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‘Ground Rent’ and Buying it out.

By March 8, 2021June 26th, 2024No Comments


‘Ground Rent’ and Buying it out.

There is no formal definition of a “ground rent” but generally it refers to a nominal rent payable by a tenant who holds property under a long lease. Tenants of Leasehold Titles need to be particularly mindful of the duration of the Lease and the time left to run on same. If there is less than 70 years left to run on a Lease, it is not a good title. If there is not a good title, Banks will be reluctant to lend money and difficulties may be encountered when trying to sell the property.
Also, some Leases may have restrictive covenants for example that you cannot extend the property.
The Landlord and Tenant (Ground Rents) Act 1967, the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 and the Landlord and Tenant (Ground Rents) (Amendment) Act 2019 enabled tenants to purchase the ground rent, subject to certain conditions. You can buy out the Ground Rent either privately or through the Ground Rents Purchase Scheme.
Consent Cases
A tenant can seek the consent of the Landlord to purchase the Ground Rent and then the price to be paid will be agreed between them.
They then make the consent application to the Ground Rents Section of the PRAI. In addition to the application form, consent of the Landlord and the fee, the tenant will also require a copy of the original Lease and the Deed by which they acquired the property.


Arbitration Cases
In many cases the consent process will not be possible either because the freehold owner is unknown or won’t agree to sell.
To purchase the ground rent under arbitration, tenants must satisfy all of the conditions of section 9 and one of the alternative conditions in section 10 of the 1978 Act.


Processing Arbitration Cases
Once the application is lodged, notice will be served by Ground Rents Section on the Landlord.
Once the Arbitrator examines the case, they will make an award or issue queries to the applicant.

When the Arbitrator makes an award declaring that the applicant is entitled to purchase the ground rent and fixing the Purchase Price, notice of this will be served on the applicant and on the immediate and superior landlords.

The parties are given a time limit within which the Award can be appealed to Court. If no appeal is made within the notice period, the applicant can then lodge in the Land Registry the amount of Purchase Money and a receipt showing payment of the Ground Rent up to the next gale day following the date of the award or lodge arrears of rent from the last receipted payment, up to a maximum of 6 years’ arrears of rent.

The Ground Rents Section will issue a Vesting Certificate when the ground rent has been bought out. This converts the title to Freehold and should be registered in either the Land Registry or Registry of Deeds, depending on where the title is registered.

Calculating the Purchase Price

Where the tenant and the Landlord have not agreed the purchase price, the amount to be paid will be decided by the Arbitrator.

a. Section 7(5) of the 1984 Act controls the fixing of the purchase price in most cases, i.e., where:
more than 15 years remain on the lease, or the tenancy is yearly, and
the land does not exceed one acre.

This amount is calculated by dividing the price of the Government stock, as quoted on the stock-exchange at closing on the previous evening, by the interest rate on the stock and multiplying the rent by the resulting figure.

b. Where the lease has expired, and the property has not “by operation of law” on the expiry of the lease become a yearly tenancy, subsection 4 applies instead of subsection 5. The amount of the purchase price is thereby fixed at one eighth of the market value of the premises if sold in fee simple with vacant possession.

Where less than 15 years remain on the lease, the purchase price is fixed in accordance with section 7(8) of the 1984 Act. The formula specified in the section is as follows:
[15 N][ V – MR] + MR
[ 15][8]

where P = Purchase-price, r = rent, v = market-value, n = unexpired-term-of-lease, m = multiplier.

c. Where the land exceeds one acre in area, the Arbitrator fixes the purchase price in accordance with the provisions of section 7(3) of the 1984 Act.

Should you have any queries in respect of same, please contact Lorna Mc Ardle, Solicitor. Ph: 012960666