FREQUENTLY ASKED QUESTIONS
WHAT IS GROUND RENT?
Ground rent applies to leasehold properties and is a sum paid each year, by the owner of a leasehold property (leaseholder), to the freeholder. Payment may be collected annually, semi-annually, or quarterly.
This sum is determined in advance and formalized in the lease contract. It may be a flat sum through the life of the lease (fixed), or the lease may provide for increases at specified intervals (escalating).
WHAT IS LEASEHOLD?
There are two main types of interest in land that exist in England and Wales – Freehold and Leasehold.
A leasehold interest typically refers to a long term, but non-permanent, interest to occupy land or property.
Under a leasehold agreement, the freeholder grants permission for a leaseholder to take ownership of the property for a specified period of time, up to 999 years.
The leaseholder typically pays an initial premium for the grant of a lease, as well as an additional annual ground rent, over the term of the lease contract. This tends to be a modest sum, given the leaseholder is responsible for paying all costs in connection with maintenance and repair of the property during the stated lease period.
WHAT IS FREEHOLD?
A freehold interest in land is the most complete type of interest that can be held in England and Wales. In practice it means the outright ownership of land or property for an unlimited period.
A freehold owner may grant a lease on the property to a leaseholder. The rights and obligations of both freeholder and leaseholder will be formally set out in a written lease contract. This includes the obligation of the leaseholder to make annual pre-determined ground rent payments to the freeholder.
If a leaseholder fails to fulfill his obligations under the lease contract, the final sanction available to the freeholder is to forfeit the lease and repossess the property.