Question 1

Ground Rent / Service Charge

Accepted Answer

We pay £15.00 per year ground rent at the moment. Are there any implications of the landlord charging more for this ( and possibly reducing the service charge). For instance is there a ratio between the amount of ground rent and the amount that could be charged for selling the freehold, either to individuals or the whole site, or would it have no effect on the purchase price? There seems to be conflicting advice on this on the internet. On another matter: we are charged VAT on our Service Charge. Are there any reasons why we could not ask the landlord to deregister from VAT? Does this depend on the amount of income she receives from our Service Charge? The FPRA Replies: With regard to the first question, the ground rent is normally an amount set within the lease and can change if so stated in the lease which can also change after a period of time. The freehold is always based on the ground rent figure over a term, for example, how many outstanding years left on the lease together with the annual ground rent figure, this would be the basis subject to a valuation. The service charge account is not affected by this procedure of freehold purchase as it should only be used for the purpose of maintenance repairing/decorating by set budgets and reserves etc. V.A.T is chargeable to any supply V.A.T registered and cannot be reclaimed by either a Landlord or a managing agent on behalf of the residents as they are the end of supply.

Question 2

Ground Rent / Service Charge

Accepted Answer

We pay £15.00 per year ground rent at the moment. Are there any implications of the landlord charging more for this ( and possibly reducing the service charge). For instance is there a ratio between the amount of ground rent and the amount that could be charged for selling the freehold, either to individuals or the whole site, or would it have no effect on the purchase price? There seems to be conflicting advice on this on the internet. On another matter: we are charged VAT on our Service Charge. Are there any reasons why we could not ask the landlord to deregister from VAT? Does this depend on the amount of income she receives from our Service Charge? The FPRA Replies: With regard to the first question, the ground rent is normally an amount set within the lease and can change if so stated in the lease which can also change after a period of time. The freehold is always based on the ground rent figure over a term, for example, how many outstanding years left on the lease together with the annual ground rent figure, this would be the basis subject to a valuation. The service charge account is not affected by this procedure of freehold purchase as it should only be used for the purpose of maintenance repairing/decorating by set budgets and reserves etc. V.A.T is chargeable to any supply V.A.T registered and cannot be reclaimed by either a Landlord or a managing agent on behalf of the residents as they are the end of supply.

Ground Rent / Service Charge

Search

Articles Archive