Ground Rent Collection

Developer lease drafting & completions service

Ringley Law help developers draft effective leases that require each leaseholder to provide a service address in England or Wales the basics for ease of serving both demands, and if necessary proceedings), preventing the necessity to serve proceedings in foreign jurisdictions. Ringley Law support developers and housebuilders preparing well drafted leases incorporating all the tricks to best protect the Freeholder from asset management and service charge management perspectives. Contact Ringley Law now. As a leading managing agent our block management team can advise on Ground Rent levels to achieve the best price for your Ground Rents and to be palatable and fair for purchasers.

For freeholders who have received a Section 13 Notice

Unless the leaseholders have messed up their Section 13 Notice to exercise their statutory right to enfranchise - it is a certainty that the freehold must be sold. What matters next is to serve a Section 21 Counter Notice stating a premium and any conditions such as leaseback of any non leased flats. Talk to Ringley Law ASAP as timescales apply and not doing so would lead to a forced sale on the Leaseholders terms. Contact Ringley Law now.

Ground Rent is an amount of money specified in a lease that the Leaseholder has to pay to the Freeholder. It represents rent for the land upon which the block of flats is built as a lease is for a term of years after which the ownership of the right to live in the flat ends. In effect an apartment is demised to a leaseholder for a term of years subject to paying ground rent. Ground rent is normally paid annually, quarterly or bi-annually. The specific ground rent requirements including amounts due, required dates and details of periodic reviews are defined in the lease.

5% Ground Rent Collection Service explained

What does Ringley’s ground rent collection service include?

• Issuing of all demands
• Fair 3 stage process, demand, polite notice, final reminder
• DD & multiple payment methods
• Ledger reconciliation & maintenance
• Ground Rent settlements
• Automated arrears reporting
• Automatic Ground Rent increases at reviews
• Legal recovery action (no cost to the freeholder)
• Ownership registers maintained
• Consents and dealings: licences sales, sub-letting, alterations
• Service of Counter Notices for lease extensions or freehold enfranchisement
• Execution of Lease extensions or Freehold transfers
• Property sales and leasehold enquiries: deed of covenants, licenses to assign and certificates of compliance etc..
• Advice on cost effective building insurance

FAQ’s about your ground rent

What is the ground rent collection?

Ground rent collection is the process of collecting rents from tenants for the use of land or property. The collected funds are then used to pay for the upkeep of the property, taxes, and other associated expenses.

Ground rent collection can be a daunting task for landlords, especially if they have multiple properties and tenants. There are many factors to consider when collecting rent, such as late payment penalties, bounced check fees, and other associated costs.

The best way to collect ground rent is to use a professional service that specializes in the process. These services will handle all of the necessary paperwork and contact with tenants on behalf of the landlord. This can save a great deal of time and money in the long run.

If you are a landlord looking for a ground rent collection service, there are a few things to keep in mind. First, it is important to find a reputable company that has experience in the industry. There are many scams out there, so it is important to do your research before selecting a service.

Second, make sure that the company you select offers a money-back guarantee. This will protect you in case the service does not live up to your expectations. Finally, ask for references from past clients to get an idea of the quality of service you can expect.

What are the benefits of using a ground rent collection service?

Using a ground rent collection service is a great way to simplify the process of collecting rent from tenants. It can save you time and money in the long run, and provide peace of mind knowing that your property is being well-maintained.

What happens if ground rent is not collected?

If ground rent is not collected, the property owner may be responsible for paying the expenses associated with the property upkeep. This can include taxes, repairs, and other costs. The property owner may also be liable for any legal fees associated with evicting tenants who have not paid their rent.

Do freehold properties pay ground rent?

No, freehold properties do not pay ground rent. The term "freehold" means that the property owner has full ownership of the land and property, and does not have to pay rent to any other party. Freehold properties are typically found in rural areas, and the owner may be responsible for paying taxes and other associated expenses.

What is the process for collecting ground rent?

In general, the process includes sending a notice to the tenant containing the amount of rent owed and the date it is due. The landlord may also include a late payment penalty in the notice. If the tenant does not pay the rent, the landlord may begin the eviction process.

