When to charge ground rent or service charge?

by Readers Question

10:33 AM, 26th November 2014
About 4 years ago

When to charge ground rent or service charge?

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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

Sagarground



Comments

Neil Patterson

10:38 AM, 26th November 2014
About 4 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.

Mike W

12:25 PM, 26th November 2014
About 4 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.

Seething Landlord

12:42 PM, 26th November 2014
About 4 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?

Ramus Wood

14:37 PM, 26th November 2014
About 4 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 ÂŁ per year (or even more). You should think about things like reviews (how often, formula, etc).

Sagar Patel

17:12 PM, 26th November 2014
About 4 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?


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