What is Ground Rent?

Ground rent is the payment transferred to the owner of land by a tenant that wishes to improve upon and use the land in such a manner that both parties have previously agreed upon. Ground rent leases in the United Kingdom are generally very long-term, and can even be handed down through generation of both leaser and lessees in some cases. At no time during a ground rent agreement does the leaser of the land surrender the title to the property to the lessee, even when the land is used to build huge projects such as multi-million dollar hotels, businesses, and condominiums. On the other hand, there are laws in place to protect the lessee from potential abuse by the tenant as well.

The term “ground rent” goes back hundreds of years to medieval England and originated from the original purpose of feudal lords making the attempt to implement their role as lords over their tenants. The act came about by a low that was passed in 1290 that effectively placed every tenant as a subject to the overlord and only that overlord. This system came about from the fact that, before the Industrial Revolution, the ownership of land was the main way of determining class. Effectually, those that owned land were the ruling class and vice versa. Peasants that lived on and worked someone else’s land gave a portion of their crops to their lord. Those that didn’t pay faced harsh discipline such as eviction or even death in some cases.

Due to recent laws and regulations that have been passed, such as the “Landlord and Tenant (Notice of Rent) (England) Regulations 2004” and the “Commonhold and Leasehold Reform Act 2002,” the power that landlords have over tenants today is generally no more than simply an owner of land leasing it to a tenant. These are the latest of the many laws that have been implemented over time to prevent the abuses that can occur in an unchecked ground rent system. For instance, there have been cases of a tenant paying ground rent to a landlord while building and establishing large, expensive businesses such as hotels and malls on the property. Without proper legislation in place, the landlord could feasibly find a loophole to break the lease and obtain that property or simply confiscate it at the end of the lease. However, with modern ground rent laws in place, the tenant has rights that allow him to either buy the property if offered or to pay a readjusted lease rate in accordance with the value of the property.

Estates & Management are a privately owned property services company.

Estates and Management are considered specialists in the management of ground rent.

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