Most leaseholders must pay an annual ground rent to the freeholder as a condition of their lease.
What is ground rent?
Ground rent is a fee you must pay to the freeholder as a condition of your lease.
Ground rent is usually around £100 or £200 a year, but it can be much more.
Your lease may say that the ground rent will:
- stay the same through the term of the lease, which is commonly 99 years
- increase after a period, often after 33 years
- increase according to a formula
If your lease has been extended, you normally won't have to pay any more ground rent. You may have to pay a peppercorn rent instead.
Paying ground rent
You don't have to pay ground rent until your freeholder sends you a formal Notice of Demand.
The notice must include:
- your name
- the period that the demand covers
- how much you have to pay
- the name and address of the freeholder
- the name and address of the managing agent if payment is made to them
- the date when payment is due
You might not get a receipt from your freeholder so keep proof of payment such as bank statements.
You don't have to pay your ground rent if the freeholder or their agent won't tell you the freeholder's name and address. You must pay once you get the details.
Legal action if you don't pay your ground rent
The freeholder can take legal action against you for not paying ground rent.
The freeholder can apply for a court order to:
- recover what you owe
- get possession of the property – this is called forfeiture action
The freeholder can only start forfeiture action if you:
- have been in arrears for three years or more
- owe £350 or more in ground rent (or a combination of ground rent, services charges and administration charges)
Sometimes a lease allows the freeholder to impose penalty charges if you don’t pay your ground rent. These must be excluded when calculating if you owe more than £350.
If you can't afford to pay what you owe before the hearing, you are normally given at least four weeks to do so.
If you pay what you owe, the legal action automatically stops. This is called relief from forfeiture. Your lease continues as before.
You will probably have to pay your freeholder’s legal costs.
Get advice about forfeiture
Get advice immediately if you are threatened with forfeiture action. You could lose your home if you do not.