Ground rent refers to regular payments that you should make as a holder of a leasehold property to the freeholder or a superior lease holder, as it is stated under a lease. The ground rent is created when a freehold piece of land is sold on a long lease. The ground rent is a right to the landowner. The valuation of ground rent depends on several factors.
1. The net present value of the reversion. At the end of the lease the freeholder (the person who receives the rent) is in most cases supposed to get the full ownership of the property. This means that the shorter the lease the more the reversion value will be.
2. Any attributable “marriage value.” This is the sum that is designed to compensate the freeholders for their loss of interest when a lease which is less than 80 years is extended.
3. Multiple of the current annual ground rent that is supposed to be paid. The value of money you will pay will depend on several things.
• The outstanding terms of the lease.
• Any future planned increases in the level of ground rent. You should make sure to check this so that you are not involved in a ground rent scandal in future.
• The market interest rates also affect the money you will pay as ground rent.
• The size of the flats. The size mostly determines rent to be paid in a particular rental.
Understanding all the terms in a lease contract for common people is sometimes very difficult. That is why we strongly recommend you make use of your solicitor and if you don’t have one. Then hire one. Let the professionals do this work for you. This way you will not get involved in a ground rent scandal in future, and if you do then you will have your solicitor to blame.