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ground-rent

What is Ground Rent?

By Blog, Development Finance

Ground rent explained

The ground rent is the monthly fee that a homeowner pays to the holder of the leasehold property. So if the property you are living in has a leasehold, you can expect to pay a ground rent every month for essentially living on that land.

This is different to if you are freehold, because them you essentially own the land. But you are required to pay ground rent even if you have a mortgage and own the property.

How much ground rent will I need to pay?

The exact amount you need to pay will be specified in your lease, but you can expect this to be around £370 per year. In the majority of cases, ground rent is an amount of money paid either in one instalment or can be asked for on a quarterly or half-yearly basis.

If there is more than one leaseholder, then regardless of whether or not they own the property as tenants in common or joint tenants, every leaseholder has the responsibility to pay the ground rent.

Any details regarding your responsibilities to your freeholders, such as ground rent or other potential liabilities are detailed in the lease. To make sure you are fully aware of the responsibilities you have and to avoid problems at a later date, it is important that you make sure you have the asked a leasehold qualified solicitor to look over the lease before moving in.

How can I avoid ground rent increases?

Making sure you have taken on a qualified solicitor is one way to avoid the potential increase, or at least be aware of them and factor them into consideration when purchasing a house, as many buyers can get caught out, being unaware that it is possible for ground rent to potentially double every few years. This has become very hot in the media recently.

It is vitally important that you know about ground rent increases before trying to purchase a property or trying to gain access to development finance, as it could impact your ability to get a mortgage or other kinds of funding.

What is meant by fixed or escalating ground rent?

There are two different types of ground rent, and these are known as fixed and escalating.

Fixed means that the amount you will be required to pay will not change for the duration of the lease, whilst escalating ground rents mean it will increase over the course of the lease. Whether the ground rent is fixed or escalating will be confirmed in the lease.

What is a ground rent review?

A ground rent review is when the freeholder is looking to increase the ground rent. If a ground rent review is requested, then it mostly works in the way mentioned below:

  • The freeholder informs the tenant that they would like to increase the ground rent, whilst stating what they want this rent to be. It is necessary for the lease to designate how long before the new rent will then become payable if the notice is served (for example 6 months or 12 months).
  • The leaseholder can either agree to new rent or suggest a different offer.
  • If the leaseholder and freeholder fail to make an agreement it will usually be passed onto an arbitrator that has been appointed by the Royal Institution of Chartered Surveyors (RICS).

When is the ground rent paid?

Unless it has otherwise been stated in your lease, this is usually paid at the end of the year or bi-annually.

What happens if you do not pay the ground rent?

There are two scenarios that may result in you not paying the ground rent. This is either because you cannot afford to pay the rent, or you have not been asked by the freeholder of the property to pay the ground rent.

lease-ground-rent

If you cannot afford to pay ground rent and the freeholder demands it, it is possible for them to take legal action to settle the cost.

What do I do if the freeholder has not asked for the ground rent?

Unless your freeholder asks for the ground rent, it is not required for you to reach out and pay. This is because any demand for ground rent by the managing agent or freeholder needs to provide notice. This will need to include:

  • The duration that the ground rent demand covers
  • The name of leaseholder
  • The name of freeholder and address
  • Amount of ground rent required for a period
  • Name of the managing agent if applicable
  • When payment is required

Is it possible to reduce your ground rent?

Yes, there are two ways to decrease the amount of ground rent you pay. You can either extend the lease under the formal process or by collective enfranchisement.

eviction notice

How to evict a tenant

By Blog, Landlord

How to properly, and legally evict a tenant will depend entirely on the factors of your current situation; including whether they have broken the tenancy terms and conditions or not and whether you live with them. Each different set of circumstances will come with a different course of action to take ensuring that your eviction is in-keeping with its relative legalities.

It is of the utmost importance that you follow the UK’s rules and regulations for eviction of a tenant, as failure to follow these laws could result in considerable penalties, and will also significantly reduce the chance of the tenant actually being evicted. If you have failed to comply with the UK’s regulations for evicting a tenant, you may be found guilty of such crimes as harassment, resulting in an illegal, and further invalid, eviction.

