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Ground Rent

My Landlord hasn’t been collecting ground rent from me – what do I do?

I regularly come across situations where tenants are very concerned that their Landlord does not collect ground rent even though it is actually payable under the terms of the lease.

This can be for a number of reasons including: because the Landlord does not know that they are entitled to ground rent from the tenants, perhaps doesn’t know how to demand it, or even because the Landlord abandoned the freehold many years ago and takes no interest in it.

If you own a flat but your Landlord doesn’t collect any ground rent from you – what should you do?

When do I have to pay my ground rent?

Your lease sets out the level of ground rent that you must pay annually. Your lease is always the starting point when you are trying to work out what you need to pay.

There may also be a deed of variation that was put in place after your lease was completed which increases or decreases the rent. You can check whether your lease has been varied by looking at your Land Registry records – known as your ‘title deeds’ or ‘office copies’ to lawyers. Any deed of variation will be recorded in the Proprietorship Register. Your lease cannot be altered without your agreement so these documents are fairly conclusive.

The ground rent provisions are usually included in the first couple of pages, or in the definition of ‘Rent’. You should be able to identify the amount that you are required to pay, any clauses which enable the Landlord to increase the rent during the term of your lease, and the date on which the amount is charged each year.

Ground rent is not the same as service or maintenance charges. Ground rent is a payment that you make to the Landlord for their benefit. 

Service charges are charges that you pay for services you receive. For example, you benefit from the roof being watertight and in good condition and so the Landlord fixes the roof and then you pay for your share of the repairs via the service charge set out in your lease. You don’t get anything back from your Landlord in return for your ground rent payment. It is a source of ongoing income for the Landlord and some Landlord’s argue that this source of income is what incentivises them to continue managing and maintaining the freehold estate or block. The service charge is meant to be a means for the Landlord to recover their expenses from the tenants who have the benefit of the services it provides. It was never intended that Landlords should profit from the collection of the service charge which is held on trust for the benefit of the tenants.

Even though the lease tells you how much ground rent you have to pay, you do not have to pay it until the Landlord has sent you a ground rent demand in writing that complies with the requirements of section 166 of the Commonhold and Leasehold Reform Act 2002. The ground rent demand must be in the form required by the Act and must specify:

  1. The amount of the payment
  2. The date on which the tenant is liable to pay it (which must be at least 30 days after the notice is given, but no more than 60 days)
  3. The date on which you would have been liable to pay it in the lease (if different to point 2)
  4. Your name
  5. The period covered by the demand
  6. The name and address of the person or company the payment should be made to;
  7. The name and address of the landlord (or agent if this applies) who is giving the notice; and
  8. Some supporting information (included as notes to the notice).

The Landlord can send the notice by post to the address of the house or flat it relates to unless you have already given the Landlord a different address for sending correspondence. This is why it is crucial to keep your correspondence address updated in your Landlord’s records (and at the Land Registry).

How many years can the Landlord seek back payments for?

The Limitation Act 1980 states that the ‘limitation period’ for recovery of ground rent is six years.  This means that if ground rent hasn’t been paid in the past the Landlord can look to recover backdated ground rent going back for a period of 6 years.

Service charges differ; the Landlord must demand any service charge for retrospective expense within 18 months of that expenditure being incurred. In other words, if your Landlord incurs some expense in providing the services under the lease and wants to get it back from you, it can’t ask you for service charge sums to cover that expense once 18 months have passed.

I would strongly recommend that if you know your Landlord is not sending ground rent demands, you put aside funds each year to cover this eventuality.

Can my Landlord charge interest or late payment fees on back payments of ground rent?

The Landlord cannot utilise the provisions in your lease which relate to non-payment or late payment of ground rent until after they have sent you a valid ground rent demand and the date for payment in that demand has passed, regardless of what your lease says about the date it falls due. This was confirmed in a 2018 case called Cheerupmate2 Limited v. De Luca Calce.

This means that if your Landlord is seeking to charge you interest or late payment fees on sums that they failed to demand previously then you can refuse to pay them.  For example, if they haven’t demanded rent since 2015, and they serve a demand for backdated ground rent from 2015-2019 on 1st September 2019, then you are only liable to pay the ground rent after you have received the demand dated 1st September 2019. Any interest or late payment charges can only be applied when you have missed the deadline for paying that demand.

If the Landlord serves ground rend demands retrospectively and also tries to charge backdated interest or late payment charges retrospectively then you should refer them to s.166(4) of the Commonhold and Leasehold Reform Act 2002 and explain that you don’t have to pay anything beyond the ground rent set out in your lease.

What if I can’t pay the whole of the amount owed?

The Landlord can demand the last 6 years’ worth in one lump sum and then if you don’t pay by the deadline it may be able to charge you interest and late payment fees if your lease allows them to. It would be best for you to pay the full sum owed as soon as you receive the invoice unless it is clearly invalidated.

If you can’t pay the whole sum then contact the Landlord and see whether you can arrange to pay in instalments. The Landlord is not obligated to agree this but most Landlords are fairly reasonably.

I haven’t owned my flat for the last 6 years – do I have to pay the former owner’s ground rent?

Your conveyancer should have ensured that when you purchased the property the seller had paid all sums of ground rent and service charge owed up to the date that you took over ownership.  That means that you should only have to pay ground rent for the period of time that you have owned the property.  However, sometimes it is not possible for a conveyancer to check this because the Landlord won’t reply to their enquiries at the time of the purchase. If this is the case, your conveyancer should have explained this to you when you bought.

Occasionally, after you have purchased, a Landlord will serve retrospective ground rent demands out of the blue for previous periods.  Technically, in most instances, you are only liable to pay the ground rent due during the period of your ownership and the seller is liable for their period of ownership.   However, in some circumstances it is possible for a Landlord to bring forfeiture proceedings against the new owner of the flat and in such situations paying up may be the easiest resolution.

If you find yourself in this position you should seek professional advice as the consequences can be very serious.

Right to Manage Company (RTM) involvement

Where the tenants have exercised their right to manage and are responsible for managing the building and collecting service charge some Landlords think that the RTM company is also responsible for collecting ground rent. That is incorrect.

The responsibility for collecting ground rent remains with the Landlord unless the Landlord specifically asks the RTM company to undertake the collection of ground rent on its behalf. Given that the RTM is collecting the service charge, this does seem like a sensible compromise.

If you are an RTM director and you know that no ground rent demands are being sent to tenants, I would strongly advise you to consider the impact on the tenants of having to pay 6 years arrears in one go. If those sums are likely to cause the tenants issues, you might want to get in touch with the Landlord to try to encourage them to serve the demands at regular intervals.

How do I get rid of my ground rent?

If you’re fed up of paying ground rent, or if you have a ‘toxic’ doubling ground rent, then it is possible to buy yourself out of it by either agreeing a deed of variation with your Landlord, or extending your lease under the Leasehold Reform Housing and Urban Development Act 1993.

Alternatively, you could get together with your neighbours and force your Landlord to sell the freehold to you but to do so a majority of flat owners in your block would have to exercise their right at the same time. This process is known to lawyers as ‘collective enfranchisement’.

You will have to pay a premium to your Landlord whichever way you proceed and will also have to pay valuers and legal fees but it may be worth it if your ground rent is having a negative impact on your property.

MWB have a specialist Leasehold Enfranchisement Team that will be able to assist you if you have any queries about your leasehold property. Please get in touch if you have any questions that we can help with.