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    • D_M_E
    • By D_M_E 17th Mar 17, 1:11 PM
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    D_M_E
    Extortionate Ground Rent clauses in leasehold
    • #1
    • 17th Mar 17, 1:11 PM
    Extortionate Ground Rent clauses in leasehold 17th Mar 17 at 1:11 PM
    For anyone interested, there will be an article/discussion on this on Radio 4's You&Yours programme starting at 12:15pm on Monday 20th (next Monday)

    They will be looking at the issue and what the Government could be doing about it.
Page 1
    • Dawn248
    • By Dawn248 17th Mar 17, 8:35 PM
    • 89 Posts
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    Dawn248
    • #2
    • 17th Mar 17, 8:35 PM
    • #2
    • 17th Mar 17, 8:35 PM
    That's interesting. Wonder if they'll be looking at maintenance charges too? I'm looking to buy a leasehold flat and one worry is if the freeholder can increase the maintenance.ground rent at will. It's already £1000PA.
    • GlamGirlie
    • By GlamGirlie 18th Mar 17, 2:03 PM
    • 417 Posts
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    GlamGirlie
    • #3
    • 18th Mar 17, 2:03 PM
    • #3
    • 18th Mar 17, 2:03 PM
    Yes Dawn, they can. Hence it's always better to either just buy a freehold property, or ensure you can buy a share of the freehold.
    I am employed as a manager in a financial services institution. My views are entirely my own.
    • benjus
    • By benjus 18th Mar 17, 2:33 PM
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    benjus
    • #4
    • 18th Mar 17, 2:33 PM
    • #4
    • 18th Mar 17, 2:33 PM
    That's interesting. Wonder if they'll be looking at maintenance charges too? I'm looking to buy a leasehold flat and one worry is if the freeholder can increase the maintenance.ground rent at will. It's already £1000PA.
    Originally posted by Dawn248
    If enough leaseholders are committed, you can demand the right to manage the property yourselves. You can then set your own service charges and decide how to spend the money. This is more likely to work if the other leaseholders are mostly owner occupiers rather than landlords.
    Let's settle this like gentlemen: armed with heavy sticks
    On a rotating plate, with spikes like Flash Gordon
    And you're Peter Duncan; I gave you fair warning
    • anselld
    • By anselld 18th Mar 17, 8:14 PM
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    anselld
    • #5
    • 18th Mar 17, 8:14 PM
    • #5
    • 18th Mar 17, 8:14 PM
    Yes Dawn, they can. Hence it's always better to either just buy a freehold property, or ensure you can buy a share of the freehold.
    Originally posted by GlamGirlie
    Ground rent cannot be increased at will. It is set in the lease. Furthermore it can be wiped out (at a cost) by seeking a statutory lease extension.

    Maintenance charges must reflect reasonable costs incurred by the freeholder in maintaining the building. If they are unreasonable they can be challenged at the First Tier Tribunal.

    There is a lot of hot air about "extortionate" leasehold charges and probably some freeholders and management companies do try it on. However there is adequate legislation and mechanisms in place if leaseholders wish to protect themselves.

    Difficult to see why the gov should need to intervene further, though I don't suppose that will stop them!
    • D_M_E
    • By D_M_E 18th Mar 17, 8:44 PM
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    D_M_E
    • #6
    • 18th Mar 17, 8:44 PM
    • #6
    • 18th Mar 17, 8:44 PM
    There is growing resentment about clauses which double the ground rent every 10 years and such clauses have been deemed to make the subject property unmortgageable and either difficult to sell or unsellable and I think it is clauses such as these that the Government has plans for future legislation on.

