POSTED 27 September 2018 Lettings

What is Ground Rent?

What is ground rent?

If you own a property, it can be surprising to know that you may still have to pay your landlord (also referred to as the freeholder) rent for the use of the land on which your home sits. This is the case for most leasehold properties and it is known as ground rent.

Check your contract

Before entering any leasehold agreement it is vital to fully understand the contract. This document will detail the obligations and liabilities you have with regards to ground rent. Have the contract reviewed by a competent and qualified solicitor who you trust. You should also check over the contract yourself and raise any issues or questions you have.

In particular, look out for any ground rent increases that may be stipulated in your contract. These are often included to allow rent to keep up with inflation. However, sometimes the fees can double after set periods of time, such as 25 years. On a property with a long lease, say 200 years or more, this can lead to unmanageable ground rent prices and can result in the property becoming virtually unsellable.

Know your rights

Freeholders, estate agents and housing companies all know their rights, so it’s a good idea to understand yours too.

Normally ground rent is payable in arrears and is collected after six months or at the end of the year. The exact details will be included in your lease.

You do not have to pay the ground rent unless it has been formally requested by the freeholder. The request should be posted to you at your current address (unless you have previously indicated otherwise). In order to be valid, it must contain the following information:

  • The name of the lessee
  • The period that the demand covers
  • How much the lessee has to pay

Also be aware that your landlord cannot raise the ground rent unless it states that they can in the lease agreement.

Understand your responsibilities

Even if your landlord doesn’t request payment from you, this doesn’t necessarily mean that you don’t have to pay it. They may request the money late and are legally able to recover unpaid ground rent going back six years. What’s more, you can be asked to pay for the full amount in one go.

Ultimately, unpaid ground rent is a matter for the courts and, in extreme cases, can result in a landlord commencing forfeiting procedures against a tenant. This means that they can, in theory, repossess your home.

As we say though, this is an extreme measure, and can only be done if the tenant has an outstanding debt amount of £350 or more and has been in arrears for a minimum of three years.

Reducing your ground rent

If you want to reduce your ground rent, you can exercise your legal right to formally extend the lease on your home by 90 years. This will reduce your ground rent to nothing, what’s known as peppercorn rent. Although extending a lease is often not cheap, if your ground rent is extortionate, it could be cost effective in the long run.