The modern version of a quitrent
So…
Earlier this week, The Legal Genealogist explored the practice of quitrents in colonial America.
Specifically in colonial Maryland1 and in colonial Virginia.2
Quitrents, of course, were a kind of land tax, payable to the local governor or to the British Crown on an annual basis, for land granted to individuals.3
Which prompted reader Eileen Souza to note: “In Maryland, even to current times many properties require the payment of annual ground rents, which sound very similar to quit rents. My first home in Maryland, purchased in 1978, had a ground rent of $120 a year. I’m not sure, but I think it goes to the State.”
Ground rents?
Yep. Ground rents. Kind of like the modern version of a quitrent. And it’s a form of property interest under which the “buyer” has the right to live in the house and use the land… but doesn’t really own the land at all. Hence the quotes around the word buyer.
According to Maryland’s high court, this is really a lease: “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. … The fee simple owner retains a real property right in the land, but the leaseholder’s interest is governed by the law of personalty.”4
The history of ground rents in Maryland has two distinct phases:
As the old English lordship system was phased out, enterprising investors bought tracts of land from the newly sovereign colonial governments and allowed tenants who otherwise could not purchase land for themselves to make small, incremental rent payments as a less-expensive alternative to land ownership.
… As the 99-year leases expired in the late 1800’s, only a very small percentage of them were actually renewed. The practice of drafting ground leases soon gave way to a higher rate of land ownership and more traditional landlord-tenant leases in which the landlord also owned the dwelling space.
Ground rents then resurfaced in Baltimore following the Second World War as investors bought up much of the land left vacant by those fighting overseas and drafted ground leases for the properties. When the GI’s returned to settle down and raise families, there was an enormous demand for low-cost home ownership in the City and surrounding counties. Many who were unable initially to afford both the land and the home built upon it jumped at the opportunity for small annual payments on the land in exchange for a (smaller) initial investment in the home. Many of these leases, too, were drafted to expire after a period of 99 years, hence the lingering prevalence in the area.5
Now, there are some limits: Maryland law provides that owners of ground rents have to register the property so nobody is taken by surprise. It also provides that most people who buy property subject to a ground rent can also buy out the ground rent interest, and so acquire fee simple ownership. The ground rent disappears if the landlord doesn’t try to collect it for more than 20 years. And no new ground rents can be created today, due to a change in Maryland law in 2007.6
And every limit that’s been put on ground rents has been bitterly fought through the courts by ground rent owners. In 2011, the registration requirement for ground leases was contested all the way to the Maryland Court of Appeal, where the Court struck down some aspects of the law that would have stripped the ground rent owners of their rights if they didn’t register according to the statute.7 In 2014, the Court struck down a law changing the way an owner could take back the property if the ground rent wasn’t paid from a right of re-entry to a right of foreclosure.8
All of which, of course, means records for genealogists, in the past, in the present, and well into the future. Records of land subject to ground rents. Records of fights over land subject to ground rents. Records of court cases over limits on ground rents.
And, by the way, though ground rents are common in Baltimore, Maryland, they’re not unique to Baltimore or even to Maryland. For years, this 99-year-lease system has been in place in Ocean Grove, New Jersey, where the land itself is owned by the Ocean Grove Camp Meeting Association, and 99-year renewable leases with ground rents are the rule,9 in Hawaii,10 and though they’re not common, ground rents are still allowed under the laws of Pennsylvania11 and Virginia.12
So, yeah… ground rents. Modern quitrents. And as genealogists, we shouldn’t be surprised when we encounter them in the land records.
