Peppercorn ground rent is one of those features of property that can confuse newcomers.
And even people familiar with it are only sometimes sure of its rules.
One of the questions many have is whether ground rent can be changed to peppercorn ground rent.
Can ground rent be changed to peppercorn?
Yes, ground rent can be changed to peppercorn. There are two ways of doing this.
1. Collective enfranchisement
One way ground rent can be changed to peppercorn is through something known as collective enfranchisement.
This phrase means that if all the leaseholders in a property come together to purchase the freehold.
They can then implement a peppercorn ground rent and extend the lease to 999 years.
2. Lease extension negotiations
Another way this situation can arise is if a leaseholder wishes to extend their lease.
They are entitled in the UK to do so for 90 years. If they have lived in the property for over two years, this lease extension can be peppercorn ground rent.
Is peppercorn ever used for rental properties?
Sometimes, although this is rare, ground rent doesn’t apply to rental properties.
The tenant will simply pay an all-encompassing monthly fee to live there.
A landlord may charge a peppercorn if they do their tenant a favour.
This means that they don’t want their renter’s money and are happy for them to stay there for free.
This is very rare though, as the property will be very unprofitable for the landlord.
Will peppercorn ground rent still be used in the future?
Many experts in the UK think so. The government is currently changing laws to give leaseholders more power.
This is expected to involve reducing ground rent payments to a peppercorn, so there aren’t substantial payments being made for this.