What is ground rent?

What is ground rent?

The subject of ground rent has been in the news recently and Notion Development was asked by the Daily Mail to provide an explanation of ground rent.  What is ground rent and how is this different to a service charge?


If your property is leasehold you will have to pay regular payments to the person or company that owns the freehold.  You are the leaseholder and they are the freeholder and the freeholder owns the land your property is built on and you paying to rent that land from them.  Ground rent can be fixed or escalating and it is usually paid annually.

The ground rent fee will be stated in the terms of your lease and is usually between £200 or £400 annually (location can be an influencing factor).  However, it can be much more and there are cases where the ground rent has doubled every ten years which has seen thousands of homeowners claim that exorbitant ground rents have made their homes unsaleable.

While it is important to point out that the vast majority of leaseholders don’t have a problem, the best advise we can give is to ensure that you and your solicitor carefully check the terms of the lease before committing to buying a property.

What is a service charge?

People living in flats or properties that have communal areas are generally expected to pay a service charge to the landlord/freeholder.  A service charge will cover the maintenance of communal areas such as the lobby, the lift and gardens.  It could also pay the wages of a concierge or for the upkeep of a gym, another benefit that lots of high end blocks are now including.  Generally, the more services the higher the service charge.  

To ensure your service charge is fair and affordable, always go through these terms in finite detail and ask to see several years accounts for the building. Ask if your service charge goes to a reserve fund which is essentially a saving fund for major repair work.  A well-managed scheme will have funds to repair a damaged roof, but a bad one, could wait for the roof to collapse and then send every leaseholder a bill for thousands of pounds.

Last modified on Tuesday, 15 August 2017 12:25