Ground Rent, Service Charge & Reserve Charge

        Ground Rent

 What is Ground Rent?

Ground rent is the rent paid for the flat by the owner. The rent is not affected by the value of the property and is usually a nominal amount.  

 What is the usual amount of ground rent payable per year?  

It is generally no more than £150.00 per year.  If the rent is likely to increase, the increases must be set out in the Lease or there must be a clear formula as to how it can be increased.

Service Charge            

  What is Service Charge?

This is a charge which covers the maintenance and upkeep of the shared areas in a block of flats such as corridors and grounds.   

  When is Service Charge Paid?  

It depends on the contents of the Lease.  Sometimes an "on account" payment is made either quaterly or half yearly in advance and sometimes it is paid monthly.  

  How is the amount of Service Charge Decided?  

It is decided by the Landlord and has to be considered "reasonable".  If they are not considered reasonable action can be taken at the Leaseholders Valuation Tribunal (LVT). 

  What do you do about Ground Rent & Service Charge when dealing with conveyancing?  

There is usually three situations:

• That the Tenant has not paid the Ground Rent or Service Charges.  In this case we will ask for a Binding Undertaking from the Sellers Solicitors to pay that money on completion.  An Undertaking is a written, signed promise to do something.
• That the Tenant has paid the Ground Rent and Service Charge in advance.  In that case they will require reimbursement by the purchaser.  If this is the case the money will be needed before completion.
• That the Tenant has paid up to the date of completion.  In those cases no money needs to be paid to the tenant and they do not need to pay anything to the purchaser.

  If the Tenant has paid all that is demanded to date, do you need to look at anything else?

Yes.  We need to check that the tenant has not been undercharged.  If they have been and a further demand is made, then you as flat owner would become liable.  If, after enquiry is made, we discover this is a possibility, we ask for the money to be retained from the sale price to cover this. 

Reserve Charge/fund

  What is a reserve charge?  

This is a charge where reserved funds are built up to cover any future expenditure such as the cost of repairing a roof etc.  

  What if I sell the Lease before the work is carried out? 
 
Unfortunately you are not entitled to reclaim the money contributed.