Lexsure e-ROT

Ground Rent · Report on Title scenario

Nobody has collected the ground rent — does it still have to be paid?

The obligation is still there. A ground rent that is reserved by the lease and simply never demanded is a technical breach of the lease, not a rent that has ceased to exist. Where the freehold is owned by the residents through a company, which is the usual explanation, the practical risk today is low — the people entitled to demand it are the people who have decided not to. That is a decision which a future board, or a change in the management arrangements, can reverse.

From the e-ROT archive

This scenario is drawn from Report on Title material dealing with this specific circumstance.

Lexsure master Report on Title paragraph: Non-Collection of Ground Rent - Where Freehold is owned by Residents · See the wording

Why it happens

Almost always because the landlord and the leaseholders are the same people. Where the residents have bought the freehold and hold it through a management company, collecting a ground rent means the residents invoicing themselves, paying the money into a company they own, and accounting for it. For a rent of £50 or £100 a year the exercise can cost more in administration than it raises, so at some point the demands stop going out.

That is an understandable commercial decision and it is not a scandal. It is simply not the same thing as the rent having been abolished, waived or extinguished, and the paperwork rarely records it as a decision at all — which is why it usually surfaces for the first time in a sale.

The same pattern appears for other reasons: an absent or uninterested freeholder, a landlord whose records were lost, or a managing agent change where the rent roll did not survive. The analysis is similar but the risk is not, because in those cases the people entitled to demand the rent are not the people living in the building.

Already bought, and now a demand has arrived?

If the position on ground rent collection was not explained before you completed, what you were told at the time is the place to start.

Find out what should have been explained → WhenIBought.com

What the risk actually is

Strictly, non-collection is a breach of the lease, and the clause remains enforceable. The practical risk while the residents control the freehold is low, because enforcement would mean the residents enforcing against themselves. But low is not none, and the position is not risk-free in the way people assume.

Future directors or a new managing agent may take a different view and start demanding the rent in accordance with the lease. The management arrangements can change — the company can be struck off, the freehold can be sold, a professional agent can be appointed and go through the lease looking for income. Any of those turns a dormant obligation into an invoice.

There is also the question of arrears. Whether past rent can be recovered, and how far back, depends on the lease, on limitation and on what has actually been demanded. It is a question to ask rather than to assume the answer to in either direction.

What to establish before you commit

Who owns the freehold, and whether the leaseholders control it. That is the fact the whole analysis turns on, and it is a title question with a documented answer rather than something to take from the seller.

Whether there has been any demand, waiver or agreement recorded anywhere — a board minute, a letter, anything in the management pack. Usually there is nothing, and knowing there is nothing is itself worth knowing.

What a lender would make of it. A ground rent that is reserved but uncollected is normally reported as what it is: an obligation that exists and is not being enforced. That is a very different report from one that says there is no ground rent, and the difference matters if anybody later decides to collect.

From the e-ROT archive

Report on Title paragraph

Non-Collection of Ground Rent - Where Freehold is owned by Residents

Master precedent Lexsure e-ROTScope Rent reserved but not demandedWord count 68Status Current master paragraph

This report sets out the relevant lease provisions relating to the collection of ground rent. Although the lease clearly provides for ground rent to be paid, the {lendlord/management company} is not currently collecting it in practice. As the freehold is jointly owned by the residents through the management company, the current approach appears to be that ground rent has simply not been demanded for a considerable period. …

Master precedent wording. This is current Lexsure Report on Title material, shown here in extract and reproduced exactly, including the merge field and its typo. It is professional precedent wording and is not advice about any particular property.

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