Through this piece, Magnet Capital will be taking you through the legal process of evicting a tenant.

How to evict a tenant with an assured shorthold tenancy?

There are two different types of assured shorthold tenancies out there, these being as follows:

  • Fixed-term tenancy – as the name suggests, a fixed term date is a tenancy that runs for a set, or “fixed”, period of time.
  • Periodic tenancy – this type of tenancy has no set end, and is ran and renewed every week or every month dependent upon the specified contract.

As with the eviction of any tenants, those who are under an assured shorthold tenancy must be evicted in a set legal process. If you want your tenants to leave after the end of their fixed term, you must provide them with a Section 21 notice. You can use a Section 21 notice on those with any type of assured shorthold tenancy, these being either a fixed-term tenancy or a periodic tenancy.

If a tenant has gone against the terms and conditions of their tenancy, you can also provide the tenant with a Section 8 notice. With this notice, you can give a tenant a time period of anything from two weeks to two months in which to vacate the property. The length of notice given will depend entirely on the extent to which they have broken the terms and conditions of the contract.

How to evict a tenant with an excluded tenancy

An excluded tenancy is a type of tenancy in which the tenant will be living/sharing the same accommodation as the landlord. With this type of tenancy, you will not have to take your tenants to court to legally evict them. You will only have to give your tenant reasonable notice. Reasonable notice is usually measured as period of the routine rental period; e.g. if the tenant pays their rent monthly,  a reasonable notice period would be one month long.

What to do if tenants refuse to leave

If the tenant(s) refuse to leave by the eviction date, the next step should be to apply for a standard possession order. This will also help you to get back any money owed in rent that the tenants have failed to pay. If you tenants still refuse to leave even after a court standard possession order has been implemented, you can then get a warrant for possession.

With a warrant for possessions, bailiffs can legally visit to remove the tenants from the premises of your property. To find out more about warrant for possessions and how to apply, please click here.

So long as you adhere to the rules and regulations of the UK’s laws surrounding tenant eviction, it should be a quick and simply process to evict a tenant if needs be. Follow our site for more tips relating to property management and development finance in the UK.

money-saving-property-development

How to save money when developing a property

By Blog, Development Finance

There are many different ways that you could save money when developing a property, each one contributing to the overall cost-efficiency of the project. The development of a property of any scale is always still a considerably large undertaking, that can have a significant impact on your finances.

Therefore, whilst saving money in different areas can help with the overall cost, it is still vital to ensure you have more than enough financial security to go through with a project. Through this piece, we will be exploring some effective ways that can help to save you money whilst developing a property.

At Magnet Capital, we aim to help you get the best value for money when developing a property. In addition to offering development finance, we will be able to provide professional advice including ways to manage your costs and cash flow as effectively as possible.

Saving money when developing a property

One of the main areas of this process that you can save money on is through the building of the property. By trying to cut back where you can through the property’s physical development, you can save considerable chunks of money. Below is a list of some of the main areas to the building process you can save money through:

  • Contractors
  • DIY
  • Reuse salvageable materials
  • Sourcing your own materials

These four areas are vital stages to developing a property, and can collectively contribute a sizeable amount to the costs of this developmental process. By knowing where and how to save on these vital areas of construction, you could save a considerable amount of money on the development of a property as a whole.

Contractors

A contractor is someone who helps in this development by providing the building equipment, materials, and workers needed to construct a property. As a contractor controls many of the major aspects that go into this physical development of the property, it is important to pick one who not only understands your budget, but will also help you to make the most out of your money.

contractors

It is always good to compare different contractors, helping you to get someone who meets your required standards, understands both your budget and your vision for the property, whilst also working for a great price.

DIY

Whilst contractors are there to help you build up your property, by picking and choosing various tasks to construct yourself, you could help to shave off hundreds, and even thousands of pounds from the overall cost of development. Although this can be quite a long and tedious process, by doing a sizeable portion of the handy work yourself, you can help to save money when developing your property.

diy

Whilst this is a great and effective way to save money, it’s worth mentioning that DIY should only be done when you have full confidence in your abilities for each task. Ensure that all projects done around the property that are DIY are done effectively and with the greatest of care.

