What does 'Ground Rent' mean when buying a property?
Find out what Ground Rent means when you are buying a property. 'What does Ground Rent mean?' plus over 150 other property related terms and jargon in plain English
Leaseholders (those who live in a leasehold property) have purchased, for a one off sum,the right to live in that property for as long as the lease lasts (the lease length). Lease lengths are typically decades (99 years) but can be hundreds of years long.
They have purchased this right from the Freeholder - a person who continues to own the building and the ground underneath it.
The leaseholder doesn't own the land they pay an annual or bi-annual rent to the freeholder for the "ground on which the building is situated" - hence the term ground rent..
This amount is usually fairly small (between £10 and £ 250) but dubious freeholders have been known to use it as a back door to big profits.
They do this by writing into the lease a clause which escalates the ground rent over time - for example, "the ground rent will double every 10 years". This takes a £250 per year bill to an annual payment of £8,000 in just 50 years.
This is an extreme example (but a real one) so it is vital you check not only the current amount of ground rent payable but also any system written into the lease which affects future increases.
To learn more about checking out ground rent and other aspects of purchasing a property pick up a copy of my ebook How to Really Buy a Property.