When to charge ground rent or service charge?
Thank you Mark and everyone on this website for all comments/articles. I have learned more on Property118 about property and other aspects in the last 6 months since I signed up then ever before. Now for my first post…
My question is a simple one… I think… when is it right to charge ground rent and service charge? I have two scenarios…
1. If I owned the land and block of apartments freehold and rented individual apartments out on AST?
2. If I sold each apartment in a block on a lease and owned the land freehold?
A further question, how would one set the right amount of ground rent and service charge?
Kind Regards
Sagar
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Member Since February 2011 - Comments: 3453 - Articles: 286
10:38 AM, 26th November 2014, About 11 years ago
Hi Sagar,
Thank you very much on behalf of the Property118 community for your kind words 🙂
I am no expert on this subject but 2 looks like the standard scenario for charging.
Scenario 1 they are just regular tenants.
Member Since September 2013 - Comments: 217
12:25 PM, 26th November 2014, About 11 years ago
Sagar,
An interesting question. I think your answer lies in the ownership structure and you should therefore consult a solicitor. I guess the answer will lie on whether you want to retain ownership of all or whether you wish to sell a leasehold interest in the property. And that may require tax advice too…. Good luck.
Member Since August 2013 - Comments: 428
12:42 PM, 26th November 2014, About 11 years ago
A slight variation on the question. Is it normal practice to charge a tenant separately for the service charge on a flat or to include it in the rent?
Member Since November 2014 - Comments: 30
2:37 PM, 26th November 2014, About 11 years ago
Ground rent and service charges are paid by leaseholders to freeholders, not by AST tenants to landlords.
I would say (though it can be a bit complicated and you should consult a solicitor for actual advice):
– service charges for all the separate units should cover expected cost of “running” the building (e.g. buildings insurance, maintenance to exterior or communal areas, etc).
– ground rent: however much you can “get away with” – from peppercorn (in practice, zero) to several hundred £ per year (or even more). You should think about things like reviews (how often, formula, etc).
Member Since June 2014 - Comments: 7
5:12 PM, 26th November 2014, About 11 years ago
Thank you for your comments, Ramus i thought exactly this, which leads me to the second part of my question..
In terms of setting the level of Service Charge and Ground Rent i assume this is a task which a professional should carry out?… to ensure the service charge is sufficient to maintain the building?