What is ground rent?

If you own a long lease on a property in England and Wales you will normally have to pay rent to the freeholder or landlord of the property; this is known as Ground Rent.

The lease will normally specify how much rent you have to pay and when it has to be paid.  Generally the rent will be quite low and is often in the region of £50 per year.  This is sometimes paid in one instalment or may be payable half-yearly or quarterly.

Ground Rent can be fixed or escalating.  If it is fixed it means that it remains unchanged throughout the term of the lease.  Escalating Ground Rents will increase during the course of the lease.  The lease will specify when the Ground Rent increases and by how much.

In a typical 99 year lease the Ground Rent might be set at £50 a year for the first 33 years and then increase to £100 per year for the next 33 years and then £150 per year for the final 33 years of the lease.

There is no set way of determining Ground Rent it can vary from lease to lease.  Some modern flats may have Ground Rents of £200 to £300 per year, whilst many ex-local authority flats may have a Ground Rent as low as £10 per year.

You do not have to pay the ground rent unless the freeholder has formally asked you to pay it. The demand will normally be posted or delivered to you at the address of the house or flat, unless you have already asked the freeholder to send ground rent demands to another address.  Where the amount of the Ground Rent is very low it is not unusual for absentee landlords to neglect to ask for it.

The demand must be in writing and must include the following information to be valid: 

  • The name of the lessee
  • The period that the demand covers
  • How much the lessee has to pay
  • The name and address of the freeholder (and, if you are to make payments to a managing agent, their name and address)
  • The date on which ground rent is due (or, if the demand is sent after the due date that's specified in your lease, the date on which you should have paid it).

If you do not pay the Ground Rent when it has been legally demanded the landlord can take you to Court to recover the debt.  In extreme cases the landlord could commence forfeiture proceedings. This means that the landlord tries to recover possession of the flat or house.  They can only do this, however, if the amount outstanding is £350 or more and you have been in arrears for three years or more.

If a leaseholder extends their lease under the Leasehold Reform Act 1993 the Ground Rent becomes what is known as a ‘peppercorn rent’.  This means that effectively the lessee no longer has to pay Ground Rent to the freeholder. 

Article contributed by Matthew Price BSc MRICS of Peter Barry Chartered Surveyors. You can contact Matthew for advice on Leasehold matters.

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