The Sun Series Sparked Ground Rent Reform

Second-place winners June Arney and Fred Schulte of The Sun in Baltimore.

By Fred Schulte & June Arney

The Realtors told us "ground rents" were as much a part of Baltimore life as crabs, a harmless vestige of Maryland’s past.

Rooted in colonial times, the system grew rapidly in the early 1900’s as developers built miles of low-cost row homes in Baltimore. Builders saw ground rents as a progressive way to keep home prices affordable for the
working class. Instead of buying clear title to the land beneath the house, homeowners leased it from investors, typically for $100 a year or less.

But there was a little known consequence of failing to pay these token sums every six months: the law granted
ground rent owners the extraordinary right to go to court to seize the home, sell it and keep every penny of the proceeds.

Our three-part series On Shaky Ground documented how small groups of investors took advantage of the law to seize homes or extract huge fees from people who were largely ignorant of the law.

We found that over the past six years, nearly 4,000 lawsuits had been filed against Baltimore property owners over ground rents as small as $24. Most cases concluded with ground rent owners collecting fees that often ran to thousands of dollars.

But in more than 500 cases, investors took the properties, which ranged from boarded-up brick row homes to a 7,000 square-foot Victorian in one of the city’s most historic neighborhoods.

The ground rent owners often sold the homes for thousands of dollars in quick profits. We followed sheriff’s deputies to several of these "ejectments" and watched as workmen changed the locks on doors and put people out on the street, sometimes with their possessions piled up around them. We filmed one and posted the video on our web site.

Identifying the investors behind these cases took months. We started with a text file database from the circuit court with fields for the name of plaintiff, defendant, attorney, property address and case disposition for all ejectments filed since 2000. Loaded into Access, the database revealed more than 300 persons or entities that had filed ejectments, many "limited liability companies" with names like "Morents, LLC."

The names of the owners are not public record. We had to search hundreds of court files, online property deeds, corporate records and federal civil and bankruptcy court cases to identify the owners.

In time, we were able to connect the majority of the lawsuits to four family groups or individuals. Obituaries and paid funeral notices from our paper and others were critical in identifying family ties.

We gave the data to our cartographer who used mapping software and U.S. Census Bureau data to track ejectments by neighborhood. This showed they were clustered in "gentrifying" areas, suggesting investors were targeting neighborhoods where property prices had been climbing.

We used online property records to track sales of the houses and ground rent deeds. Each ground rent deed is listed in property records, allowing us to track sales of thousands of them, starting in the late 1990s as property values started to rise. Many of the sellers were foundations, small investors, or estates who hadn’t collected ground rents in years. The buyers were investors who often sued to take the home shortly after buying the delinquent ground rent.

We hit the streets to find the people caught in the ground rent trap and tell their stories. Some had no idea that a home owned in the name of their deceased parents or other relatives was about to be seized -- because nobody bothered to contact them.

One key reason this story succeeded and produced such massive reform was that we stayed open to developments after the series was printed.

The best example of that came just days after publication when we decided to go out to yet another planned ejectment -- one in which the listed homeowner was deceased.

One of us went to the house with a photographer expecting to document a boarded up property about to quietly change hands.

What we found was Christmas decorations framed a real cat sitting in the window, and a man and his two teenage sons living there had no idea that they were at risk of losing their home the following morning.

The story and emotional photos that appeared the following day fueled outrage that inundated the newspaper with calls and e-mails from readers horrified that someone’s home could be taken under such terms.

It was holiday time, and lawmakers already were incensed by what they’d been reading for days.

The man living in the house, Vernon Onheiser, became the face of ground rent abuse in Baltimore. A few months later, the new Governor, Martin O’Malley, would send a car to carry him to Annapolis to take part in the first of several bill signings. In all, the legislature approved an emergency bill banning new ground rents and passed seven other reform measures, including one that eliminated ejectments -- the legal process that ground rent owners used to seize property.

The law abolishing ejectment took effect July 1. As ground rent owners anticipated the change, they filed about 600 ejectment lawsuits in the first half of 2007 in Baltimore Circuit Court -- more than were filed in any full year before 2005.

Rather than filing an ejectment lawsuit to seize a property, leaseholders now must file a lien against the homeowner to recover their debt.

Recently, dozens of ground rent owners teamed up and filed a class-action lawsuit demanding compensation that could exceed $400 million, saying that ground rent reform laws effectively are an unconstitutional taking of property for public use without just compensation.

Their 23-page lawsuit alleges that the laws make ground rent leases worthless by making it too costly and cumbersome to collect rent or seize houses if rents aren’t paid.

Lawmakers insist the laws are solid.

We have no idea who will prevail in the courts, but one thing’s for sure: ground rent is far from the innocent quirk of Baltimore life the Realtors told us about. Many readers are glad we took the time to look into it.

Fred Schulte can be reached at 410-332-6296 or fred.schulte@baltsun.com.

June Arney can be reached at 410-715-2832 or june.arney@baltsun.com

 

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