The Board of Ground Rents Income Fund has announced that, on 12 August 2016, it agreed two amendments to the property adviser agreement with Brooks Macdonald Funds Limited (the investment adviser).
At the moment, the adviser collects ‘Consent Fees’ and ‘Notice Fees’ from leaseholders on behalf of the fund. ‘Consent Fees’, which are levied by the freeholder, are typically for permission to amend a specific element of the lease or alter the underlying bricks and mortar of the property in some way. ‘Notice Fees’, which are levied by the freeholder, are usually in regard to the sale or re-mortgage of a property.
They say the volume of Consent Fees, in particular, and the revenues generated from them have increased significantly ahead of expectations. In the 12 months to 30 September 2015, the Fees payable to Ground Rents Income Fund totalled GBP201,629, against a budget of GBP129,000, and in the ten months to 31 July 2016 the Fees totalled GBP317,886 (unaudited) against a budget of GBP190,000.
The Board has agreed to amend the agreement, so that the investment adviser will be paid 20 per cent. of fees received, effective from the start of the current financial year on 1 October 2015, in order to compensate the adviser for the increase in costs incurred due to the higher volume of fees and for the commensurate increase in the adviser’s workload, which was not envisaged when the agreement was entered into.
The Board has also agreed to increase the notice period in the agreement by three months to 12 months, or, in the event that either (a) the entire portfolio of properties owned by Ground Rents Income Fund is disposed of, or (b) a takeover offer (as defined in section 974 of the Companies Act 2006) is made in relation for the fund, then the notice period will be increased to 18 months. This reflects the complexity a management handover would entail due to the large number of properties and tenancies in the portfolio.
GRIO : Ground Rents Income Fund amends fee structure