What is it?
Ground rent is a small fee which is paid annually to the freeholder as part of the leasehold deal. The conditions of the lease will dictate whether ground rent must be paid and various rules apply to how it should be paid, when and the punishments for not paying it on time (or at all). Whilst not all leaseholders pay ground rent, it can be considered to be the norm and is sometimes referred to in a lease as ‘peppercorn’ rent.
The lease should detail the amount set for ground rent, the date it is due and exactly who it should be paid to (the managing agent or freeholder themselves in most instances).
Ground rent is not to be confused with service charges, which are charge imposed under the lease for providing services to the property, including maintainance and repair.
When will it have to be paid?
You are compelled by law to pay ground rent but only if the freeholder fulfils his/her obligations first. They must ask you to pay in the form of a demand notice delivered to any addresses you specify including the property in question. Within this demand should be your name, the price, the period involved, the due date and the freeholders personal details (name, address etc.). If these things are missing from the demand notice it can be said to be invalid. Equally, if the freeholder does not include a copy of the Notes for Leaseholders, detailing the leaseholder’s rights and responsibilities, the notice is invalidated.
The notice must be received between 30 and 60 days before the payment is due. Note, however, that the freeholder is not compelled to provide a receipt for any payment so you should keep your own records for the transaction.
Do I have to pay it?
If you fail to pay your ground rent, you can expect to end up in court provided that the freeholder fulfilled his/her obligations in terms of formally serving the rent demand within the right notice period (30-60 days) and you still failed to pay by the deadline.
The freeholder is likely to take you through the small claims court as a first port of call in an attempt to recover the arrears. If they wish to take more serious action, they can technically pursue forfeiture action, which is essentially the repossession of the property. However, in reality, such action is only deemed appropriate by the court in exceptional cases and you would have to be at least £350 in debt to the freeholder and 3 years late making the payment. Even if these conditions are satisfied, it is risky action for the freeholder because failure to follow the right legal procedure could mean that they evict you unlawfully and end up facing criminal charges themselves.
I’m being taken to court, what now?
Once the freeholder has secured a court hearing, you should attempt to pay the arrears prior to the court date. If you wait unit afterwards, you will need to pay the freeholder’s legal costs, as well as your own and the overdue rent. Paying it will stop the legal action straight away and you can go back to living as normal.
Should you find that you cannot afford to pay before the hearing, you will be given 4 weeks in which to pay. If you miss this deadline as well, the freeholder can apply to have you evicted. It may be possible to buy more time if an appeal is made to court quickly but urgency is required.
Raising ground rent – can the freeholder do this?
The freeholder will only be able to increase the level of ground rent if the property is sold, you agree to a hike in rent or the lease states that it’s permissible for the freeholder to do so.
Most leases will limit the amount that a freeholder can increase the amount of ground rent, so that they can only do it once every 4 years for example. If such a clause exists, it should be specified how much notice the freeholder is required to give.
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