What is the forfeiture process in relation to ground rent?

The forfeiture rules regarding ground rent litigation in the UK have evolved over time through legislation and court decisions.

Forfeiture is the legal process through which a leaseholder's rights in a property can be terminated if they breach the terms of their lease. In the context of ground rent, forfeiture may occur if the leaseholder fails to pay the ground rent or breaches other lease terms related to ground rent obligations.

The specific rules and procedures for forfeiture in ground rent cases are outlined in legislation, particularly section 146 of the Law of Property Act 1925. This has been added to by the Commonhold and Leasehold Reform Act 2002, and the Leasehold Reform, Housing, and Urban Development Act 1993.

The process typically involves the serving of a section 146 notice on the leaseholder, which notifies them of the breach and provides an opportunity to resolve the situation within a specified timeframe. If the breach is not remedied, the landlord may then seek a court order for possession of the property.

However, forfeiture is considered a severe remedy. Courts have developed principles to ensure fairness and proportionality in its application. They have the discretion to grant relief from forfeiture, compelling leaseholders to rectify the breach and retain their rights in the property, subject to certain conditions.

What notable cases have had an impact on ground rent issues in the UK?

One significant case related to ground rent demands is the case of Arnold v. Britton [2015] UKSC 36. The Supreme Court considered the interpretation of a ground rent provision in a long lease agreement and held that the clear wording of the provision should be given its ordinary and natural meaning. This resulted in the ground rent increasing significantly over time. The decision emphasized the importance of the exact wording and language used in lease agreements when determining the rights and obligations of the parties involved.

What is ground rent?

Ground rent is a periodic payment made by a leaseholder to the freeholder or landlord as a condition of the lease. The terms and validity of ground rent demands can be subject to legal disputes and there have been cases that have dealt with various issues surrounding ground rent demands.

How often does ground rent usually rise?

The frequency of ground rent increases can vary depending on the terms specified in the lease agreement. It is common for ground rent to increase periodically, often at fixed intervals such as every 10, 20, or 25 years.

Some lease agreements may provide for fixed increases at regular intervals, while others may include provisions for ground rent to increase in line with inflation or based on a specific formula. In some cases, the lease may stipulate that ground rent remains unchanged for the entire duration of the lease.

There are common practices, but the rate of increase depends on the terms specified in the lease agreement.

Why do 10 yearly ground rent reviews cause a problem?

Parliament has discussed the scandal surrounding leasehold houses and the practice of doubling ground rents every 10 years. The agreements have become known as 'onerous ground rent clauses' and have attracted significant attention and criticism.

The scandal involves the inclusion of leasehold terms in new-build houses that include ground rent provisions with substantial increases every 10 years. These clauses have been criticized for their potential impact on homeowners because the increasing ground rents can become financially burdensome over time and may restrict selling or mortgaging the property.

These concerns led to calls for leasehold reforms and increased regulation in the UK and ultimately led to ground rent being banned on new build properties after 30th June 2022 as part of the Leasehold Reform (Ground Rent) Act 2022.

What happens to ground rent after I extend my lease?

When you extend your lease, the terms of the lease are typically renegotiated, which may include changes to the ground rent. Ground rent is the periodic payment made by the leaseholder to the freeholder or landlord for the right to occupy the property.

The specific changes to the ground rent will depend on the terms negotiated between you (the leaseholder) and the freeholder or landlord. Here are a few possible scenarios:

1. Ground rent remains the same: The ground rent may remain unchanged after you extend your lease. This means that you will continue to pay the same amount as specified in the original lease agreement.
2. Ground rent is adjusted: The ground rent may be adjusted as part of the lease extension to a higher or lower amount than previously. This adjustment may be based on factors such as inflation, market rates, or a predetermined formula outlined in the lease extension agreement.
3. Ground rent is eliminated: The lease extension may include a provision to eliminate the ground rent entirely. This means that you would no longer be required to make any ground rent payments to the freeholder or landlord.

What is a peppercorn ground rent?

