Your very own mansion – for £18,000
Publication: The Times
Flip through a property auction catalogue and you’re likely to spot a few deals that will prompt a double-take. How about a “mid-terrace building arranged as four flats in Maida Vale within easy reach of fashionable Notting Hill” – for £18,000? Read on and you will find that actually it is a “ground rent investment let at £1,650 per annum”. What is being sold is the freehold, not the building itself.
Under the British system of property ownership, almost all leaseholders are in effect tenants and must pay an annual “ground rent” to the freeholder, or landlord. Once the preserve of traditional landed estates and family trusts, the agreements are a relic of our feudal past and can run for hundreds of years…
Glenda Ferneyhough, a partner at SA Law, says : “A ground rent portfolio is relatively expensive to acquire and the income can be lost if any of the flat owners claim their right to a lease extension at a peppercorn rent or collectively exercise the right to buy the freehold. The end result is that the freeholder receives a capital sum in compensation, which also serves to extinguish the ground rent. There is also quite a lot of administration involved in demanding ground rents, arranging insurance of the building (where this is the responsibility of the landlord) and responding to inquiries when any of the flats are sold. All in all, this area is not suitable as an investment for amateurs.”
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