Ground Rent in Baltimore, Explained

If you own a Baltimore rowhome, there is a real chance you do not own the ground under it. Someone else does, and you pay them a small annual rent for the right to sit on it. That is ground rent. It is a 200 year old Baltimore arrangement that still shows up on settlement sheets every week, and it surprises almost every seller who has one.

Handled correctly it is small money. Handled badly it is expensive. Here is how it works, what happens at settlement, and what to do when nobody can find the holder.

What ground rent is

Under Maryland Real Property Article, Section 8-701, a ground lease is “a residential lease or sublease for a term of years renewable forever subject to the payment of a periodic ground rent.” Ground rent is the money owed under it. The ground lease holder holds the reversionary interest.

In practice the property splits into two estates. You hold a leasehold interest in the house, which Maryland law treats as personal property even though it functions as your home. The ground lease holder keeps fee simple title to the land and a reversion. The term is typically 99 years and renews forever, and you pay all the taxes.

The Maryland Court of Appeals described it this way in Muskin v. SDAT: “A ground rent lease, common in Baltimore City, is a renewable 99 year lease where the fee simple owner of a property receives an annual or semi-annual payment (‘ground rent’) and retains the right to re-enter the property and terminate the lease if the leaseholder fails to pay.”

Residential ground rents apply only to property used for four or fewer dwelling units, per Section 8-702. And no new ones exist. Under Section 8-803, on or after January 22, 2007, an owner “may not create a reversionary interest in the property under a ground lease or a ground sublease for a term of years renewable forever subject to the payment of a periodic ground rent.” Every ground rent in Baltimore is at least that old.

Why Baltimore, and almost nowhere else

The Court of Appeals, quoting the 1953 case Kolker v. Biggs, put it plainly: “Ground rent leases, which were rare in England but common in Ireland, were introduced in Maryland before the Revolution. Seldom used in other States, they have been a favorite form of tenure in Baltimore.” See State v. Goldberg.

The concentration is not a figure of speech. A Maryland Department of Legislative Services fiscal note on House Bill 1182 of 2020 reports: “As of January 2020, there are 92,419 ground rents registered with the State Department of Assessments and Taxation. According to the registry, ground rents are concentrated mostly in Baltimore City (62,223), with other ground rents located in Anne Arundel (3,795), Baltimore (25,939).”

Baltimore City holds roughly two thirds of every registered ground rent in the State. It is not a thing in Phoenix, which matters if you inherited a Baltimore house and live somewhere else.

The registry, and why it decides whether you owe anything

Maryland runs an online ground rent registry at SDAT. This is the single most useful thing on this page, so read it carefully.

Under Section 8-707, if a ground lease is not registered, the holder may not “collect or attempt to collect any ground rent payments, late fees, interest, collection costs, or other expenses related to the ground lease,” may not bring a civil action against you to enforce it, and may not bring an action for possession. The same section says a tenant of an unregistered ground lease “may not be required to hold more than 3 years of ground rent in escrow.”

SDAT states it in plain English on its ground rent page: “While you may voluntarily pay any ground rent bill, only ground rents listed on SDAT’s Ground Rent Registry are legally collectible by the ground lease owner.”

There is a billing condition too. Under Section 8-809, a holder may not collect an installment unless the lease is registered and, at least 60 days before the payment is due, mails a bill in the statutory form to your last known address and to the property address in SDAT’s records.

To check your own property, search the address on SDAT Real Property Data Search and open the ground rent registration and ground rent redemption views. Do this before you list, not the week of closing.

Why the rules read this way

Maryland tried to solve this harder. A 2007 law extinguished unregistered ground rents outright. In 2011 the Court of Appeals held in Muskin that retroactive extinguishment violated the due process and takings provisions of the Maryland Constitution, while upholding the registration requirement itself. The legislature returned in 2012 with the collection ban that survives today, and tightened it again effective October 1, 2023.

Redemption, and the exact formula

Redeeming means buying out the ground rent so you own the property outright, free of it. Under Section 8-804, a reversion reserved in a ground lease for longer than 15 years is redeemable at any time, at your option, after 30 days’ notice to the holder by certified mail with return receipt requested and by first class mail.

The price is fixed by statute. The reversion is redeemable for the annual ground rent multiplied by:

The statute also allows a lesser sum if the lease specifies one, or any amount the parties agree on at the time of redemption. SDAT’s own worksheet uses the 6 percent figure as the default when the lease date is unknown, and adds up to three years of ground rent to the redemption amount.

Registration itself is free. SDAT’s registry form states that effective October 1, 2020 there is no filing fee for the document. Redemption through SDAT carries a fee: SDAT lists $20 for regular processing, which it estimates at about nine weeks, or $70 expedited, estimated at about five weeks.

