What happens to ground rent when a lease is extended?
If you extend your lease formally then you will only have to pay a “peppercorn rent” which means no ground rent at all. If you extend your lease informally by negotiating with your landlord, you may still have to pay ground rent depending on what you agree.
Can peppercorn ground rent increase?
Is it possible for ground rent to be changed to peppercorn? The simple answer is yes, but not until the leaseholder wants to extend or vary his lease.
What does it mean if ground rent is a peppercorn?
If the amount is very small, or notional, it may be described as a peppercorn rent. If a leaseholder extends a lease under the Leasehold Reform, Housing and Urban Development Act 1993 they then only have to pay a ‘peppercorn rent’, effectively a ground rent of nothing.
Is a peppercorn rent legal?
A token or nominal rent (eg a peppercorn, red rose, £1.00) paid by way of consideration in order to form a legally binding lease contract and create a legal relationship between landlord and tenant.
Does lease extension remove ground rent?
If you extend your lease, the value of your flat will rise. The rise in value must be calculated and the total ground rent and reversion due are then subtracted.
What is the ground rent scandal?
The scandal of new homes with doubling ground rents goes back years, impacting a potential 4.5 million leaseholders. Hundreds of thousands of home owners are caught in a leasehold scandal that sees them clobbered by spiralling hidden costs and trapped in unsellable homes.
What is a Section 42 lease extension?
A Section 42 Notice is a formal request from a leaseholder to the freeholder or landlord (or both) and any other appropriate party to extend their lease on a property. This provides a leaseholder with an extension of 90 years on top of the remaining lease term and a ground rent reduced to zero.
Is peppercorn rent the same as ground rent?
Ground rent is a yearly sum of rent paid to the landlord under the terms of the lease. This can be a “peppercorn” rent (no ground rent) or any other sum of money set by the lease.
What is the value of one peppercorn?
A token or nominal rent. The name comes from leases where the rent is one peppercorn a year. Other kinds of token or nominal rents, such as £1, or a red rose each year, may also be referred to as peppercorn rents. A peppercorn rent is often found where a premium has been paid for a lease.
What is the peppercorn rule?
In legal parlance, a peppercorn is a metaphor for a very small cash payment or other nominal consideration, used to satisfy the requirements for the creation of a legal contract.
How does peppercorn rent work?
The most common example would be to have a lease of a flat or house for 999 years and the rent to be one peppercorn. Essentially the landlord is saying that the property is rent free and actually his interest lies in the premium or price for which he is selling the property.
When does a leaseholder get peppercorn ground rent?
Under the Leasehold Reform, Housing and Urban Development Act 1993, a leaseholder can obtain a lease extension of 90 years and be entitled to a peppercorn ground rent if they have lived in the property for two or more years.
When does a leaseholder have the right to extend?
Because of this, the law gives the leaseholder (tenant) the right to extend their lease once they have owned it for two years. The right is to add 90 years to what is left on the existing lease at a ‘peppercorn rent’.
Do you still have to pay ground rent if you extend your lease?
If you extend your lease by negotiation with your landlord you may still have to pay ground rent depending on what you agree. Lease extension can be a difficult process. We recommend you get professional help from a solicitor and surveyor with experience in this area.
Is it possible to extend your lease for 990 years?
Leaseholders can also face high charges to extend their lease. For leasehold house owners, which face slightly different rules, they can also face barriers when they look to extend their leases. Today’s changes mean both house and flat leaseholders will now be able to extend their lease to a new standard 990 years with a ground rent at zero.