QUESTION
I would be most grateful for your advice regarding the ground rent that has not been collected since we set up our Right to Manage Company (RTM). We are very happy with the managing agents we appointed in 2011 but there has been a problem with the collection of the ground rent since that time, and it remains uncollected. The ground rent (£200 pa) was previously collected by the managing agents appointed by the developer in 2001. We asked the new managing agents to take over the collection of the ground rent (on behalf of the freeholder) once we appointed them. Unfortunately, despite numerous attempts by our managing agents, including meeting up with the freeholder, permission to act for the freeholder was not forthcoming. The freeholder said that they would arrange collection of the ground rent themselves -- this has not happened and we are currently three years behind payments. The monies owed are building up and we are concerned that we may suddenly be presented with a request for the whole amount -- heading towards £800 -- which may cause problems for some of the older residents. Can you advise what the legal position is - would we be obliged to pay the whole amount owing if requested? This is despite the fact that we have not been invoiced annually and it is on record that our managing agents did all they could to assist with this."
ANSWER
The Right to Manage does not carry with it the right for the Management Company to receive the ground rent payable under a tenant’s lease and consequently the right to demand such rent remains with the landlord. The Limitation Acts state that a Landlord has six years in which to bring proceedings to recover payment of ground rent lawfully due otherwise they then become statue barred from recovering it. In times gone past unscrupulous landlords hoping to regain possession of their properties might choose not to demand ground rent in the hope that the tenant would not then pay and thus arrears that the tenant might then be unable to pay, would over time accumulate. To address such situations The Commonhold and Leasehold Reform Act 2002 introduced procedures to control the demanding of ground rent and the landlord’s ability to gain possession of their properties should the demand not be paid. Under these procedures for ground rent to be lawfully due the landlord must give to the tenant a prescribed form of demand for its payment. The need for such demand overrides any provision in the lease that may say that ground rent is due without demand. Consequently if the tenant has received no demand in the prescribed form then they have the right to withhold payment. The procedures also create a time period and financial minimum need before a landlord can seek to terminate a lease by reason of the non-payment of ground rent lawfully due. Thus to terminate the lease for unpaid ground rent lawful due the amount so due must be more than £350 or consist of or includes an amount that has been outstanding for more than three years. If the landlord simply wishes to recover the unpaid ground rent lawfully due then they may simply commence debt proceedings for the same irrespective of the amount or period (subject to the six years limitation period) of time that they have been unpaid. From a practical point of view:- (a) in the absence of any demand from the landlord the tenants can tender payment of their ground rent simply by sending the same, preferably by cheque, to them at their last known address. If the cheque is cashed all well and good. If it is not then the tendering of the payment will give the tenants a defence of tender to any subsequent proceedings that the landlord might bring against them; or (b) the tenants should set aside the ground rent payable in a separate account so that if and when a lawful demand is received ready access to funds with which to settle the same can be had.
Tony Beaumont, Managing Director at Hamways Ltd
