What are ground rents?
A ground rent is normally the product of the division of a freehold property with the components sold on long lease, normally divided as flats. For instance a developer might purchase an unmodernised Victorian terrace, and turn it into 4 one bedroom flats. These would then be sold as 125 year leaseholds, and the developer would then be the owner of a freehold ground rent investment.
What are my ground rents worth?
The variables with affect the value of a ground rent are
• The remaining terms on the flats leases
• The annual rent that the leaseholders pay
• Whether there is any ancillary services provided by the landlord, such as insurance, management or car parking provision.
I am convering a house into flats, and want to maximise the value of the ground rent investment that I will create. How can I do this?
• Shorter leases- maximum of 125 years but preferably 99 years
• Ground rents which rise at regular intervals – eg with RPI every 25 years
• The landlord to arrange insurance and management
• Well drafted leases which make maintenance responsibilities clear and with little room for ambiguity
What are the legal procedures involved in selling ground rents?
When you sell ground rents on flats you are obliged to serve Section V notices on the leaseholders, which gives them the option of first refusal at the agreed sale price. They have two months to respond, and then a further two to nominate a purchasing entity should they wish to buy. Some ground rent investors will serve the notices for free, which will reduce your legal costs. Once the Section V notices have expired you are free to sell the ground rents at any price in excess of that noted on the Section V notice, but not below.
How can I get an idea what my ground rents are worth to an investor?
Elmdon Real Estate LLP specialises in purchasing ground rent investments. They operate the website Ground Rents Wanted http://www.groundrentswanted.com, and you can fill in the form there. Alternatively you can call them on 0800 756 6412 or email info@elmdonrealestate.com