Maryland General Assembly overhauls two real estate issues, but

The General Assembly succeeded in overhauling two issues on the real estate front ---- ground rent and eminent domain ---- but failed to pass other reforms.

Ground rent, a Colonial-era system of land ownership that forces some homeowners to pay rent for the ground beneath their homes, gained the most attention. Legislators passed bills abolishing the issuance of new ground rents, regulating those already in existence and adding fees and other measures to discourage the system.

The General Assembly entered the State House in January with ground rents near the top of the agenda after The (Baltimore) Sun documented abuses in which many ground-rent holders forced evictions of homeowners for failing to pay sometimes nominal rents.

Eminent domain received less attention. But legislators did pass a law increasing compensation for business owners forced to move when governments use their eminent domain authority to seize private property. Senate Bill 3 raised from $10,000 to $60,000 the amount businesses can receive after being displaced.

"Senate Bill 3 certainly didn't achieve all the changes that we wanted," said Tom Saquella, president of the Maryland Retailers Association. "But we still think it took a long and overdue first step to providing fair and more just compensation."

After a 2005 U.S. Supreme Court ruling broadened government's eminent domain authority, lawmakers promised to drastically change Maryland's eminent domain rules during last year's General Assembly session. But the topic got pushed aside while legislators struggled to pass last-minute protections for Marylanders facing huge hikes in electric utility costs due to expiring rate caps.

True eminent domain reform was "politically difficult," Saquella said, because "you have local governments who are opposed to any restrictions on their ability to perform eminent domain."

Other attempts at real estate reforms failed, such as a bill seeking to create new development fees to fund Chesapeake Bay cleanup, and a proposal to tax business entities for land transfers. House Bill 1220 would have established a Chesapeake Bay "green fund" with the fees. House Bill 475 would have closed a loophole that allows business entities to sell properties without paying taxes on the transfer.

But the failure was good news to the Home Builders Association of Maryland and the Maryland chapter of the National Association of Industrial and Office Properties. They and other groups lobbied against the proposals, saying they would harm the real estate industry.

"It would have put the entire burden - on the backs of new home buyers and new commercial development," John Kortecamp, executive vice president of the home builders association, said of the green- fund bill.

Thomas C. Shaner, executive director of the Maryland chapter of the National Association of Industrial and Office Properties, said he thought the green-fund bill was unfair.

"It was taxing the wrong people for the wrong reasons," he said.

Shaner said he expects to work with lawmakers next session to craft a green fund that would lessen the impact on developers by spreading fees and taxes among more stakeholders.

He also hopes lawmakers will be more specific next time they try to close the LLC loophole. Those in the business of owning and maintaining properties should not be taxed every time they transfer a property, he said.

"There are definitely abuses going on in the LLC world," Shaner said. "But there are distinctions that need to be made on that."

Copyright 2007 Dolan Media Newswires
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