Summary of the proposed structure (subject to contract)

Sale of ground rents at the Lower Mill Estate (“Transaction”)

By way of a brief summary, we set out below a summary of structure of the proposed Transaction:

  • The asset to be sold as part of the Transaction is not a property asset and no property interest will be sold to the purchaser. The asset which is to be sold is the right to collect (and sue) for the ground rents payable under various leases granted at the Lower Mill Estate (i.e a “chose in action”). This right will include the right to any interest due for late payment (subject to a 28 day grace period). Given the nature of this estate adopting the structure of a more traditional ground rent sale is not possible.
  • The Transaction will be documented by way of a deed of assignment. The deed of assignment assigns to the purchaser the benefit of the ground rent (as increased annually pursuant the terms of the various leases) and any interest due on late payment of rent.
  • The length of the leases is 999 year and the ground rent remains payable through the term.
  • The deed will includes provision to require the freeholder to commence forfeiture proceedings in the event that there are arrears of rent. There will be minimum thresholds which must occur before action has to be taken: the debt has to have been outstanding for more than 26 weeks and amounts to more than £1000.
  • In the unlikely event that a forfeiture, then net capital value shall be split equally between the freeholder and the purchaser
  • The purchaser is to be responsible for the collection of rent and for charging and accounting for any VAT due on those rents. As the ground rents are over property which is defined as ‘holiday accommodation’ the ground rents are subject to VAT at the standard rate.
  • There will be a restriction registered against the freehold titles so to require any purchaser of the reversion of any of the ground rent leases to enter into a deed of novation under which they accept the same obligations in respect of the assigned ground rents going forward.
  • The purchaser is free to assign or charge the benefit of the deed as they shall wish.
  • The freeholder is not permitted to make any alterations or variations to the lease in so far as it affects the ground rent, the review of the ground rent or the late payment interest provisions. Other than these restriction, the freeholder may continue to manage the estate as they wish
  • On completion of the deed the freeholder is to issue a rent authority letter to each of the tenants informing them that all future rents should be paid to the purchaser.

This note is for information purposes only and may not be relied upon. The purchaser should seek verification from their own professional advisers.