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

Ground Rent

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.

Search Results for 'ground rent' in
How to Really Buy a Property

"... to put forward. Remember also that the yield Calculation does not take into account the costs of ground rent and Service Charges on Leasehold properties. This is often overlooked but a £4,000 annual service charge on the example above reduces its yield by nearly 2%! When calculating..."
"... houses maintenance is far more substantial and it is here that the novice investor can make mistakes because houses often appear to have a better yield. On first inspection there is no service charge or ground rent to pay and so the rental profit appears much better. But it is essential to remember that the costs of roof and window repairs or replacements, as two examples, can be..."

"... ground rent: The Freeholder is the person who owns the land beneath the property and the structure itself, you are simple leasing a section of it. As such he will usually charge you rent for this land. The term for this is ground rent. The amount you will need to pay varies dramatically but for flats it is usually between £10 and £500 per year. The lease can allow for this amount to increase as the length of the lease..."
"... length and value have little connection in a Share of Freehold Property. Paying ground rent: The partners in a share of freehold may still decide to pay a nominal ground rent to the registered company that they own. Paying a Service Charge: It is up to the partners in a share of freehold how..."

"... Rent Receipts (Leasehold Only) - the ground rent is a charge made by the freeholder. Again the last three years receipts will be sought by your solicitor in order to make sure the premiums are not excessive or rising sharply. Any debts that the vendor may have with the freeholder are identified here and are also extremely important. As with the service charge, ground rent debts are also based on the property. If you buy when there are outstanding debts they will become your..."
"... is in dispute with them. Leasehold only: The freeholder is absent (has gone missing and no one knows where they are!) and so no ground rent payments have been made. Your solicitor may be concerned that he will reappear and want to claim the outstanding debt from you. Leasehold only: Your..."
"... Accounts (Leasehold only): From the managing agents or from the freeholder if he has not appointed managing agents. ground rent Receipts (Leasehold only): From the freeholder. License to Assign (Leasehold only): From the freeholder. Deeds of Variation (Leasehold and Share of Freehold only,..."
"... been changed within the last three years and the previous agents are refusing to pass on any documentation. Leasehold only: The freeholder is extremely slow to provide ground rent receipts Leasehold only: The freeholder is absent (has gone missing and no one knows where they are!) and so no..."
"... only: The freeholder is extremely slow to provide ground rent receipts Leasehold only: The freeholder is absent (has gone missing and no one knows where they are!) and so no ground rent payments have been made. Share of Freehold Only: Some of the parties who own part of the freehold are..."

"... for the property? Management Agent Enquiries If it is a leasehold property are the service charges and ground rents of the level you were lead to believe by the agent and have they all been paid by the current owner? That really is about it and that is why it is possible..."

"... building insurance details The local search If the property is leasehold The last three years service charge accounts The last three years ground rent receipts Any deeds of variation Optional but a big bonus are: Past or recent surveys Recent quotes for works..."
"... quotes to ensure something you relied on in your offer, say the damp proofing, is not going to become an unaffordable expense. - Service Charge and ground rent - Managing agents come in all shapes and sizes from large companies to individuals who buy up freeholds. They can be helpful or..."

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