Simon Tye explains the complexities in collecting ground rent
Since 28th February 2005 any demand for ground rent by a freeholder, or their managing agents, must be made in a “prescribed form” as set out in Section s.166 of the Commonhold & Leasehold Reform Act 2002.
If the ground rent is not demanded in this prescribed form, and completed in accordance with section 166, the tenant (leaseholder) is not liable to make payment unless, and until, it is properly demanded.
The form of rent demand notice can be viewed on the Leasehold Advisory Service website under the “Advice Guides” tab. At first glance the form looks reasonably straight forward. However, it is easy to complete it incorrectly, and many freeholders, or their advisers, do get this wrong.
The date for payment of the ground rent given in the notice cannot be earlier than 30 days from the date notice is given, nor more than 60 days after that date. Overriding this is the provision that the date for payment cannot be earlier than the date set out in the lease itself.
Complications can arise where the freeholder is attempting to recover several years’ arrears of ground rent. The best advice for a freeholder is to use separate forms for each period of ground rent owing.
The notes for leaseholders and landlords on the form should be read carefully to ensure compliance from a freeholder’s and leaseholder’s point of view.
Section 166 provides that the notice must be in the prescribed form and “may “be sent by post. If the notice is sent by post, it must be addressed to the tenant at the dwelling on which the ground rent is payable, unless the tenant has notified the landlord in writing of a different address in England & Wales at which he wishes to be given notices under this section (in which case it must be addressed to him there).
In reality, the failure by a freeholder to demand ground rent, properly, may only mean that payment of the ground rent is delayed until the freeholder serves a proper demand. It does not mean that the ability to demand ground rent has been lost. However, if a freeholder, or their agents, attempt to add legal or administration charges,for nonpayment, based on an incorrect demand notice, such charges will not be payable.
The form contains a reference to section 167 of the 2002 Act. This section provides that a landlord cannot use the forfeiture procedure under the lease unless the amount owed for ground rent, service charge or administration charges (or a combination of them) is more than £350. However, the forfeiture procedure can be used even if the amount is less than £350, if it has been outstanding for more than three years. Ground rent can be recovered for up to six years in
arrears. In conclusion, the bad pun in the title of this article is correct the Ground Rent demand can be a “demanding notice” to complete correctly.
Simon Tye is a legal advisor with the Leasehold Advisory Service.