Conti Fenn LLC| Ground rent gives new owner headache

The Baltimore Sun: Ground rent gives new owner headache

Article by By Eric Siegel, The Baltimore Sun

SOME FIRST-TIME homebuyers wind up with unexpected problems with faulty boilers, leaky roofs or noisy neighbors. Holly Edelstein is facing a far different - and more serious - difficulty. Seven months after buying a rowhouse just east of Patterson Park, she is being threatened with the loss of her property. The 31-year-old is a defendant in a lawsuit over the failure of the previous owner of her property, the Patterson Park Community Development Corp., to pay the ground rent - that peculiar institution that is essentially a long-term lease for a fairly nominal sum on a residential property, primarily in the city and in Baltimore and Anne Arundel counties. Edelstein is clearly unnerved by the case. "I'm not happy that I'm caught up in this situation," she said. "It's a headache I did not need." Anthony Conti, the lawyer hired by the development corporation to defend the case, doesn't deny that back ground rent on the property is owed. He said the nonprofit - which has helped spark a revitalization in the Southeast Baltimore neighborhood by buying and renovating blighted properties and selling them to purchasers like Edelstein - has attempted to make good on the delinquency but has been rebuffed. In court papers and in an interview, he says the lawsuit in Baltimore Circuit Court is an attempt by the owner of the ground rent lease, real estate investor Gary Waicker, to unfairly get as much money as he can from the development corporation. Conti points out that an initial letter in September 2003 to the development corporation asked for nearly $1,800, or about 14 times the $126 in ground rent owed at the time - money he says less-savvy owners might be inclined to pay out of fear of losing their property. The latest amended complaint in the lawsuit, filed in January, asks for recovery of the property plus $10,000. "What's going on in this case is using every legal means possible to extract money from the CDC," Conti said. "There's no legitimate reason to bring Holly Edelstein into this case other than to harass her and make the defense more difficult." Neither Waicker nor his attorney, Donald P. Mazor, who have filed at least a couple similar actions against other property owners, returned phone calls seeking comment. But in court papers, Mazor vigorously defended the claim. In legal actions involving ground rent, he argued, "the amount of money that triggered the action ... [has] absolutely no relation to the cost and expense of collection, including attorney fees." Mazor also said the development corporation could have avoided the situation before buying the house at foreclosure in the summer of 2003 by "having a thorough, complete and exhaustive title search performed. ... This was never done." Two years ago, the General Assembly unanimously passed legislation limiting expenses in what are called ground rent "ejectment" lawsuits to $1,000 and imposing more stringent notification requirements before actions are filed. But because the delinquent ground rent that triggered this case predated the legislature's action, Circuit Judge M. Brooke Murdock ruled that the new law did not apply. Waicker sued the development corporation in January 2004. When the development corporation sold the house to Edelstein six months later for $202,000, she says she was never told about the litigation. Ed Rutkowski, executive director of the development corporation, said the lack of disclosure was an "obvious" oversight. "I have no idea how that would have happened," he said. Edelstein - who works as a settlement agent for a title company, though not the one that did the search on her home - was added as a defendant in the suit in September. To try to get Edelstein and her house out of the case before the May trial date, the development corporation is planning to deposit enough money with the court to cover Waicker's monetary claim plus the cost of buying out the ground rent, according to Conti. "The only reason I'm not upset with Patterson Park is I know their intentions are good," Edelstein says. There may be some history at play here as well. In 1995, the City Paper published a story about Waicker's business practices, which included buying houses in struggling neighborhoods and often selling them quickly to out-of-town investors. Rutkowski was among the community leaders quoted who complained about the practices. Waicker sued the weekly for defamation - and his case was dismissed. "If it was anybody else and we owed him the money and his legal fees were reasonable, we would have paid it," said Rutkowski. Edelstein, meanwhile, is caught in the crossfire.

March 03 2005 at 3:10 PM