Merry Christmas Costs $18,000

The Onheiser Ground Rent Ejectement Case has come to an end. The Ohneiser family will not lose their home, but they have still been saddled with $18,000 in fees and interest on property taxes. This certainly isn't the best outcome, but the attorney's for the ironically named "Neighbor Saver LCC" who brought the nefarious ejectment suit don't seem to think so.

"Heidi met with her clients who are investors in ground rent, and theydecided to do this as a Christmas gift to the Onheiser family," said John H. Denick, an attorney who has also represented Neighbor Saver and spoke yesterday for Kenny.

Excuse me while I laugh out loud. A Christmas present? This guy could give Scrooge lessons in heartlessness.

"I hope that the Onheisers have a merry Christmas and a happy new year, and that they appreciate that they have the house," Denick said.

The case shows how rapidly fees can increase. Kenny's bill lists legal fees of $1,200 for herself and $3,000 for Denick, who helped to negotiate the settlement.

The bill also includes $12,854.61 that Neighbor Saver said it was owed in property taxes for 2004 and 2005. Under state law, those who buy property tax liens from the city are entitled to charge homeowners 18 percent interest, which can quickly add up. City records show that the Onheiser rowhouse's total tax bill for both years was less than $4,000. The bill submitted by Kenny doesn't say how the property tax amount was computed.

This is nauseating. Mr. Denick and Ms. Kenny should be ashamed of themselves. Councilman James P. Kraft misses the point completely.

"I have to give credit where credit is due," Kraft said yesterday. "Regardless of the problems that Ms. Kenny has elsewhere, she could have fought this. She could have thrown them out that morning, and she didn't. It's nice when you have a situation where people make certain representations and then they do what they say they're going to do."

Ms. Kenny could have done a lot of things. She could have set their house on fire or murdered the Onheisers in their sleep. She could have showered them with $100 bills and sung Christmas carols outside of their home. Its not about what Ms. Kenny and her predatory company didn't do. It is about what they did do. What Ms. Kenny, Mr. Denick and Neighbor Saver did was disturbingly wrong and most likely it should be illegal. Lets hope Frank Conaway can wake them up and force them to feel at least 1% of the suffering they have inflicted on so many homeowners in our State.

State Legislators Draft Several Bills Aimed at Ending the Ground Rent System in Maryland

Wow, ask and you shall receive, eh? (hat tip to The Baltimore Sun for their solid coverage of this issue)

Several state legislators said yesterday that they are drafting legislation to change Maryland's arcane ground rent system, including bills to prevent homes from being seized over missed rent payments and to ban the creation of new land leases.

"We're just going to do what we did with flipping and other scams. We're going to get rid of it," said Del. Maggie L. McIntosh, a Baltimore Democrat who is chairwoman of the House Environmental Matters Committee, which handles matters of real property and housing. "We're going to stop it right where it began."

Wonderful news, I must say. Doug Gansler weighs in:

"It clearly wasn't intended for the owners of the ground rent to get hundreds of thousands of dollars of improved property," state Attorney General-elect Douglas F. Gansler said yesterday. "That's what people are finding outrageous."

The system has "outlived its usefulness," Gansler said.

I would say the system was useless from the start; an congenital colonial disease, besmirching the Old Line State. How the legislation against ground rent exploitation will take shape is not yet clear. Several bills are in the works at the State level.

One bill would eliminate new ground rents. Another would protect people who fall behind in their ground rent from losing their house. A third would assure that people receive information about the system when they close on the purchase of a home. This might require a new registry to make sure ground rent holders and their tenants can locate one another, McIntosh said.

I would like to see a combination of the first and the second. The system needs to be killed, and by eliminating new ground rents, that process can begin. Protection of the homeowner's property is also important.

"[State Senator, Brian E. Frosch] said the legislature must prevent ground rent owners from keeping all proceeds from selling the houses that they seize. No other private debt collectors can reap such windfalls. In a foreclosure, for example, the mortgage company gets to keep only the amount it is owed.

