Opinion ID: 2681037
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Heading: Facts and Legal Background

Text: The ground lease is a centuries-old home financing tool found almost exclusively in Maryland. See Banks v. Haskie, 45 Md. 207, 218 (1876). With roots in feudal England, the ground lease, although little known elsewhere in the United States, is common in Maryland. See Lewis Mayer, Ground Rents in Maryland 43 (Cushings & Bailey ed., 1883). Although ground leases have changed little over the centuries, recent legislation attempted “reforms” of the ground lease system. In late 2006, The Baltimore Sun published a three-part investigation into the ground rent system. Fred Schulte & June Arney, Part 1 of 3: On Shaky Ground, The Baltimore Sun, Dec. 10, 2006, http://www.baltimoresun.com/business/bal-te.bz.groundrent10dec10,0,5955952.story (last retrieved Nov. 13, 2013). Focusing on some anecdotal reports of tenants being ousted from their homes due to missed payments totaling far less than the value of the home, these articles led to a legislative attempt during the 2007 session of the General Assembly to address perceived abuses of the ground lease system. Appellees, a class representing ground lease holders, 4 claim that the Legislature abrogated impermissibly their vested rights. Appellant, the State, counters that the legislation at issue is simply a substitution of remedies aimed at curtailing reported abuses of tenants by ground lease holders. 4 We shall hereinafter sometimes refer to Appellees as “the Class.” -2- As noted earlier, the legislation at issue here is Chapter 286 of the 2007 Session Laws of Maryland, which revised Section 8-402.2 of the Real Property Article (“RP” 5). Md. Code (1974, 2010 Repl. Vol.), § 8-402.2 of the Real Property Article. Appellees challenged three aspects of Chapter 286. The first challenge is to Chapter 286's revision of RP § 8-402.2(a)(2) to prohibit ejectment proceedings for residential ground leases with four or fewer units. 6 Second, Appellees challenged Chapter 286's enactment of RP § 8- 402.3, establishing a lien-and-foreclosure process available for ground lease holders whose tenants owe at least six months’ rent. 7 Finally, Appellees challenged Chapter 286's institution of RP §§ 8-402.3(j)(3)(ii)-(k)(1)(ii), limiting the amount of attorney’s fees that would be available as part of a judgment. Appellees, 49 individual plaintiffs (“the Class”), filed suit against the State on 1 November 2007 in the Circuit Court for Anne Arundel County. 8 In their suit, the Class claimed that by replacing ejectment with the lien-and-foreclosure procedure, the State 5 When referring to previous iterations of the Maryland Code, we will use the long-form citation with reference to the relevant year. 6 “Ejectment” is a process that allows a landlord (in this case the ground lease holder) to re-enter the property after a tenant’s default, and retake possession, ejecting the tenant. See RP § 8-402.2(a) (discussed in more depth infra). 7 We explain in depth the lien-and-foreclosure process created by Chapter 286 infra. Shortly put, this process replaced ejectment with a lien-and-foreclosure sale. The lien receives priority from the date the ground lease was created. The debt is paid from the proceeds of the sale. If the ground lease is redeemable, the redemption amount is deducted also from the proceeds of the sale. If the ground lease is irredeemable, the foreclosure buyer takes subject to the ground lease. RP § 8-402.3(d). 8 The Circuit Court certified later this case as a class-action. -3- abrogated unconstitutionally a vested property right. In addition to seeking declaratory relief, the Class sought $114 million in damages they claim were caused by the State’s enactment of Chapter 286. Both sides moved for summary judgment. After we issued our opinion in Muskin v. State Dep’t of Assessment & Taxation, 422 Md. 544, 30 A.3d 962 (2011), the Circuit Court heard the cross-motions for summary judgment, granted the Class’ motion for partial summary judgment on their constitutional and damages claims, and dismissed the remaining claims as moot. On 11 April 2012, the court entered the judgment as final. The Circuit Court began its analysis with the Maryland Constitution’s prohibition against the Legislature enacting any law “authorizing private property, to be taken for public use, without just compensation, as agreed upon between the parties, or awarded by a Jury, being first paid or tendered to the party entitled to such compensation.” Md. Const. art. III, § 40. In considering the constitutional implications, the Circuit Court addressed two questions in its ruling: the first is the threshold question of whether a ground lease holder’s action for ejectment constitutes a vested right or a remedy; the second is the ultimate question of whether Chapter 286 constitutes an unconstitutional taking through abrogation of vested property rights. In answering the threshold question, the Circuit Court interpreted our decision in Muskin to hold that the bundle of vested rights that make up ground leases includes the vested right of re-entry upon default. Because it interpreted Muskin as holding that the right to re-enter in the event of default is a vested property right, the Circuit Court held that Chapter 286 operates as an unconstitutional taking of the ground lease holder’s property. -4- We granted certiorari to consider the following question: Is legislation substituting one remedy for failure of a ground lease tenant to pay rent (lien and foreclosure) for another (ejectment) a permissible alteration of remedies that does not impermissibly abrogate vested rights of ground lease owners? We shall affirm the Circuit Court’s judgment.