Paying off ground rent in full

savingforoz

Hi, I've just had my annual ground rent invoice (all of £3!!), along with the offer to redeem it in full for ever for £260. What are the advantages , if any, of doing this? The blurb in the letter says "Enjoy 100% control of your property" but as far as I can see I have that anyway. I am thinking of converting my house into 2 flats - would redeeming the ground rent charge help in any way?

Otherwise I think I'll go for the £3 option!

Thanks in advance.

Elliesmum

It would take 86 years (approx) at £3 a year to get to £260 - I'd stick with the £3 too for the minute!

EM xx

rosysparkle

What advantages would you get by buying the freehold?

How long is your lease and how much will a lease extension cost if you need to extend (for example if you want to sell)? You'll need your freeholder's permission to convert your property to flats, and they might charge you for the privilege.

savingforoz

I don't have a lease, never have had. I think I'll give them a call as the letter doesn't explain anything about the benefits of doing this, which is why I'm puzzled.

unsure

Ground rent is usually charged to leasheolders who own flats by the freeholder who technically owns the ground they sit above. Freeholder may also be repsonsible for service charges for common parts etc as well...though not necessarily. Houses are nealry always sold freehold. It sounds a bit odd and £3 is very low...barley worth collecting I'd have thought. When I had my first small flat 25 years ago the ground rent was £50 and that was considered quite reasonable.
If it is all gneuine, £260 also seemd remarkabaly cheap for the freehold. Having the freehold would give you permanent control of the property in a way tha tleashold would not. Definitely worth making the phone call to see what it's all about.

matto

You'd be better off sticking the £260 in a savings account and using the interest to pay the ground rent.

savingforoz

Thanks, all - I am still no wiser after looking at the FAQs on the ground rent company's website. I will call them on Monday. From the letter, it appears that the £260 includes legal costs (theirs).

If I wasn't thinking of converting the house, I'd just pay the £3, but I need to be clear in my mind just what the £260 is for and what benefits I gain. It may be vital in my plans to convert the house, I just don't know.

MarkyMarkD

I think some of the posts here are confusing leasehold property with ground rent.

I'm certainly not an expert, but as far as I understand it ground rent is simply payable forever at a (normally) small amount, whilst leasehold property has a remaining term which may be relatively short if the original term was 99 years. And as one post points out, it will be hard to sell a leasehold property with a short remaining term.

So, back to ground rent.

It's never going to be worth paying these off. Companies and individuals go round buying these up from their original owners for next to nothing because the administrative costs of invoicing and collecting (say) £3 a year are ridiculous.

They then make offers to sell the liability for (say) 75-100 times the annual rental and people pay them off because they think "it's only £250".

They are getting money for old rope in these cases. They probably paid £25 for the ground rental income rights, and they sell it for 10 times as much.

Just keep paying the £3 a year and don't be conned into thinking it's good value to buy it out.

cattie

savingforoz wrote: »

I don't have a lease, never have had. I think I'll give them a call as the letter doesn't explain anything about the benefits of doing this, which is why I'm puzzled.

This is quite intriguing. I always thought only leasehold properties were liable for ground rents to freeholder, whereas freehold properties own the land as well as the buiding, so no ground rent to pay.

MarkyMarkD

I don't think that's right.

Leaseholders own the property and the "owner" only leases it.

Normally freeholders own both the land and the property, but in some cases the original builder (normally) kept the land and just sold the property with a ground rent liability attached.

A bit of a pension scheme for the builders, is how I heard it described. Quite a good idea I suppose.

The amounts often seem trivial now, but would have been a fair bit in the 1930s or whenever the properties were built. We had a 1930s house in Bristol with ground rent liability.

savingforoz

MarkyMarkD wrote: »

I think some of the posts here are confusing leasehold property with ground rent.

I'm certainly not an expert, but as far as I understand it ground rent is simply payable forever at a (normally) small amount, whilst leasehold property has a remaining term which may be relatively short if the original term was 99 years. And as one post points out, it will be hard to sell a leasehold property with a short remaining term.

So, back to ground rent.

It's never going to be worth paying these off. Companies and individuals go round buying these up from their original owners for next to nothing because the administrative costs of invoicing and collecting (say) £3 a year are ridiculous.

They then make offers to sell the liability for (say) 75-100 times the annual rental and people pay them off because they think "it's only £250".

They are getting money for old rope in these cases. They probably paid £25 for the ground rental income rights, and they sell it for 10 times as much.

Just keep paying the £3 a year and don't be conned into thinking it's good value to buy it out.

Thanks, MarkyMarkD, I suspect you're right. I did get the impression that some posters (whilst I am grateful for them taking the time to post) were thinking that I have a leasehold property - I don't. I bought my house freehold but have paid £3 a year ground rent ever since. There is no mention in their letter or on their website as to what exactly I will gain from paying it off. It's only the prospect of converting my house that has made me think about it instead of just paying the £3.