What Is Ground Rent Scandal?

Before we understand the ground rent scandal, we need to know about a few terms which would further define and describe the phenomenon. here are the crucial ones involved.

Leaseholder

When a house or property is bought by someone on lease for the long term, the buyer is called leaseholder and has the control over the property and pays agreed rental for the lease term duration as per the agreement.

Freeholder

Unlike the leaseholder, the freeholder is the buyer in the scenario of a permanent and one-time purchase of any property. Freeholder, being the ultimate owner having complete possession of the house, does not have to make any payment to anyone and hence there are no charges involved in freehold ownership.

Ground Rent

Ground rent is the cash amount which is paid to the original owner of the property by the leaseholder annually. This is generally a fixed amount which is mentioned in the lease agreement and remains constant unless the lease is renewed or changes are introduced with mutual consent.

Scandal

ground rent scandal is a phenomenon which occurred in the UK. It is a scenario of increasing the ground rent paid by leaseholders to freeholders of a house or property. as per the past practices, this amount was always an insignificant one or a small part. It was only in recent few years when the change was made and the leases were modified with abrupt increases in ground rent.

The changes were imposed and enforced through the idea that all old leases did contain the condition or clause of virtual freehold and hence this implied that conversion into or execution of leasehold would incur sudden increase and change in the ground rent amount paid and which could go as high as freeholders and owners would deem right and justified. This entire change happened to surface as a manipulative practice to exploit leaseholders into paying a high amount of cash and was termed as ground rent scandal.