How Ground Rent Dynamic Works

• The basic ground rent

This is the amount which is mentioned in the lease agreement for the contract and this is taken as the starting point of the rent amount to be paid annually. The amount might get decided by the valuation and third party intervention on the deal. This is the first cash flow which goes to the freeholder as the ground rent. Again, there is no hard and fast mechanism in place to decide the number and this can be agreed upon through mutual consent with the help of a highly expert professional.

• Change in ground rent

The ground rent continuously increases as per the recent practices which made it ground rent scandal, being a tool for exploitation of the leaseholders. The typical condition is that it would double every decade i.e. after every 10 year and this rise would continue for the entire duration of the lease. To some cases, it was found that the ground rent would rise to a scale of tens of thousands of pounds soon if not curbed by proper measure and the leaseholder would be paying enormous cash only as the ground rent applied.

• Lease duration for dynamic ground rent

The typical lease agreement durations begin with a period of few hundred years. A typical number might be 99 years, 125 years or 999 years or even longer. These numbers are based on historical data and might or might not have any concrete basis behind the choice of a particular number. A lease could be lifelong as well which puts the leaseholder at the risk of never ending ground rent scandal and a constant exploitation. Also, the contract term might vary from geography to geography and might have evolved over time to attain the present form it is in. Though this nature of a fix duration does give some scope of exit to the leaseholder.