The redemption loan most people never hear about

Maryland DHCD runs a Ground Rent Redemption Loan Program that “provides interest-free loans to help Maryland homeowners buy out (redeem) the ground lease on their property.” The terms as published: 0 percent interest, a 30 year term, and a lien recorded against the property. The maximum loan is $3,500, including up to $1,000 for transactional costs. You must own the property, it must be your primary residence, you must be current on past ground rent payments, and household income cannot exceed 80 percent of the statewide median.

How it shows up at settlement

Two statutory notices exist specifically to stop a ground rent from ambushing a sale.

First, under Section 8-811, a contract for the sale of real property subject to a ground rent must contain a statutory notice in boldface type, at least 14 point. That notice restates the whole redemption schedule and tells the buyer that if the ground lease holder cannot be identified, SDAT provides a process that may result in absolute ownership.

Second, under Section 8-812, before settlement of a purchase or refinance loan on a residential property subject to a redeemable ground rent, the settlement agent must tell the borrower they have the right to redeem, that the redemption amount is fixed by law but can be negotiated, and that “it may be possible to include the amount of the redemption in this loan.”

On arrears, the ceiling is statutory. Under Section 8-806, a holder is entitled to demand or recover “not more than 3 years’ past due ground rent.” And if the ground lease was not registered before you acquired title, the holder may not sue you at all for rent that came due before that date.

The practical effect is that ground rent is usually a small line item, not a deal killer. It sits alongside the other Baltimore items that come off your proceeds, covered in selling a house with a lien on it and closing costs when you sell in Baltimore.

When nobody can find the ground rent holder

This is common. Many of these leases are a century old, the original holder is long dead, and the interest has passed through estates nobody tracked. Maryland built a procedure for exactly this, in Section 8-804(f).

After giving the required 30 days’ notice, you apply to SDAT to redeem. You pay a $20 fee. SDAT posts notice on its website that an application has been made, and that notice stays posted for at least 90 days. You supply an affidavit certifying either that you have not received a bill or other communication from the holder in the three years before filing, or where the last payment was sent. You then pay the redemption amount plus up to three years of past due ground rent.

SDAT issues a redemption certificate. The critical last step is yours: redemption is effective to conclusively divest the holder of the reversion and vest it in you “when the leasehold tenant records the certificate in the land records of the county in which the property is located.” An unrecorded certificate does nothing. If the holder never claims the money, it escheats to the State after 20 years.

SDAT’s published sequence adds a wait to plan around: after approval, you mail the affidavit and lump sum payment no sooner than 100 days later. Treat this as a months long process, not a week.

What happens if ground rent goes unpaid

Maryland has moved this around twice, so ignore anything you read from before 2015. A 2007 law replaced ejectment with a lien procedure. In 2014 the Court of Appeals struck that down in State v. Goldberg. In 2015 the legislature repealed the lien remedy and restored an action for possession, now at Section 8-807.

That action is heavily gated. A holder may bring it only if the ground lease is registered, the rent is at least six months in arrears, and every notice requirement is met. There is a 60 day notice, then a 30 day notice in 14 point bold containing an itemized bill, then a circuit court filing no less than 30 days after that. Recorded lienholders must be notified and are necessary parties. Costs are capped: not exceeding $100 after the first notice, not exceeding $650 after the second, and attorney’s fees not exceeding $500 once an action is filed. The tenant also gets six months after execution of a writ of possession to pay what is owed and seek relief from it. A holder who misses any notice requirement gets neither a writ nor reimbursement.

In other words, losing your house over a $60 a year ground rent is not supposed to happen anymore. It still deserves your attention, because unpaid ground rent muddies title and slows a sale.

Selling a Baltimore house with a ground rent on it

You do not have to redeem before you sell. Houses trade subject to ground rent in Baltimore constantly. What you do have to do is know the answer before a buyer asks, because a seller who does not know whether the ground rent is registered has just handed a lowball buyer a reason to shave the price.

Two things Baltimore owners say about this are worth repeating. Some buyers prefer a property without a ground rent, so redeeming can widen your buyer pool. And a large out of state lender that has never seen a ground rent can stall a financed deal while it works out what it is looking at. Neither is a reason to panic. Both are reasons to know the status early rather than in underwriting.

Three moves, in order. Search the address on SDAT and note whether a ground rent is registered and at what annual amount. Pull the recorded documents that establish it. Then get a real valuation, which usually shows the ground rent is a rounding error.

We buy houses subject to ground rent and we handle the settlement side. REBA gives you a real number for your address in minutes, free, with no phone call required. If the house also needs work, see selling a Baltimore house that needs work and what your house is worth as is. If there are City charges on the property too, read Baltimore water bill liens and the Baltimore tax sale process. When you want a number in writing, get your cash offer. Bring a verified written offer from anyone else and we will beat it or tell you to take it.

Before you act on this

This page is general information about how these processes work in Maryland. It is not
legal, tax, or financial advice, and your situation may turn on details this page cannot
know. Talk to a Maryland attorney or a licensed tax professional before you make a decision
you cannot reverse. If you are facing foreclosure, you can also speak with a HUD approved
housing counselor at no cost.