What are Service Charge and Ground Rent Arrears?

The Information on this Guide Applies to Individuals Living in England and Wales Only

You’re normally required to pay for service charges if you own a leasehold estate. This is utilized to cover the maintenance expenses of the property where you reside. Along with this is paying for a ground rent which is a part of your contract agreement. This will then be paid to the freeholder

The details of how you can pay and when to pay both your ground rent and service charges must be indicated in your contract or lease. Also, unpaid service charge and ground rent can result in enforcement actions such as eviction and repossession.

What is a service charge?

Service charge is a bill for repairs or maintenance costs if you are leasing a property. This involves maintaining the property’s structure such as drainage or other management charges. This is normally paid in a month or quarter based on the contract with your freeholder.

If you own the property, your service charge is included in your agreement. If you are renting the estate, it is inclusive on your rent which you can verify in your tenancy agreement.

The service charge amount varies yearly. It would depend on the exact cost of the services. Your service charge is considered as a priority debt since it can result in severe consequences when not paid.

The freeholder should also charge you with a reasonable fee. Since service charge costs vary, it can be difficult to set aside an exact budget for it. On the contrary, if you’re uncertain whether you should be paying for it, you can check your lease agreement or talk to your landlord or management company.

If you have objections on how you are billed, you can contact the Leasehold Advisory Service for more details.

What to do if I can’t afford my service charge?

If you cannot afford to pay your service charge, do not wait before you fall into arrears. Communicate with your landlord or the management to negotiate for possible arrangement on how you can suffice payments. Once you neglect or ignore this bill, you’ll be at risks of losing your home.

What is ground rent?

Ground rent is the amount you pay to the freeholder of your estate. It is normally a part of your lease agreement. It can amount from £100 to £200 a year. You can check these details on your lease as this has to be included.

What can happen if I ignore paying my ground rent?

Unpaid ground rent can result in your freeholder enforcing court action to repossess the property. This method is referred to as ‘forfeiture’.

  • The freeholder can pursue commencing court action if:
  • Your ground rent arrears amounts to three years or more
  • You owe more than £350 on your ground rent, service charge as well as administration charges

Usually, you’ll have about a month to settle your arrears. Once you’ve made payments, legal enforcements can stop and your lease will resume as it is.

On the contrary, unpaid arrears after a court action is secured can lead to freeholder utilizing bailiffs to evict you from the property.

If your freeholder does not require you in paying for the ground rent a few years, they cannot oblige you to pay more than six years for backdated payments. They must also follow certain standards in collecting the payment.

Once you’re falling behind payments on your service charge and ground rent, do not hesitate to contact us. If you find it hard to suffice payment on your bills, we suggest that you get free debt help and advice urgently.

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