Mark Hawthorn, director of Bolton-based Landmark Investments Group, is launching a campaign to raise awareness to residential developers about cashing in on ground rents which would help boost their profits within end of year sales results.
Hawthorn is warning developers they do not consider the value of selling or collecting ground rents from their properties, which he says "is almost all profit", when posting end of year results, causing them to miss out because they don't act quickly enough.
Ground rent is a regular payment required under a lease from the owner of leasehold property, which is payable to the freeholder. Ground rent is created when a freehold piece of land or when a house, apartment and commercial unit, is sold on a long lease.
Within Landmark's ground rent guide it said a ground rent charge can range from £100-£500 a year as an average.
Landmark Investments Group's research shows that of the largest 20 developers in the country, whose combined turnover exceeds £19bn, over two thirds have end of year results due in the next six months. The company said that legal notices required in selling ground rents alone take eight weeks to complete, which is before any contract can be sent, meaning action needs to be taken now to secure the extra profits for 2009-2010.
Hawthorn comments: "Considering the market conditions over the last couple of years, ground rent sales could be a welcome and significant addition to profits, especially for housebuilders with large scale apartment developments. We are approached all too often by developers who need to sell ground rents quickly for their year-end sales only to have to inform them that it is not legally possible this late in the day. We want to raise awareness of the potential profit and urge developers to act now if they do not want to miss out.
"We can assist with serving of notices as well as the management of ground rents and sites in the run up to sales. In many cases we are able to do this free of charge."
Hawthorn believes residential developers are failing to record a potential £300m profit in their end of year sales results, based on a £19bn turnover, with £200,000 average sale price, where 80% of units have ground rent attached at £250pa.
Landmark Investments Group, which is now in its tenth year purchasing, selling and managing ground rents, acts on behalf of developers and house builders as well as charities, trusts and pension funds. At the beginning of this year, the firm announced targets to spend £30m in 2010, with a primary focus on ground rent contracts in the North West and London.