If you buy a leasehold property, you normally have to pay the freeholder “ground rent” as the freeholder is leasing you the land that the house is stood on. This is because as a leaseholder, you don’t own the bricks and mortar of the property, nor do you own the land on which it is built. You have bought a lease, which entitles you to rent the property for a certain amount of time. You are therefore required to pay a ‘rent’ for this land.
The lease will set out how much this ground rent payment is. Some leases will say that ground rents will increase after a certain period of time or will increase over time in accordance with a specified formula. If you’re lucky the ground rent may stay the same for a set period of years and if you are very lucky the ground rent will be a peppercorn (a very low or nominal rent).
You are not required to pay Ground Rent until the Freeholder actually sends you a formal demand notice which must include your name, the period that the demand covers, how much you have to pay, the name and address of the freeholder, the name and address of the managing agent if there is one and the date at which the payment is due. You do not have to pay the ground rent if the Freeholder or Managing Agent will not give you a name and address in England or Wales where you can contact them.
If you do not pay the Ground Rent the Freeholder can take Legal Action. This means the Freeholder can apply to Court to recover what you owe or apply to the court for forfeiture action (this means that they can apply to take possession of the property), the Freeholder may also be able to impose penalties for late payment. The freeholder can only start forfeiture action for not paying ground rent if you have been in arrears for three years or more or you owe £350 or more in ground rent (or a combination of ground rent, services charges and administration charges).
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