The Gazette 1993

VOL. 87 NO. 2

JULY/AUGUST 1993

Ground Rents:

The Shape of Things To Come

By: J.M.G. Sweeney*

Failure to recognise an opportunity

compulsorily to acquire the fee

simple may expose a tenant's legal

advisers to an action for

professional negligence. Should the

previous government's commitment

to abolish domestic ground rents by

January 1,1997 be persevered with,

this will not reduce the practical

importance of even ground rents on

dwellings as it will remain always

necessary to be able to identify

what has been extinguished. This

article examines some threshold

requirements the presence of which

should indicate to the practitioner

the existence of the kind of ground

rent which may entitle the tenant to

acquire a reversionary lease or the

freehold reversion. It also suggests

some reforms.

The Professional Negligence Risk

As a lease approaches its expiry date,

the leaseholder will often be under

considerable pressure to have him

apply for a new lease for a term of, at

most, 35 years and at virtually a

market rent. If the rent of the lease

which is about to expire is low, or if

the length of the term suggests a

building lease

, it will probably occur

to the tenant's solicitor that the rent

may in fact be a ground rent entitling

| his client to apply for a 99 year

reversionary lease at a fraction of the

"new tenancy" rent or, better still, to

acquire compulsorily the fee simple.

However, it is by no means easy to

determine whether such a right exists

and the legal adviser may, quite

wrongly, be persuaded that the tenant

| is not entitled to anything more

favourable than a 35 year tenancy at

| what may prove to be a crushing rent.

Such a decision on this question could

be a serious mistake on the lawyer's

Professor JMG Sweeney.

part resulting in grievous loss to his

client for the recovery of which he

might sue the practitioner.

But are not grounds rents to be done

away with? On 19 November, 1991

a reply to a parliamentary question, the

then Minister for Justice, Mr. Ray

Burke TD, stated that a very rough

estimate made some years previously

of the number of domestic ground rents

which still existed was about 200,000

and quoted from the Programme for

Government

which had then been

recently published, as follows:-

The Government is committed to

introducing legislation which will

abolish all remaining domestic

ground rents as and from January 1, \

1997. Under these proposals, all

remaining such rents will be deemed

no longer to exist, and the fee

simple of the property will become

the exclusive ownership of the

householder. The legislation will

shift the onus of completing the

purchase of outstanding ground

rents from the householder to the

ground rent landlord. Payment of

compensation to the ground rent

landlord would continue to apply on

a similar basis as at present

If there is to be leglislation, what

shape will it take? There are rumours

of doubts concerning the

constitutionality of these proposals

(and, perhaps, even their compatibility

with the European Convention of

Human Rights) which may inhibit our

legislators. Furthermore, the omission

of the topic from the agreed Pro-

gramme for a Partnership Government ;

can hardly be regarded as accidental

. '

Subject to this, the writer ventures to

believe that any future Act will follow

closely the wording of the 1978 Act

which prevents the creation of new

leases reserving ground rents on

dwellings. It may be expected to vest

in the tenant the fee simple (together

with all intermediate interests) in a

dwelling the subject of every lease

made before the 16th day of May,

1978" if the tenant would, apart from Í

this future Act, have the right, under

the 1978 (No. 2) Act (including, of

course, any future amendments), to

enlarge his interest into a fee simple.

Whatever form any future Act may

take, it should, I think, be clear that

the practical importance of ground

rents will continue if the following is

considered:

1. It was not proposed to abolish

ground rents on business premises.

2. In deciding whether a rent has been

extinguished or not, i.e., whether it

has vested automatically in the

tenant or not, it will still be as

necessary as ever to refer to the

complicated statutory provisions

and case law which today determine

whether a tenant is entitled to

acquire the fee simple or a

reversionary lease.

The Threshold Requirements

; Accordingly, one of the aims of this

article is to extract from this entangled

subject some of the threshold or

preliminary elements which should

warn the practitioner of the presence

of the kind of ground rent which

entitles a tenant to acquire the

freehold reversion or a reversionary

lease. Even then, it will not be

possible to scrutinize in a short article

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