced the legislation just days after Maryland’s top court, on Feb. 26, struck down a 2007 law that had replaced ejectment with a lien-and-foreclosure process as the only method to get the property back from homeowners who have not paid their ground rents.

In its 5-2 decision in Maryland v. Goldberg, the Court of Appeals said the lien-and-foreclosure law deprived lease holders of a settled property right “in mindful ignorance of clear, strong language describing this unique property interest.”

Under Senate Bill 1095, ground-rent holders would have to provide 30 days’ notice before initiating ejectment proceedings at the risk of forfeiting any claim to attorney’s fees, court costs, photocopying fees and postage.

Frosh defended the extra conditions, saying ground-rent holders generally should not get “the money that it costs [them] to get that windfall.”

But Howard said the bill’s hurdles to cost-collection would make it “a lot more difficult” for ground-rent holders to exercise their right of re-entry and as a result would lead to more litigation.

“Litigate away,” Frosh responded.

Ground-rent holders own the land and grant inexpensive 99-year leases to use it to the owner of the buildings on the land, under an investment model that dates to colonial times. The investment was seen as safe and has remained popular since payment was largely guaranteed by the threat of ejectment.

But the General Assembly, reacting to Baltimore Sun articles documenting ejectment with little notice, passed the since-invalidated 2007 law requiring rent holders to secure a lien and foreclose in order to get the property back.

SB 1095, Frosh’s proposal, also drew fire from the Coalition of Maryland Ground Rent Owners, who objected to the bill’s requirement that the ground-rent tenant be notified personally when an ejectment proceeding is pending. Owners should be permitted to provide notice by less onerous means, such as a posting on the property or public notice in a newspaper, the group stated in a letter to the committee.

“Since there are many situations where personal service may be impossible or impracticable, the bill’s limits effectively prevent a ground rent owner from enforcing ejectment and other rights,” the group wrote. “It would be impermissible for the General Assembly to effectively abolish the ability to enforce ground rents in this indirect way, after the Court of Appeals has opined that the General Assembly cannot do it directly.”

The group also objected to a $450 limit on attorney’s fees, saying that figure “has no rational bearing on practice, hourly rates, time involved.”

Gov. Martin O’Malley, the Office of the Maryland Attorney General and Baltimore Mayor Stephanie Rawlings-Blake’s Office of Government Relations submitted letters to the committee in support of the legislation.

“The Court of Appeals recently held that homeowners of property encumbered by existing ground rent leases are still subject to the harsh punishment of ejectment for failure to pay ground rent,” O’Malley wrote. “Senate Bill 1095 adds additional safeguards to protect Maryland homeowners. As long as the ground rent system exists, the state must do all it can to avoid the harsh result of families being turned out of their homes.”

SB 1095 has been cross-filed in the House of Delegates. House Bill 1529 is sponsored by Dels. Maggie McIntosh, D-Baltimore, and Doyle L. Niemann, D-Prince George’s.

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