Date:  11 June 2008

RESIDENTIAL LEASEHOLDS – PROBLEMS WITH GROUND RENT?

Landlords and managing agents have had to live with service charge complexities for a number of years now, but at least they could always rely on the fact that ground rents were pretty straightforward.  After all, the lease tells you what the ground rent is, and so that means the tenant has got to pay, doesn’t it? 

There are still some landlords who do not realize that this is no longer the case.  Ground rent is no longer payable just because the lease says it is payable.  You cannot sit back, wait for the relevant date to pass, and then forfeit the lease or take other such dramatic action. 

Since the implementation of section 166 of the Commonhold & Leasehold Reform Act 2002, ground rent is not payable unless the landlord serves a demand for it.   The notice must comply with regulations made under section 166 – those regulations came into force on 28th February 2005.  Amongst other things, ground rent demands must not only be made, but must be accompanied by the appropriately worded notice.  This must contain all of the information specified in the regulations. 

Of course, once you have got your template set up for the demand, there should be no problem, but be careful about taking action concerning arrears which may have arisen in the early days of the regulations being in force – best to check before you take action. 

Taking action, of course, might not include forfeiting the lease any longer – failure to pay ground rent or other sums no longer gives rise to a right to forfeit the lease, unless the sums in question are more than £350, or include monies which have been outstanding for more than three years. 

Richard Davis