Anyone know anything about Ground Rent?

[vulcangascompany]

I’m an owner of a flat & a Director of the management company - 3 flats, 3 Directors, limited company - we hold the freehold to the building through the company. Only owners can become Directors of the company. Good arrangement all works well for the benefit of everyone.

One thing we haven’t sorted yet is charging a Ground Rent every year or whether we should be. The last sale of a flat brought this to our attention, as we've never done this. Can we just say its included in our monthly management charges? I’m beginning to think that for sake of clarity it might be better to us all to pay £10 a year on 1st Jan just to make it clear and above board. But if we do would we need a legal document drawn up to say its £10 for next 5/10/20/50 years. Its worked ok for 10 years without doing this so is the best thing to leave it alone??

Anyone got any experience in this area and can comment, thanks.

[draftsmann]

In the scenario where leaseholders own shares in the freehold-owning management company, it’s entirely up to them whether they charge a ground rent.

As one thought, a ground rent in this case could be used to build a long-term sinking fund that could be used for any future major building repairs. I knew of one 1960s concrete apartment block where this was done to make provision for if/when major concrete repairs might be needed.

It’s something you perhaps should put to the vote of the management company members.

[David_D]

One thing we haven’t sorted yet is charging a Ground Rent every year or whether we should be.

Not entirely sure I understand but wouldn’t any rent be due under an existing lease? I don’t think it’s a case of deciding to charge one if there isn’t currently.

The management charge is (again, based on my understanding) to cover communal property costs - short and long term.

[Suds]

No experience tbh but why not charge the traditional‘peppercorn’ ground rent?


Sent from my iPhone using Tapatalk

[David_D]

As one thought, a ground rent in this case could be used to build a long-term sinking fund that could be used for any future major building repairs. I knew of one 1960s concrete apartment block where this was done to make provision for if/when major concrete repairs might be needed.

Slightly off piste but I suspect that ground rent would be taxable in the hands of the recipient whereas (usually/always) management charges (including sinking fund contributions) are deemed to be some kind of trust arrangement between leaseholders so that no tax charge arises. May depend on the precise set up but that’s how one I have operates. The company has no income or expenditure of its own.

EDIT: See section 4

https://www.icaew.com/-/media/corpor...-accounts.ashx

[gerard]

Is there an existing lease? If so within that will be the ground rent payable which is likely to be a peppercorn i.e. £0.00.
Whatever the lease says is the ground.rent due.

If there is no lease you probably need to get one drawn up.

Sent from my moto g(8) plus using Tapatalk

[vulcangascompany]

Is there an existing lease? If so within that will be the ground rent payable which is likely to be a peppercorn i.e. £0.00.
Whatever the lease says is the ground.rent due.

If there is no lease you probably need to get one drawn up.

Sent from my moto g(8) plus using Tapatalk

Interesting thanks, i didn’t know ground rent was entirely dictated by the lease. We have a newish lease as the previous owner sold off the whole block 10 years ago - 999 years etc, i will dig it out and have a read. Thanks again.

[draftsmann]

Slightly off piste but I suspect that ground rent would be taxable in the hands of the recipient whereas (usually/always) management charges (including sinking fund contributions) are deemed to be some kind of trust arrangement between leaseholders so that no tax charge arises. May depend on the precise set up but that’s how one I have operates. The company has no income or expenditure of its own.

EDIT: See section 4

https://www.icaew.com/-/media/corpor...-accounts.ashx

Good point- and helpful link.