"It's especially outrageous that someone can come in and take the property, and they don't pay [the homeowner] the surplus" after its sale, Frosh said. "It's ridiculous."

And finally:

Sen. Delores G. Kelley, a Baltimore County Democrat, said she would introduce legislation that, among other things, would reduce the fees that ground rent owners can charge homeowners if rent isn't paid on time or if a lawsuit is filed. Currently, ground rent owners can pass on up to $500 in costs of collecting overdue rent before a suit is filed and then up to $700 in attorneys' fees, $300 in title fees and all other court costs once a suit is filed.

George W. Della Jr., who failed to pass a similar bill in 2003, has the last word in the Sun article:

Goldberg, the ground rent owners' spokesman, said recently that he thought the fees should be raised because many expenses have increased.

"For that gentleman to say the fees are not high enough ... give me a break," Della said.

Good work by The SUN in making this issue an important one this year, and good work by the State Legislature for responding. Lets hope they can give anyone who owns or hopes to someday own a home in Baltimore City, a much needed break by getting rid of the predatory ground rent system.

UPDATE: Story today from The Sun about one family's fight to save their Canton home from an ejectment.

UPDATE 2: For a comprehensive look at ground rent in Maryland, check out The Sun's Ground Rent Series.

It is Time to End the Ground Rent System in Maryland

The Sun article On Shaky Ground makes it clear why.

• In nearly every aspect, the law favors ground rent holders. Homeowners rarely win once a lawsuit is filed. And the longer a case goes on, the more it can cost the homeowner.

• No other private debt collectors in Maryland can obtain rewards so disproportionate to what they are owed. In contrast with a foreclosure, the holder of an overdue ground rent can seize a home, sell it and keep every cent of the proceeds. To prevent a seizure, homeowners almost always have to pay fees that dwarf the amount of rent they owe.

• State law puts the onus on property owners to track down their ground rent owner and make payments, though it's sometimes next to impossible to find that information. No registry of ground rent holders exists, and property deeds typically contain only the barest of details about them.

• Some investors seek out overdue ground rents to purchase, then file lawsuits to take the property built on the land. In some cases, the legal owners of these houses have died, and the law is not clear about whether investors must give relatives a chance to satisfy the debts and keep the homes.

I was also interested to learn that this is a colonial system. Unlike the rest of the nation (excluding Pennsylvania), Maryland has decided to let this relic of the colonial age live on. In Baltimore there is a now a cottage industry for creating ground rent "ejectment" cases. Often the cases aren't challenged in court, and once the homeowner, excuse me, newly homeless person, is put out on the street, the property can be sold for exorbitant amounts. Forget the fact that defendants are being charged more for the fees associated with prosecuting them than for the actual ground rent itself. Forget the fact that the "ejectment" case, often over unpaid amounts as low as $200 a year, can strip a person of their whole life's work in moments.

In the words of a ground rent lawyer in the article, "Business is business."

Ah yes, business:

Thelma Parks, 56, lived for more than two decades in Druid Heights, just a few blocks from the boyhood home of the late Supreme Court Justice Thurgood Marshall, until losing her house last year in an ejectment case. It was filed by a trust set up by Fred Nochumowitz, whose relatives have long held ground rents.

Records show that the Nochumowitz trust bought the ground rent on Parks' house in January 2002. Parks couldn't make her payments, which with the fees for the court action came to "about $1,200," she says. With more time, she says, she could have paid off the $1,200.

After taking her property, the trust sold it to an investment company for $70,000 in September 2005. That company resold it about six months later for $128,000. Parks, meanwhile, was forced to rent in another part of town.

"It ruined every one of my plans," said Parks, who works for the federal government. "They all went out the window. ... I'm going to have to work until I fall apart.

"I can't retire," she said. "Everyone is making a profit from it but me."

I for one don't think this predatory practice of "ejectment" over ground rent should be business as usual.