What is ground rent?

As leasehold occupation of a property is basically a long term tenancy then a payment of rent is usually required to be paid to the landlord.

The amount of Ground Rent payable can vary considerably.

The terms and cost of the ground rent will usually be detailed in your Lease and is payable upon demand.

Nominal ground rents are known as “peppercorn” however some amounts payable can rise to many hundreds of pounds a year.

In some leases the ground rent is set for the full term of the lease but in others the lease will show that the ground rent can be reviewed.

The periods between reviews can often be quite long, so whoever is responsible for collecting the ground rent should ensure that they are aware of the dates that the reviews take place to ensure that correct monies are collected and paid to the landlord.

Ground rent income can be a significant amount for the landlord. Where the Residents Management Company (RMC) also own the freehold the income collected from the ground rent can be useful to assist in the running of the Company as it will not have any “income” of its own.

The ground rent income will also assist in determining the value of the freehold should it ever be sold to another freeholder.

If a leaseholder falls in to arrears with their ground rent there will usually be a provision in the lease which shows how this will be handled. There will usually be a late payment fee which is payable to the landlord or property manager due to the leaseholders breach of an obligation in the lease. Often solicitors costs may also be requested in connection with any notices or proceedings applied for (Section 146 of the Law of Property Act).

In addition interest charges may be requested.