For all your legal challenges...

We're here to help

News and Events

Do you have the Ground Rent grumps?

View profile for Amy Settle
  • Posted
  • Author
Do you have the Ground Rent grumps?
As leasehold property owners we are faced with that annual ground rent payment and we just don’t know why we pay it. Many pay a nominal amount equivalent to a high street coffee but others pay so much more with nothing in return.  
So what is ground rent?  Effectively it is paying an annual sum to a freeholder for use of their land which your leasehold house sits on. 
Most of us find this ground rent payment often still calculated in pounds, (shillings) and pence - an annual frustration as we no longer own a cheque book for payment. For many others the frustration runs into anxiety as to what the payment can escalate to one day in the future.  Many leases have been drafted with an escalation clause enabling the ground rent to be reviewed and in some circumstances can even double every 10 years.  A standard 999 year lease with a doubling ground rent could find payments running into the thousands and sometimes tens of thousands once the term of the lease starts to decrease.
An added problem for those whose ground rent is £250.00 per annum or above (£1000.00 per annum in London) is this could be classed as an Assured Shorthold Tenancy (AST) in accordance with the provisions of the Housing Act 1988.  Creating an AST from a property owner then failing to keep up with their ground rent payments for just three months could see a home owner losing their home allowing the freeholder to remedy via repossession for non-payment as would be the case if the property was rented.
Aspects of the above can have a detrimental effect on both the ability to obtain a mortgage and saleability of properties leaving home owners faced with further expense to vary their lease to a fixed annual ground rent for the remainder of the term by entering into a Deed of Variation with the freeholder or further more, purchasing their freehold title.  Home owners could be looking at costs in the thousands to make their homes not only desirable to future buyers but also mortgage lenders too.
In light of the increasing problems arising from ground rent there have been attempts to help and in February 2023 the Leasehold Reform (Ground Rent) Act 2022 was introduced, abolishing ground rents on all new build flats and houses in England and Wales, but this does not help those with existing leases containing rent review clauses or high annual payments.
Ground rent is not to be confused with a service charge, they do serve a purpose!  If you feel you could be affected by a higher than usual ground rent payment or an escalation clause making payments unaffordable please contact our experienced team and we can assist you with a Deed of Variation or purchase of freehold with your freeholder.