What is ground rent?
If you own a leasehold property, ground rent is a fee you must pay to the freeholder of the land that your property is built on, the ground rent fee is set out under the terms of your lease.
Do I have to pay it?
You do not have to pay ground rent unless your landlord (the freeholder of the land) has sent you a formal written demand for it. A formal written demand will normally be sent to the address of the property unless you have requested otherwise. The demand must be in writing and contain certain information to be considered valid
This information includes;
- Name of the leaseholder
- Amount payable
- Date when the payment is due
- Period of time the demand covers
- Name and contact information of the freeholder
How often do I pay it?
Ground rent is most commonly paid in one instalment annually, however, depending on the terms in the lease it can also be paid in instalments either by-annually or quarterly.
What happens if I don’t pay the ground rent?
If you do not pay the ground rent after it has been legally demanded by the landlord, you are in breach of the terms set out in your lease conditions. This means that the landlord can take legal action against you in order to recover the debt.
How much is it?
Ground rent varies from lease to lease, there are no set guidelines on how much ground rent a freeholder can charge. Ground rent can be anywhere between as little as £50 annually for ex-council houses and flats and as much as £400 annually for new builds.
Your lender will want to know how much the ground rent is going to be when they are considering your mortgage application. A higher rate of ground rent may affect how much a mortgage provider will lend you if they doubt the ability to pay it.
Can the landlord increase the ground rent?
Ground Rent can either be:
- Fixed: it will not change throughout the terms of the current lease
- Escalating: the ground rent IS increased in certain circumstance under the terms of the Lease; usually after certain time periods.
The lease should specify when the ground rent will increase and by how much. The increase can be a specified amount after a certain amount of years or in line with the market after a set amount of time.
The Landlord cannot increase the cost of ground rent to any more than what has been set out under the terms of your lease unless you agree to the increase.