Reuse salvageable materials

Some materials your contractor will have to order in, however, when developing a property on land that already has building structures on it, it may be good to inspect these structures and see if any of the materials are salvageable for reuse. This can help to cut the cost down of the amount of materials ordered in for the development of your property, and therefore the overall cost of the property’s development.

Sourcing your own materials

Whilst the contractors will, in some circumstances, know where to get you the best materials for the best prices, doing some digging yourself is only going to improve the cost-efficiency of the project. By helping the contractor to look around on the best deals on all materials and features to the property, you can help to improve the cost-efficiency of your property’s development.

See also, typical costs when developing a property.

being-a-good-landlord

How to be a good landlord

By Blog, Development Finance

Tips for being a good landlord

If you are renting out a property that you own to people, it should be one of your top priorities to make sure that you are keeping your tenants happy. This is important for a number of reasons. Why? If you keep those who are living in your property satisfied, you can increase tenant retention, reducing the need for you to spend time as well as money finding new tenants to replace the existing ones. Furthermore, being a good landlord also creates mutual respect, increasing the likelihood of your building being kept in good condition.

But how exactly do you keep your tenants happy? As property development finance specialists, we have a lot of experience in this field, so we have created this guide to talk you through the main things you should keep in mind when renting out a property to people.

Give tenants space

One thing that no tenant likes is to feel as if they are being hassled by their landlord. Do not attempt to try and become their friend or neighbour by regularly visiting unannounced to the property. Not only is this likely to annoy your tenants, but it will also leave them feeling on edge. In addition, it is illegal to turn up as a landlord to a rented property unannounced, without providing 24 hours notice beforehand.

Maintain the property

One of the best ways of being a good landlord is to make sure that things that need to be fixed in the house you rent are quickly dealt with, and properly. Making sure that you regularly maintain the property is a surefire way to keep your tenants happy.

Put safety first

If you are a landlord, you are legally obliged to make sure that the property you rent out adheres to health and safety standards. This means making sure that all electrical and gas equipment has been safely installed and checked on an annual basis by a registered engineer.

Furthermore, you should ensure that there are fire alarms and carbon monoxide alarms fitted in the house, and make sure that batteries are regularly replaced.

Not only does this make you a good landlord, but it also helps you too: if you do not comply with health and safety regulations, you run the risk of not only putting your tenants at danger but also invalidating your landlord insurance entirely.

Make sure your tenant’s deposit is protected

Another legal obligation that you have as a landlord is that you need to keep your tenants’ deposit in an approved deposit scheme so that both you and the tenant are fully protected.

If you fail to choose one of the three main approved deposit schemes in the UK,  then you could face severe financial consequences: you could end up having to face legal proceedings, as well as a potential fine which is the equivalent of three times the amount of the deposit in question.

Don’t do things cheaply

If you have great tenants and want to keep them, don’t try to cut corners by refusing to do things such as upgrade necessary appliances or refusing to repaint when it is needed.  If you fail to reasonably maintain the property for the good tenants you have already, then its worth remembering this work will still be needed to be carried out when you need to replace them.

Think carefully about raising the rent

Another thing you should think very carefully about is increasing the rent, as you could run the risk of your tenants upping sticks and leaving completely. It is worth remembering that change-overs can be considerably expensive if they do decide to leave when you think about the cost and the inconvenience of arranging new tenancy agreements, viewings and credit checks.

Be easily contactable

There is nothing worse for many tenants of finding it almost impossible to contact their landlords when they need to, therefore, making sure you give them your mobile number and an email address so that your tenants can contact you if required. It is worth noting that tenants are only likely to contact you in an emergency only.

Do an inventory

Whilst writing up an inventory can take a long time, it is absolutely worth doing it if you want to be a good landlord. This is because it provides you with details of the contents and condition of the property on the day the tenants move in, meaning that in the event that there are disagreements regarding damage during the tenancy, you have evidence to fall back on. You should make sure that the inventory is as thorough as possible.

See also Gov.uk for more information being a landlord.