David Porthouse & Co

Carlisle Accountants

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81 Larch Drive, Carlisle CA3 9FJ

Archives for April 2017

Ground Rent Doubles Every Ten Years

 
To take a topical question, would you sign a 99 year lease on a house where the ground rent doubles every ten years, starting at 1,000 pounds a year? Let’s just work out what’s involved.

The tenth root of 2 is 1.07177 so an inflation rate of 7.177% is being assumed. Actual long-term inflation rates are more like 3%, so the inflation rate on the ground rent in real terms is something like 4.055%. This is a rise of about 49% every ten years.

Within 99 years there will be nine rises in the ground rent, with the last rise being 1.488 to the power nine, or 35.8, which means a ground rent in current real terms of 35,803. This could be more than your salary!

Of course, you could say by then it will be someone else’s problem. Well yes, but what do you think it will be like in a few decades trying to sell your house with a rather high ground rent?

The Cheque Run about 25 April 2017

 
It is quite common to invoice a customer with terms of “30 days or net monthly account”. Small customers will be expected to pay within 30 days, while large customers will be expected to pay at the end of the month following the month of the invoice, so an invoice sent in March 2017 would be settled by 30 April 2017. Large companies do it this way because they may receive several invoices from a supplier, and will want to settle all of them with one payment when they do their computerised cheque run. It would therefore be a good idea for the supplier to have sent a statement at the start of April listing all outstanding invoices. Typically the cheque run would be about the 25th of April. If you give credit and have debts to collect, then you might like to have a discussion with us. Most accountants are also general business advisors as well.