Ground-rent battle shifts to House panel

Daily Record Legal Affairs Writer//March 20, 2014

Ground-rent battle shifts to House panel

By Steve Lash

//Daily Record Legal Affairs Writer

//March 20, 2014

ANNAPOLIS — The Maryland House of Delegates will likely approve a Senate-passed bill to permit ground-rent owners to collect attorneys’ fees and other costs of ejecting the building owner only if such costs are authorized under the ground lease, according to a delegate whose panel oversees housing legislation.

“There is a consensus that we need to do something” to protect ground-rent tenants, said Del. Doyle L. Niemann, who chairs the House Environmental Matters Subcommittee on Housing and Real Property. “I think the chances [of passage] are very high.”

Niemann’s comments followed the Senate’s 46-0 vote Thursday on a bill introduced just days after Maryland’s top court struck down a 2007 law that had eliminated ejectment as a remedy for unpaid ground rents.

The Senate-passed legislation would restore the right to ejectment, but require ground-rent owners to provide 30 days’ notice before initiating the proceedings. Without such notice, the ground-rent owner might forfeit any claim to attorneys’ fees, court costs, photocopying fees and postage.

Niemann said the provision helps to protect the ejected building owner from the additional insult of having to pay the costs of having them ejected.

Ground-rent owners “can collect a reasonable amount, but they cannot pad the bill,” added Niemann, D-Prince George’s.

The subcommittee will hold a hearing on the legislation sometime next week, Niemann said.

The panel can expect strong opposition from Katherine Kelly Howard, general counsel of Baltimore-based Regional Management Inc., which owns and manages ground rentals and other properties.

Howard assailed the limitations on collection as “unduly punitive.”

Many of the contracts were drafted in Colonial times and in the years after World War II, when recovery of ejectment costs was a presumed right, Howard said after the Senate vote.

Thus, many ground-rent agreements are silent as to costs, leaving the owners with no chance to recover their ejectment costs under the legislation, Senate Bill 1095, she said.

Contractual provisions spelling out recoverable fees and costs are “a relatively new concept,” Howard said. “We will certainly be trying to make that point to the folks in the House.”

Sen. Brian E. Frosh, the chief sponsor of SB 1095, said the measure lacks the strong tenant protection of the 2007 law, which the Court of Appeals invalidated on Feb. 26. But Frosh, D-Montgomery, said he takes some solace in the safeguards the current measure will provide.

“It’s a good bill,” said Frosh, who added that he is still smarting from the high court’s ruling in Maryland v. Goldberg. “[But] it is not as protective as I would have liked to see it for people whose homes are at stake.”

As Frosh originally drafted it, SB 1095 would have required ground-rent owners to personally deliver to the tenant written notice of their intention to begin ejectment proceedings and capped potential attorney’s fee awards at $450.

But ground-rent owners assailed the personal notice provision last week during a hearing before the Senate Judicial Proceedings Committee, which Frosh chairs.

The owners called the provision too onerous, as citing other civil actions that allow for notice on the property or in the newspaper. They also said the $450 cap is too low, since a title search alone can run $200.

The Senate committee amended the bill to allow notice by a posting “in a conspicuous place” on the property or by certified mail to the tenant’s last known address — but only after at least two “good-faith” efforts are made to provide personal delivery. The committee also raised the attorney fees cap to $500.

The bill would also require individuals who hold a lien on the ground-rent property to be made a party to the ejectment proceeding so they can assert their claim for the debt owed.

Sen. Nancy J. King, D-Montgomery, was the only senator not to vote on the bill. She was absent from Thursday’s session due to a family obligation, according to a Senate aide.

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 with little notice, passed the since-invalidated 2007 law requiring owners to secure a lien and foreclose in order to get the property back.


Networking Calendar

Submit an entry for the business calendar