Ground Rent Collection and Management
Professional ground rent management and collection for freeholders, ensuring timely payments and full compliance with current legislation.
What Is Ground Rent?
Ground rent is a payment made by a leaseholder to the freeholder of the land on which their property sits. It is a contractual obligation set out in the lease and is separate from the service charge, which covers the cost of maintaining the building and communal areas. Ground rent has historically been a relatively modest annual sum, though some modern leases introduced escalating ground rent clauses that significantly increased payments over time.
For freeholders, ground rent represents an important income stream and a contractual right that must be administered correctly. For leaseholders, understanding ground rent obligations is essential to avoid breaching the lease. At Block Management Company, we provide comprehensive ground rent collection and management services that protect the interests of freeholders while ensuring leaseholders are treated fairly and in accordance with the law.
The ground rent landscape has changed significantly in recent years with the introduction of the Leasehold Reform (Ground Rent) Act 2022. Understanding how this legislation affects both existing and new leases is critical for anyone involved in leasehold management.
Our Ground Rent Collection Process
Effective ground rent collection requires a systematic approach, proper record-keeping, and adherence to legal requirements. Our ground rent management service covers every aspect of the process:
It is important to note that ground rent is not payable unless the freeholder or their managing agent serves a formal demand in the correct prescribed format. Under Section 166 of the Commonhold and Leasehold Reform Act 2002, the demand must specify the amount due, the period it covers, and the leaseholder's rights. We ensure every demand we issue meets these requirements, protecting the freeholder's right to collect and providing leaseholders with clear, compliant documentation.
The Abolition of Ground Rent for New Leases
The Leasehold Reform (Ground Rent) Act 2022 came into force on 30 June 2022 and effectively abolished ground rent for most new residential leases granted from that date. Under the Act, ground rent on qualifying new leases is restricted to a peppercorn, which means it has zero financial value. This applies to new long leases of residential properties, including flats and houses.
However, the Act does not affect existing leases. Leaseholders who hold leases granted before 30 June 2022 must continue to pay ground rent as set out in their lease terms, including any escalation clauses. The government has indicated that further reforms may follow to address existing escalating ground rents, but no legislation has yet been introduced to retrospectively change existing lease terms.
For freeholders, this means ground rent collection remains relevant for all pre-2022 leases. For leaseholders on older leases, understanding your options for challenging or reducing ground rent is important. A statutory lease extension is one route that can replace existing ground rent with a peppercorn, providing long-term financial relief.
Challenging Ground Rent
If you are a leaseholder facing high or escalating ground rent, there are several options available to you. The most common approaches include:
- Exercising your statutory right to a lease extension, which replaces the existing ground rent with a peppercorn
- Negotiating directly with the freeholder to vary the ground rent terms
- Applying to the First-tier Tribunal for a lease variation under Section 35 of the Landlord and Tenant Act 1987
- Participating in a collective enfranchisement to purchase the freehold
Escalating ground rent clauses, particularly those that double at set intervals, have been widely criticised and can make properties difficult to mortgage or sell. If you are affected by an escalating ground rent clause, we strongly recommend seeking professional advice to understand your leaseholder rights.
At Block, we can advise both freeholders and leaseholders on ground rent matters and help facilitate fair outcomes. Whether you need assistance with collective enfranchisement or understanding your leaseholder rights, our experienced team is here to help.
Frequently Asked Questions About Ground Rent
What is ground rent and who pays it?
Ground rent is a payment made by a leaseholder to the freeholder as a condition of the lease. It is essentially rent paid for the land on which the building sits. The amount and frequency of ground rent payments are set out in the lease. Historically, ground rent was a nominal amount, but some modern leases included escalating ground rent clauses. The leaseholder is responsible for paying ground rent to the freeholder or their appointed managing agent.
Has ground rent been abolished in the UK?
The Leasehold Reform (Ground Rent) Act 2022 abolished ground rent for most new residential leases granted on or after 30 June 2022, setting it at a "peppercorn" (effectively zero). However, this only applies to new leases. Existing leases with ground rent obligations remain in force, and leaseholders must continue to pay ground rent as set out in their current lease terms. The government has indicated it may introduce further reforms in the future.
Can a freeholder increase ground rent?
A freeholder can only increase ground rent if the lease includes a specific provision for increases, known as a rent review clause. Common escalation methods include fixed increases at set intervals, increases linked to the Retail Price Index (RPI), or doubling clauses. If the lease does not contain a rent review clause, the ground rent remains at the amount originally agreed. The Leasehold Reform (Ground Rent) Act 2022 prevents ground rent exceeding 0.1% of the property value for leases granted from 30 June 2022.
What happens if I do not pay my ground rent?
Failing to pay ground rent is a breach of your lease and can have serious consequences. The freeholder can pursue the debt through the county court and, in extreme cases, may seek forfeiture of the lease, which means you could lose your home. However, the freeholder must follow strict legal procedures before forfeiture can occur, including serving a Section 146 notice. It is always advisable to pay ground rent when demanded and raise any disputes through proper channels.
Can I challenge my ground rent?
Leaseholders can challenge ground rent if they believe the lease terms are unfair, particularly where escalating ground rent clauses result in unreasonably high payments. Options include negotiating directly with the freeholder, seeking a lease variation through the First-tier Tribunal, or extending your lease through the statutory process which can replace the existing ground rent with a peppercorn. Legal advice is recommended before taking action.
Need Help With Ground Rent Collection or Management?
Whether you are a freeholder seeking professional ground rent management or a leaseholder with questions about your obligations, we are here to help.