When property hunting you may come across the term ‘ground rent’. In our latest legal Q&A, Mark Morton explains what it means and how it relates to leasehold properties
The Question
I’m looking at purchasing a property and someone mentioned that I should watch out for ground rent when viewing homes.
What is ground rent and how will I know If my property has it?
Mark’s Answer
Ground rent is an annual rental payment due to the landlord under the terms of a lease when you own a leasehold property.
The details of the ground rent payable, if applicable, will be contained within your lease and if you do not hold a copy of your lease then you can apply for a copy from the Land Registry online.
If the ground rent under the lease is expressed to be a peppercorn, then there is no monetary payment required.
The lease will also confirm if the ground rent payable can be increased. Although you may be comfortable with the level of ground rent you do need to bear in mind that if the ground rent is subject to review then the cost to you could be substantial and affect both the value of the property and your ability to sell it in the future.
New legislation governing ground rent came into force on the 30 June 2022. In very basic terms the new Act now prevents a Landlord from charging a ground rent when granting a new ‘regulated’ lease.
With some exceptions (e.g. shared ownershipleases and voluntary lease extensions) the Act will apply to most new leases of residential premises granted for more than 20 years at a premium.
The Act does not have retrospective effect, so where the lease already reserves a ground rent you will remain liable to pay it. Special rules apply where a non-regulated lease is extended, whether by agreement or under the relevant legislation.
Meet our expert
Mark Morton is a residential property licensed conveyancer for Copley Clark (the trading name of Parfitt Cresswell). He has a career spanning two decades and joined Parfitt Cresswell in February 2020.
If you would like to ask him or one of his colleagues a legal question connected to your home or related finances email kate.saines@emap.com
