Ground Rent and Service Charge

When purchasing a property, it is important to budget for ground rent and service charge. This generally applies to Leasehold Property purchase and some freehold properties with management companies.

Ground Rent

Ground rent is generally paid to the landlord or freeholder of the leasehold property. It is usually a yearly payment; however, this is dependent on the terms of the lease. Ground rent essentially covers the cost for renting the land in which the property sits on.

The cost of ground rent varies, although the likelihood of the rent exceeding £500 a year or £1000 a year for properties in London is lower as lenders often do not lender on properties where the ground rent exceeds these amounts.

The Leasehold Reform (Ground Rent) Act 2022 has banned ground rent for new homes on long leases, however it is important to note that this does not apply on existing leasehold properties. This means that you will continue to pay ground rent whilst owning the property as a leaseholder.

Service Charge

It is important to read the terms of your lease carefully as this will detail who your service charge fee is payable to. Service charge fees can be paid to the management company, the managing agent or the landlord. Service charge typically cover services such as maintenance, repairs, buildings insurance and management costs. In terms of cost, service charge fees vary depending on the property and terms of the lease. Payments can be monthly, quarterly or bi-annually.

What if will happen if I don’t pay my Ground Rent or Service Charge?

In the event that you do not pay your ground rent or service charge, depending on the terms of the lease, the freeholder may be entitled to pursue legal action against you. Non-payment of ground rent and service charge may be considered as a breach of the terms of the lease. In some cases, the freeholder may be able to take forfeiture action and regain possession of the property.

Please get in touch with Johnson Astills today and we would be more than happy to discuss your requirements further. Please call us at our office in Leicester on 0116 255 4855 or our office in Loughborough on 01509 610 312 and ask to speak to a member of the Property Team. Alternatively, you may prefer to email us at legal@johnsonastills.com or fill in our enquiry form.