Ground-rent owners rush to file suits

Sun reporter

Even though a state law ending ground-rent ejectments takes effect today, Baltimore residents will for years face the prospect of having their homes seized by investors or being hit with large fees over small unpaid land debts.About 775 cases - some dating to 2003 - are pending in Baltimore Circuit Court, including more than 300 new ones filed in June as ground-rent owners rushed to get cases logged in under the old law. There were 154 lawsuits filed on Friday alone.

The Baltimore sheriff's department has scheduled ejectments into August and says it has no choice but to follow the old law permitting them."I would hope that ground-rent owners would be willing to work out payment arrangements, but I'm not sure there's going to be a legal process to block the ejectments," said Steven A. Silverman, chief of the Consumer Protection Division of the Maryland attorney general's office. "At the most extreme, you could have someone with significant equity in their house, and they lose the house."

Ejectment, a distinct court process that ground-rent owners can use to seize the homes of delinquent ground-rent payers, was abolished by the General Assembly this year as part of an overhaul of a nearly 400-year-old system. Owners of more than 80,000 Baltimore City homes must rent the ground under their houses; smaller numbers of ground rents exist in Baltimore and Anne Arundel counties.

Under the new law, rather than filing an ejectment lawsuit to seize a property, leaseholders will have to file a lien against the home to recover their debt. Homeowners will have 45 days to challenge that action in court. Homeowners would be able to recover any equity remaining after the debts are repaid through a settlement or a foreclosure; under the old law, a ground rent owner can seize a house through an ejectment process, resell it and keep all the proceeds. Also, the caps on attorneys fees will be lower than the caps in ejectment cases.

The General Assembly overhauled the ground-rent system after The Sun published an investigative series that showed how a small number of investors had used their extraordinary power under the law to seize hundreds of homes over back rent as meager as $24. In many other cases, ground-rent owners have extracted fees of 20 to 50 times the amount of rent owed to settle cases.

Most parts of the new law take effect today, the traditional effective day for new Maryland laws, although an emergency bill banning the creation of new ground rents took effect Jan. 22.

Against the backdrop of the looming ejectment ban, about 600 ejectment suits were filed in the first half of this year in Baltimore Circuit Court, more than were filed in any full year before 2005. R. Marc Goldberg, a Baltimore attorney and ground-rent owner who acts as a spokesman for about two dozen ground-rent owners, had anticipated a flurry of lawsuits as the law change approached. Goldberg's office itself filed 18 cases in a single day last week.

He and other ground-rent owners have contended that homeowners would refuse to pay their rent without the threat of losing their homes. "It only makes sense that if you have rights that need to be enforced, that will no longer be in existence tomorrow, that you would try to enforce them today," Goldberg said.

"I will pursue the cases to their conclusion. If the people would just pay me, then it would go away immediately."

Sen. Brian E. Frosh, chairman of the Senate Judicial Proceedings Committee, one of the legislative panels that considered the ground-rent bills, said he found it troubling that ground-rent owners have filed so many ejectment cases in recent days.

"They said they don't do this as a matter of course - it's very rare. Obviously, they're doing it now," he said.

Frosh, an attorney and Montgomery County Democrat, said he is not sure why the abolishment of ejectment wasn't passed as an emergency measure and put it into effect right away, as the ban on new ground rents was.

"We may have overlooked the possibility they would try to take advantage of the time lapse for the new remedy," he said. "If it turns out there's a stampede to get things filed early, then we may be looking at some injustices that could have been avoided."

Last week, the trustee for a ground-rent owner in Anne Arundel County filed a lawsuit challenging the constitutionality of the ejectment ban and a law requiring ground-rent owners to register their leases by Sept. 30, 2010, or lose them.

State officials maintain that the ground-rent measures were scrutinized for constitutionality before they were enacted.

"Our view is that the remedy was changed but not the substantive ability to enforce a ground-rent obligation," Silverman said. "We didn't take away the ability of a ground-rent owner to obtain the money owed; we just changed the way they go about collecting it. We expect compliance and a fairer system to both sides."

The executive director of Civil Justice Inc., a Baltimore legal-help group, said Friday that his group might intervene in that case to help homeowners who are facing ejectment lawsuits and perhaps even people who have lost homes going as far back as 10 years.

Phillip R. Robinson, executive director of Civil Justice, said he intends to argue that the law allowing ejectments was unconstitutional because "it results in a ridiculous windfall for the ground-rent owner."

"We're worried about the people who may have lost their homes already or are in the process of losing them," said Robinson, conceding that his argument is a long shot. "Maybe they're being charged ridiculous fees. The ground-rent owners should be careful about their tactics, because if we're successful or the state is successful, they may be forced to pay a lot more than they were expecting."

Meanwhile, the old law still applies in active cases such as those involving a homeowner who said she had owned the property for decades and never paid ground rent on it, one who paid half the bill and thought the matter was resolved, and another whose bills stopped coming a couple of years ago and was sued anyway.

Hilton Stone, 80, whose home is in the Franklintown neighborhood, paid ground rent for 30 years. But then a disagreement arose among people who said they owned the ground rent, and the bills stopped coming, he said.

"I got a couple letters where my checks came back to me," Stone said. "Ain't nobody bothered me about no ground rent for two years. I'm going to talk to a lawyer about it."

Edward A. Bennett, a 53-year- old systems engineer, said he didn't realize that a ground-rent ejectment lawsuit had been filed against him in January 2006 - though the court file includes a letter dated February 2006 that demands $3,500.

He said he bought the home in the Frankford neighborhood in 1990 and was surprised to find that he owed back ground rent and fees of about $2,000. He said he paid half that amount and then paid a new bill when it arrived.

"I thought, `It's crazy, ground rent - what's that?'" he said in a recent interview. "I thought it was done. I was hoping. The amount of money they said I owed was all interest."

At the end of last week the Baltimore sheriff's office had received notices of 10 ground-rent ejectments ordered by the Circuit Court. Six had been scheduled - four for July and two for August.

"We have to carry them out," said Baltimore sheriff's office administrative Lt. Deborah Claridy. "Whatever the law says is what we're bound by. We can't add our opinion to it."

State Sen. George W. Della Jr., who lobbied for ground-rent reform, said he'll continue to monitor ejectments as well as the annual auctions in which investors bid for the right to collect back taxes and fees from homeowners.

"It's unfortunate that they didn't get the message," said Della, a Baltimore Democrat. "They're going to keep squeezing this thing for as long as they can and get everything they can out of it. They're doing what the old law allows them to do."

Ground-rent reformIn addition to ending the court process known as ejectment, the new ground-rent laws:Make previously irredeemable ground rents - those created before April 9, 1884 - redeemable by the homeowner unless paperwork maintaining its irredeemable status is filed by Dec. 31, 2010.

Offer loans through the Department of Housing and Community Development to homeowners to redeem ground-rent leases.

Require ground-rent owners to mail bills no later than 60 days before a payment is due to the homeowner's last known address.

Create an online registry of properties subject to ground rent. Ground-rent owners must register their properties by Sept. 30, 2010.

Eliminate the waiting period before a ground rent can be redeemed.

Require that homeowners receive notice about their right to redeem when a ground lease is transferred to a third party and when they close on a loan secured by property subject to ground rent.

An emergency bill banning the creation of new ground rents took effect Jan. 22.

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