Getting ground rent demands right

Friday, December 14, 2018

Ground rent is a regular payment made by a Lessee to its Landlord.

 The Lease will usually specify (i) who has to pay the rent (ii) who it is payable to (iii) the amount of rent payable and (iv) how and when the rent is to be paid. In addition to these matters Parliament has enacted statutory protections for Tenants. Accordingly, ground rent is not payable until a proper demand (a Section 166 demand) has been served on the Tenant. Since 2005 any demand for ground rent must be in a prescribed form as set forth in Section 166 of the Commonhold and Leasehold Reform Act 2002 and the Regulations made under that section. 

The demand

It is important to note that the date on which ground rent is payable. The Landlord must give not less than 30 days and not more than 60 days from the date of when the demand is sent before it falls due. If the date of which the ground rent is being demanded differs from the date on which the rent was payable under the Lease (i.e. the ground rent is demanded in 2018 for ground rent due on the 1st January 2016), then the 166 demand must specify the date of when it was due as per the terms of the Lease.

The notice must also state on whom the demand is served (i.e. the Tenants name/s), the amount of ground rent being demanded, the date it is required to be paid and finally the period and the date the ground rent was due as per the Lease if it was demanded after this date.

Failing to demand ground rent in its prescribed form can cause delayed payment of ground rent from a Tenant to the Landlord.

Section 166 notices, when being sent via post, must be addressed to the Tenant at the property of which the ground rent is due unless the Tenant has notified the Landlord or their managing agents of an alternate address within England or Wales. If the Tenant has notified the Landlord/ agents of an alternate address to serve demands and the Landlord/ managing agent fails to serve its demands to the address they have been notified of, this would also prove the demand has not been sent correctly.

Many Landlords, if not in receipt of ground rent, issue forfeiture proceedings by way of obtaining payment of ground rent or alternatively forfeiting the Lease due to non-compliance with the Lessee. However if forfeiture proceedings take place and a section 166 demand has been issued incorrectly this may well ramification. The right to forfeit may be lost costs could be awarded against the Freeholder/ Landlord. If the Freeholder has added administration charges due to non-payment, such charges will not be payable by the Lessee.