SOURCES
- Judy G. Russell, “One shilling sterling,” The Legal Genealogist, posted 13 Aug 2018 (https://www.legalgenealogist.com/blog : accessed 16 Aug 2018). ↩
- Ibid., “A tale of two Fredericks,” posted 14 Aug 2018. ↩
- See generally “Quitrents,” Taxes in Colonial Virginia (VA-NOTES), Library of Virginia (http://www.lva.virginia.gov/ : accessed 14 Aug 2018). ↩
- Muskin v. State Dep’t. of Assessments & Taxation, 422 Md. 544, 550 (2011). ↩
- “Understanding Ground Rent in Maryland,” The People’s Law Library of Maryland, Maryland State Law Library (https://www.peoples-law.org/ : accessed 16 Aug 2018). ↩
- See Code of Maryland §§8-801 et seq. ↩
- Muskin v. State Dep’t. of Assessments & Taxation, 422 Md. 544 (2011). ↩
- State v. Goldberg, 437 Md. 191 (2014). ↩
- Wikipedia (http://www.wikipedia.com), “Ocean Grove, New Jersey,” rev. 3 Aug 2018. ↩
- See Alexandra Mitchell, “The History of Hawai’i’s Leasehold Property,” Maui Now, posted 4 Jan 2016 (http://mauinow.com/ : accessed 16 Aug 2018). ↩
- See e.g. 42 Pa.C.S. §5530. ↩
- See Va. Code § 55-79.01 to -79.06. ↩
Ocean Grove, NJ! I was surprised to see that name in your blog. As a child, I attended the Church of the Brethren Annual Conference there in 1959 and 1962. We stayed in the Bath Ave. House. Not sure if it still exists. It may have been my first look at the ocean. On Sundays, there was no driving of cars allowed, so we had to park the car in nearby Asbury Park and walk over with our suitcases Sunday after church if we wanted to leave that day. That law might still be in existence, not sure. Ocean Grove has been a kind of magical place in my memory ever since.
The rules changed when Ocean Grove was foolish enough to take on a delivery truck driver for the NY Times. But it’s still a cool place and probably my favorite NJ beach town.
They still exist in Manhattan.
Back when I was with the IRS, I was auditing the Estate Tax of a certain decedent [never mind which one; see Internal Revenue Code § 7213(a)(1)]. There were various issues that caused this Estate Tax return to be audited, but at the audit the Executrix’s attorney brought up the issue of the valuation of the decedent’s co-operative apartment in Manhattan.
Attached to the Return was a copy of an appraisal by a very reputable appraiser (sometimes returns are selected for audit on account of the appraiser’s identity and reputation, and conversely, the IRS valuation experts had occasion to tell me to not bother them with ANY appraisal by Appraisers X, Y, or Z).
The appraiser’s valuation was based upon the assumption that the ground rent would be a certain amount when the long-term lease was to be re-upped about 10 weeks from the decedent’s death, and about a month after the appraisal.
Turns out that the re-up was negotiated at a higher amount — which lowered the actual value of the co-op unit (and was reflected on the sale of the unit subsequent to the filing of the Estate Tax return).
The case was closed with some adjustments in the IRS’s favor, but the overall hit to the Estate was mitigated significantly by the lowered value of the co-op unit.
As a historical matter, this entry is incorrect. Quitrents were a feudal holdover applicable only to lands derived initially from the crown and subsequently from the holder of a royal grant. Quitrents were only applicable in Virginia within the Northern Neck Proprietary granted to Lord Fairfax and his descendants. The rate, originally related to the elimination of certain feudal services owed a noble proprietor, were actually quite small. A 1777 Virginia statute that gave those required to pay quitrents a proportionate break on property taxes set the rate at only 2 shillings six pence for 100 acres.
Ground rents were a completely different animal. They could be created on any real estate, regardless of connection to crown or nobility. Their amount was set by the market, they were typically tied to very long term lease (as long as 900 years in some cases) and gave the lessee complete dominion over the property for that entire period, so long as the rent was paid. The lessee was free to sell his or her rights under the lease, along with any and all buildings, etc. he or she had installed on the land to another, always subject to the need to pay the ground rental; the lessor was apparently also free to sell what amounted to a semi-permanent source of income from the rental to others.