Ground rent is a charge imposed on leaseholders by freeholders for occupying a property on their land.
For this charge no service is given and payments for ground rents have no connection to service charges.
The length of time a property sited on freeholders land is governed by the length of the lease.
It is extremely advantageous to own the freehold.
In addition to the ground rent income the freeholder can appoint their own managing agents, arrange insurance with hidden commissions of up to 40%, charge extortionate fees for permissions or other administrative costs.
Not only that, but in any dispute with a leaseholder., even if the leaseholder wins at a tribunal the freeholder can recover all their costs.
Even worse, a debt over £350 or over 3 years can lead to a forfeit of the leaseholder's property in its entirety.
And the cost of gaining this valuable asset?
Between 5%-10% of what the leaseholder paid for their property!
Tens of thousands pounds derived from the leaseholder for an investment that can be as little as 5 grand? A scandal!
Ground rents typically increase over a set term. The usual cycle is either over 10,15 or 25 years.
The leaseholder will receive a letter from the freeholder or their agent (such as E&M) advising them of the new figure possibly with a demand for back payments if the uprating has not been carried out in due time.
Many leaseholders can be confused as to the timing of the increases, believing that the clock starts when they moved in to the property or the lease was first signed.
This is wrong.
The clock starts ticking when the lease was first created. It is perfectly possible to move into a new build property that the lease is already three years old, so the purchaser will face an increase in just 7 years!
Ground rent increases are generally determined in three ways.
Doubling, RPI (Retail Price Index) or after the freeholder has appointed an independent RICS surveyor to carry out a valuation at their cost.
So when you receive a letter informing you of any ground rent increase, the first thing you must do is check your lease!
When was the lease created? What are the terms of ground rent increases? How are the increases to be calculated? Have the increases complied with the lease?
Has the correct RPI figure been used? Or if a surveyor has been required has a surveyor been used? And if so what is the name of the surveyor?
Just because,you may receive a communication from the Ground Rent Uplift department of E&M it ain't necessarily so?, especially given that E&M have no actual employees save two directors?
