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Property Law

Ground Rents in Ireland-a Minimalist Guide

ground-rent-law-ireland

Buying out the ground rent on a leasehold property is an option for many people….either in commercial or residential premises.

What is ground rent?

Ground rent is rent paid on leases which are at least 99 years old.

Features of ground rent are

* Very low rent (ie not market rent)
* No rent reviews

They can apply to both residential and commercial leases.

The Landlord and Tenant Act 1967 gave the tenant the right to buy out the freehold.

I deal elsewhere on this site with the right to a new lease and in addition to the right to a new lease the tenant may have the right to buy the freehold.

The differences are that

1. the right to buy the freehold only applies to permanent buildings on the land (the right to a new lease applies to any building, not necessarily of a permanent nature)
2. there is an occupancy requirement re the new lease procedure; there is no occupancy requirement to buy out the freehold

Landlord and Tenant (ground rents ) act, 1978

This act changed the test to establish whether the tenant has the right to buy out the freehold. Essentially it requires that in order to have the right to buy out the ground rent and acquire the freehold then the tenant must comply with all of section 9 of the act and one of the conditions of section 10.

I do not propose to spell these conditions here but they can be accessed at www.irishstatutebook.ie in the act itself.

Yearly tenants

If the tenant is a yearly tenant then section 15 of the act sets out the conditions required to obtain the entitlement to buy the freehold.

Restrictions

Section 16 of the act sets out the restrictions to the entitlement to buy out the ground rent.

Procedure

There are 2 methods to buy out the ground rent and purchase the freehold

1. For a business premises-you must use the procedure under the 1967 act
2. For a residential premises you can use either the 1967 act or the 1978 act

Both of these acts can be viewed on www.irishstatutebook.ie
Essentially there are various forms and notices to be served on the landlord and these forms can be accessed on www.landregistry.ie

If the lessor can not be found then you can make application to the County Registrar for the conveyance to be executed. Consult your solicitor to follow this procedure.

The 1978 act procedure, which applies only to residential premises, is called the Vesting Certificate procedure and these certificates are issued by Land Registry, even where the property is unregistered.

Price to buy out the ground rent and acquire the freehold

The price of the freehold is provided for in Landlord and Tenant act 1984 and makes provision for the use of an arbitrator to determine the price. The arbitrator will either be the County Registrar (1967 act) or the Registrar of titles in Land Registry (1978 act).

Generally the value will be approximately one eighth of the market price where the lease has expired.

Where the lease has not expired then Land Registry can advise as to what multiplier they are currently using. It will be approximately 8/10 times the annual rent for residential premises and 18/20 times the annual rent for commercial.

However if you find yourself in this situation it is prudent to engage the services of a professional valuer and your solicitor.

If you are paying ground rent and qualify to buy out the ground rent and acquire the freehold interest, then you would be well advised to do so.

For more information about ground rents check out the Property Registration Authority also.

Update December 2019

The law surrounding ground rents is due to change once commencement orders are signed giving effect to the Landlord and Tenant (Ground Rents) (Amendment) Act 2019. This act was signed into law in December 2019 and it seeks to rectify what some see as the harsh consequences of a 2012 Supreme Court decision.

That decision, in Shirley & ors v A. O’Gorman & Co. Ltd & ors [2012] IESC 5, interpreted the Landlord and Tenant (Ground Rents) (No. 2) Act 1978 (the 1978 Act) as meaning that if a landlord or predecessor of the landlord had ever entered into possession of the land in question then this meant the tenant did not fulfil the criteria to buy out the ground rent.

By taking possession it was held that the landlord inherited all previous interests of tenants in the property, including the persons who had built the building in question.

The Landlord and Tenant (Ground Rents) (Amendment) Act 2019 amends the 1978 act insofar as it provides that a prior tenant cannot equate to a predecessor of the landlord. This will allow anyone subject to a ground rent to cast off the obligation to pay ground rent and permit them to buy out the freehold and enlarge their interest.