A peppercorn ground rent is a symbolic or nominal amount of rent that is charged to the leaseholder by the freeholder or landlord. The term 'peppercorn' is often used to signify a very low or token amount, typically a nominal sum, such as £1 per year or even less. It is not expected to be enforced, and so terms like 'if demanded' are often included.

The purpose of a peppercorn ground rent is to maintain the legal status of the lease as a valid contract and to establish the relationship between the leaseholder and the freeholder. It serves as a formality to ensure that the leaseholder is acknowledging the freeholder's ownership of the land.

By setting the ground rent at a peppercorn amount, it effectively means that no substantial rent is required to be paid by the leaseholder. However, even though the ground rent is nominal, other financial obligations such as service charges, maintenance costs, and other leasehold fees may still apply.

Peppercorn ground rents are commonly used in leasehold arrangements such as long leases, lease extensions, or the granting of new leases. They are particularly prevalent in situations where the freeholder or landlord does not intend to generate significant rental income from the property but still wants to maintain their legal rights and interests.

Can interest be charged on ground rent arrears?

Yes, interest can be charged on ground rent arrears, but this would generally depend on the terms outlined in the lease agreement between the leaseholder and the freeholder or landlord. The specific conditions for charging interest on ground rent arrears should be stated clearly in the lease.

If the lease contains a provision allowing for interest to be charged on overdue ground rent, it will specify the rate of interest, the calculation method, and the circumstances in which interest will be applied. The interest rate may be fixed or variable, and it could be a percentage or a set amount. The lease will also state from when interest can be charged.

What is the formula for calculating interest on ground rent arrears?

The formula for calculating interest on ground rent arrears can vary depending on the terms outlined in the lease agreement. Generally, the formula involves multiplying the outstanding arrears by the specified interest rate and the duration of the arrears.

Below is a general formula that can be used to calculate interest on ground rent arrears:

Interest = Arrears * Interest Rate * (Number of Days Late / 365)

In this formula:

- 'Arrears' refers to the outstanding amount of overdue ground rent.

- 'Interest Rate' represents the rate of interest specified in the lease

agreement. This is the cost for delayed repayment of the ground rent. This is usually expressed as an annual percentage.

- 'Number of Days Late' indicates the number of days that the ground rent arrears have been outstanding.

- '365' represents the total number of days in a year.

To calculate the interest, you would multiply the arrears by the interest rate and then multiply that result by the number of days late divided by 365.

This is only a general formula. The specific terms and conditions outlined in the lease agreement may stipulate a different calculation method. It is always advisable to consult the lease agreement or seek legal advice for accurate and precise calculations.

For ground rent, do you have to serve a rent review notice to increase the ground rent?

The requirement to serve a rent review notice to increase ground rent depends on the terms and conditions specified in the lease agreement. Many lease agreements for ground rent include provisions that allow the landlord to increase the ground rent periodically, often at predetermined intervals or according to a specific formula, without notice of rent review needing to be served.

However, the lease agreement may contain provisions for rent review. The procedures for notifying the leaseholder of the proposed increase may involve serving a formal rent review notice, specifying the new ground rent amount, the effective date of the increase, and any other relevant details. So always check the lease.

What prescribed notes have to be served with a ground rent demand for it to be valid?

In the United Kingdom, section 166 of the Commonhold and Leasehold Reform Act 2002 introduced specific requirements for ground rent demands to be valid. These requirements include serving prescribed information alongside the demand.

The Landlord and Tenant (Notice of Rent) (England) Regulations 2004 include further prescribed notes and an example demand form for payment.

The prescribed information typically includes:

1. The amount to be paid
2. The date on which the tenant is liable to pay it
3. Leaseholder's name
4. Demanded rent's attributable period
5. Name of the payee and where it is to be paid
6. Name and address of the landlord

If you do not serve prescribed notes with a ground rent demand, can you correct this or is it fatal, meaning the demand is never valid?

An invalid demand would mean that the tenant is not yet liable to pay the due rent. If the demand for ground rent is served without the prescribed notes, that demand is invalid. Another valid demand would have to be made within the limitation period from when the ground rent was originally due. Under the Limitation Act 1980, the limitation period for the recovery of ground rent is 6 years.