Most leaseholders must pay an annual ground rent to the freeholder.
What is ground rent?
Ground rent is a fee you must pay to your freeholder as a condition of your lease for the land your home is on.
A typical ground rent is often up to £400 a year but could be more depending on the terms of your lease.
When ground rent increases
Your lease may say that the ground rent will:
- stay the same through the term of the lease (commonly 99 years)
- increase after a period, often after 33 years
- increase according to a formula
If you extend the lease on a flat, you normally won't have to pay any more ground rent. You may have to pay a peppercorn rent instead.
If you extend the lease on a house a new ground rent will be set.
Make sure your solicitor checks and explains any ground rent clauses in the lease when you buy. Some ground rents increase rapidly after a certain number of years
Paying ground rent
You don't have to pay ground rent until your freeholder sends you a formal ground rent demands notice.
The notice must include:
- your name
- the period 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 must also be given an address in England or Wales where you can contact the freeholder in the case of legal proceedings.
You don't have to pay your ground rent if the freeholder or their agent won't give you an address in England or Wales where you can contact them.
This could be their agent's address. You must pay once you get the address.
Make sure you keep proof of payment such as bank statements. You might not get a receipt from your freeholder
If you don't pay your ground rent
The freeholder can take legal action if you don't pay your 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
There will be a court hearing if the freeholder is bringing forfeiture action.
The freeholder can only start forfeiture action for not paying ground rent 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)
Penalty charges for non payment
A freeholder can sometimes impose penalty charges if you don’t pay your ground rent.
The freeholder can't include these penalty charges when calculating if you owe more than £350.
If you have a mortgage and the freeholder is threatening forfeiture action, the lender may pay the ground rent arrears and include the amount in your mortgage debt.
Repayment extension times from the court
The court will normally give you at least 4 weeks to pay if you can't afford to pay your arrears before the court hearing.
If you pay the arrears before the end of those 4 weeks, the legal action automatically stops. This is called 'relief from forfeiture'. Your lease continues as before.
You usually have to pay your freeholder’s legal costs. You may be able to challenge these costs at tribunal if they are unfair.
Get advice about forfeiture
Get advice immediately if you are threatened with forfeiture or repossession action. You could lose your home.
Last updated 14 May 2019 | © Shelter
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