Ground rent
From Wikipedia, the free encyclopedia
 |
The tone or style of this article or section may not be appropriate for Wikipedia. Specific concerns may be found on the talk page. See Wikipedia's guide to writing better articles for suggestions.(December 2007) |
A ground rent, sometimes known as a chief rent in the North West of England,[1] is a form of lease in which unimproved land is leased for a long term for purposes of improvement by the tenant.
Contents |
[edit] Laws
In Roman law, ground rent (solarium) was an annual rent payable by the lessee of a superficies (a piece of land), or perpetual lease of building land.
[edit] Valuation
The value of a ground rent is based on
i) a multiple of the initial rent receivable ii) the net present value of the reversion iii) any attributable marriage value
[edit] English
In English law, it appears that the term was at one time popularly used for the houses and lands out of which ground rents issue as well as for the rents themselves.[2] Lord Eldon observed in 1815 that the context in which the term occurred may materially vary its meaning.[3]
The contemporary accepted meaning of ground rent is the rent at which land is let for the purpose of improvement by building; i.e. a rent charged in respect of the land only and not in respect of the buildings to be placed thereon. It is therefore usually lower than the rent that might be achieved for a building let on the open market, and is for a far longer term of years (at least 21 years, but more commonly 99 years or 125 years, or even 999 years).
In the United Kingdom, the rights of residential tenants owning property subject to a long lease at a ground rent are governed by the Leasehold Reform Act 1967 for houses and the Leasehold Reform, Housing and Urban Development Act 1993 for flats.
The Commonhold and Leasehold Reform Act 2002 and the The Landlord and Tenant (Notice of Rent) (England) Regulations 2004 now govern the form of notice that needs to be issued to collect ground rent. Previously there had been a problem with some landlords sending confusing or dishonest demands for payments to tenants.
The final sanction available to a landlord faced with a leaseholder in breach of his lease due to the failure to pay the service charges, ground rent or administration charges, is to forfeit the lease and to repossess the house or flat. To do this the landlord must first serve a valid notice under section 146 of the Law of Property Act 1925, the Notice of Seeking Possession. However, The landlord cannot serve a section 146 notice where the amount of service charges, administration charges or ground rent owed (or a combination of all of these) total less than £350, or have been outstanding for less than three years.[4]
Under the provisions of The Rentcharges Act 1977, Lessees can free themselves of any annual rentcharge created before 22 August 1977, by applying to make a lump sum payment through the Government Office for the North West. These rentcharges will (if not already extinguished) be extinguished on 22 July 2037.[1]
[edit] Scottish
In Scots law, the term ground rent is not employed, but its place is taken, for practical purposes, by the ground-annual, which bears a double meaning. (i.) At the time of the Reformation in Scotland, the lands of the Church were parcelled out by the crown into various lordships, the grantees being called Lords of Erection. In the 17th century these Lords of Erection resigned their superiorities to the crown, with the exception of the feu-duties, which were to be retained till a price agreed upon for their redemption had been paid. This reserved power of redemption was, however, resigned by the crown on the eve of the Union and the feu-duties became payable in perpetuity to the Lords of Erection as a ground-annual. (ii.) Speculators in building ground usually grant sub-feus to builders at a high feu-duty. But where sub-feus are prohibited—as they might be, prior to the Conveyancing (Scotland) Act 1874—and there is much demand for building ground, the feuars frequently stipulate for an annual rent from the builders rather than for a price payable at once. This annual rent is called a ground-annual. Interest is not due on arrears of ground-annuals. Like other real burdens, ground-annuals may now be freely assigned and conveyed.
[edit] American
The term ground rent in the English sense does not seem to be generally used in the United States, but is applied in Pennsylvania to a kind of tenure, created by a grant in fee simple, the grantor reserving to himself and his heirs a certain rent, which is the interest of the money value of the land. These ground rents are real estate, and, in cases of intestacy, go to the heir. They are rent services and not rent charges, the statute Quia Emptores never having been in force in Pennsylvania, and are subject to all the incidents of such rents. The grantee of such a ground rent may mortgage, sell, or otherwise dispose of the grant as he pleases; and while the rent is paid the land cannot be sold or the value of the improvements lost.
A ground rent being a freehold estate, created by deed and perpetual in duration, no presumption could, at common law, arise from lapse of time, that it had been released. But, by statute (Act of 27th of April 1855, s. 7), a presumption of release or extinguishment is created where no payment, claim or demand has been made for the rent, nor any declaration or acknowledgement of its existence made or given by the owner of the premises subject to it, for the period of 21 years. Ground rents were formerly irredeemable after a certain time. But the creation of irredeemable ground rents is now forbidden (Pennsylvania Act 7 Assembly, 22nd of April 1850).
Ground rents are also found in some portions of Maryland, primarily in the Baltimore area. These are typically 99-year leases, renewable in perpetuity, subject to a semi-annual rent payment. Under Maryland law, the tenant of a residential property has the right to redeem the ground rent for a one-time payment and obtain full title to the property. If the renter does not pay, the ground rent holder can go to court and have the tenant evicted or ejected over as little as $30-$300, which can take place immediately. The owner can then resell it for full profit, and the former owner does not get anything from the deal. Due to these circumstances, an emergency bill was presented by Democratic Maryland Governor Martin O'Malley to completely ban new ground rents in Maryland; the bill was passed by the legislature, though it is being contested in court.
[edit] Sale of ground rents in the UK
There are a number of companies which specialise in buying ground rents for long term investment from people who want to sell ground rents. Normally they focus on purchasing reversionary ground rents, either for initial income or for the opportunity of a reversion of the underlying property at some point in the future. The value of ground rents is affected by the rent review pattern on future income increases, the value of the underlying property, the unexpired lease length and whether marriage value is applicable.
Prior to selling ground rents it is a statuatory obligation incumbent on both parties to the transaction that Section V notices are served on the long leaseholders. This gives them a two month period within which to respond. Upon expiry of the notices, a transaction can proceed at the price stated on the notice or higher (but not lower) for up to 12 months subsequently.
[edit] External links
- Special Baltimore Sun Series on Ground Rent in Baltimore City
- UK Rentcharges Act 1977 at propertylawuk.net
- The Leasehold Advisory Service UK: Service charges and other issues
- The Government Office for the Northwest UK
- "A way out of ground rent" from the Manchester Evening News
[edit] References
- For English Law see Foa, Landlord and Tenant (3rd ed., London, 1901)
- Scots Law, Bells Principles (10th ed. Edinburgh, 1899)
- American Law, Bouvier, Law Dict. (Boston and London, 1897).
This article incorporates text from the Encyclopædia Britannica Eleventh Edition, a publication now in the public domain.
- "Mystery of ground rents is solved with a few facts". (August 19, 2001). Baltimore Sun, p. 3L.
- "End ground rent evictions, O'Malley says". (February 1, 2007). Baltimore Sun.
