Why do I have to pay ground rent?

What is ground rent?

Here’s a topic we often deal with for our clients when they are buying a property. It seems to tie people in knots but when explained, really isn’t that tricky.

Firstly, a lot of people struggle with the somewhat abstract notion: “What is ground rent?!”

noun: ground rent; plural noun: ground rents

rent paid under the terms of a lease by the owner of a building to the owner of the land on which it is built.

In easy-to-understand terms – you own the house but not the land it sits on; that’s owned by the ground rent owner who has granted you (or typically the original builder) a lengthy lease.

This, simply put, is what a leasehold property is.

Where you own both the land AND the house; that’s a freehold property – free of the ground rent landlord’s lease that is!

LITTLE-KNOWN FACT: Ever wondered why these leases are for 999 years instead of, say, 1000? It’s because solicitors used to be paid by the word - especially in Victorian times when a lot of Belfast’s properties were being built. So “nine hundred and ninety nine” was more lucrative to them than “one thousand”!

Unfortunately today’s busy legal professionals rarely have time to explain the concept of ground rent fully (in my experience). However, a good solicitor will check paperwork to ensure that this is paid up to date, avoiding any old ground rent debt on the property being transferred to the new owners.

I’ve had a good number of clients over the years genuinely upset by the very idea of a landlord owning the ground rent to a property they have just bought and want to own outright. It can be irritating, especially if you are a first-time buyer and thought you never had to pay rent to a landlord again!

For some, it feels like a mean and sneaky afterthought; something to squeeze more money from them.

Now whilst that’s not actually true, my heart does go out to clients thinking this, and it is true that the concept of these being separate things to own isn’t universal - in fact, it’s fairly unique to the UK property market. Whether you think it’s fair or not is up to you…

Interestingly, the Department of Finance in Northern Ireland decided to give people the option to redeem their ground rents, and introduced the Ground Rents Act (Northern Ireland) 2001.

In “real speak” it means you have a way out of continually paying these small but regular amounts by buying out your ground rent.

There are 2 ways to do it:

(a) Do it yourself (simple explanation):

• obtain a certified copy of the lease
• obtain a ground rent receipt for your most recent payment
• lodge an application and send your payment, any ground rent arrears, and the Land Registry fee

(b) Do it yourself (detailed explanation):

• Complete an online form called a GR1 – it’s on the Department of Finance website under the section titled “Redemption of Ground Rent forms and guidance”
• Complete the form together with the Land Registry fee, an amount equivalent to nine times the ground rent, plus any ground rent arrears.
• The other side (typically the estate agent employed by the ground rent landlord) have then got to complete the corresponding forms; but even if they fail to do so, the application can proceed (but with more admin on your side)
• Once received, these then are reviewed by the Land & Property Service. If successful – you’ll get the freehold of your property, but be prepared for a wait – this isn’t famous for being a quick service!

 

 Alternatively, ask an experienced agent to do it for you – and maybe bring Starbucks when you come in; this often works a treat…

2 ways to buy out ground rent