Ground Rent

The modern-day accepted meaning of ground rent is 'the rent at which land is let for the purpose of improvement by building; i.e. a rent charged in respect of the land only, and not in respect of, the buildings to be placed thereon'. It is therefore usually lower than the rent that might be achieved for a building let on the open market. It is for a far longer term of years (at least 21 years, but more commonly 99 years, 125 years, or even 999 years).

New purchasers will not usually be expected to be personally liable for ground rent arrears which accrued before the property was purchased. However, the freeholder may still be able to take action to forfeit the lease as, under the Limitation Act 1980 the limitation period for recover of ground rent is 6 years.

Increases

Periodic increases in the level of ground rent are acceptable provided they are fixed or can be readily established and reasonable. If the solicitor suspects that the provision is set in such a way as to materially affect the future value of the flat it must be reported. Many leases contain a provision whereby the rent is increased in line with the Retail Price Index (basically the cost of living) which is usually acceptable. The mortgage offer will often state how much the lender believes the current annual ground to be but if the figure in the offer is not accurate it too should be reported.

DEMANDING GROUND RENT

Under s166 of the Commonhold and Leasehold Reform Act 2002, and the Landlord and Tenant (Notice of Rent) (England) Regulations 2004 ground rent demands must be requested in a specific manner before a landlord is able to take any action or impose any penalties for late payment (regardless of whatever the lease says). If the leaseholder does not receive the demand in the legally prescribed format then he is not liable to pay. Rent under s166 does not include service and administration charges.

The notice must specify:

• The amount due;
• The date by which payment is to be made and, (if different) the date on which the amount would have been payable under the terms of the lease. Due to a Statutory Instrument (SI) made in 2004, the notice must also state;
• The name of the leaseholder who is given notice;
• The period to which the rent demanded is attributable;
• The name and address of the person who requires payment ;
• The name of the landlord who served the notice.

If the date of payment (by virtue of the notice) is after the date by which the rent would have been payable under the lease, any provisions in the lease concerning delayed payments will not have effect.

Payment Date

The date payment is to be made must be:

• At least 30 days (not less) and not more than 60 days after the day the notice is given;
• Must not be before the date it would normally be payable under the terms of the lease, both of which will be reflected in the ground rent demand notice

The landlord will be prevented from making any additional charge in respect of the rent unless he has issued a written notice and the ground rent is still unpaid after the due date.