    Management fees are a different matter and, as has been pointed out above, the freeholder can set these at whatever they feel they can get away with.
    • Boler1985
    • By Boler1985 19th Mar 17, 8:14 AM
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    Boler1985
    • #7
    • 19th Mar 17, 8:14 AM
    • #7
    • 19th Mar 17, 8:14 AM
    I sympathise with people who've signed such sale agreements but there's a fundamental doctrine of English contract law that you cannot escape a bad bargain because you didn't bother to read and understand the contract. This is for a very good reason. I doubt government intervention will help in this regard. Solicitors get paid to advise on such onerous clauses.
    • always_sunny
    • By always_sunny 19th Mar 17, 9:31 AM
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    always_sunny
    • #8
    • 19th Mar 17, 9:31 AM
    • #8
    • 19th Mar 17, 9:31 AM
    That's interesting. Wonder if they'll be looking at maintenance charges too? I'm looking to buy a leasehold flat and one worry is if the freeholder can increase the maintenance.ground rent at will. It's already £1000PA.
    Originally posted by Dawn248
    And you're still looking at it?
    Expat with an EU passport
    • eddddy
    • By eddddy 19th Mar 17, 10:22 AM
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    eddddy
    • #9
    • 19th Mar 17, 10:22 AM
    • #9
    • 19th Mar 17, 10:22 AM
    I sympathise with people who've signed such sale agreements but there's a fundamental doctrine of English contract law that you cannot escape a bad bargain because you didn't bother to read and understand the contract. This is for a very good reason. I doubt government intervention will help in this regard. Solicitors get paid to advise on such onerous clauses.
    Originally posted by Boler1985
    The government have intervened massively in the past - through the Landlord and Tenant act etc.

    Legislation has given leaseholders...

    The right to extend leases
    The right to manage
    The right to challenge unreasonable service charges
    The right to a consultation before major works begin
    The right to vary leases in specific circumstances
    etc

    Typically, none of these rights exist in the contracts (leases) that leaseholders have signed.

    So I guess governments have a bit of a history of rescuing leaseholders from bad bargains.
    • always_sunny
    • By always_sunny 19th Mar 17, 10:48 AM
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    always_sunny
    The government have intervened massively in the past - through the Landlord and Tenant act etc.

    Legislation has given leaseholders...

    The right to extend leases
    The right to manage
    The right to challenge unreasonable service charges
    The right to a consultation before major works begin
    The right to vary leases in specific circumstances
    etc

    Typically, none of these rights exist in the contracts (leases) that leaseholders have signed.

    So I guess governments have a bit of a history of rescuing leaseholders from bad bargains.
    Originally posted by eddddy
    In fairness though the government should intervene further to make freeholder not profitable at all cause essentially they are nothing but middle men.
    Expat with an EU passport
    • anselld
    • By anselld 19th Mar 17, 11:05 AM
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    anselld
    In fairness though the government should intervene further to make freeholder not profitable at all cause essentially they are nothing but middle men.
    Originally posted by always_sunny
    Someone has to own, manage and maintain the building in situations where there are multiple properties within a building.

    If fairness, who is going to do that in your non-profit world?
    • davidmcn
    • By davidmcn 19th Mar 17, 11:21 AM
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    davidmcn
    Someone has to own, manage and maintain the building in situations where there are multiple properties within a building.

    If fairness, who is going to do that in your non-profit world?
    Originally posted by anselld
    There isn't a need for the common areas of a building to be in separate ownership, or for that ownership to be regarded as a profitable enterprise in its own right. It would be possible for the owners of the flats to own those areas in common (if anybody bothered to reform the relevant bits of English law), and (if they wish) to engage a management company to administer the maintenance etc on their behalf - obviously that bit requires a profit margin but it can be a transparent management charge on top of actual disbursements.
    • anselld
    • By anselld 19th Mar 17, 11:38 AM
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    anselld
    There isn't a need for the common areas of a building to be in separate ownership, or for that ownership to be regarded as a profitable enterprise in its own right. It would be possible for the owners of the flats to own those areas in common (if anybody bothered to reform the relevant bits of English law), and (if they wish) to engage a management company to administer the maintenance etc on their behalf - obviously that bit requires a profit margin but it can be a transparent management charge on top of actual disbursements.
    Originally posted by davidmcn
    Already possible in most cases under the Leasehold Reform Act 1967 and the Commonhold and Leasehold Reform Act 2002. Right to buy freehold, right to manage, etc, etc.
    • Freecall
    • By Freecall 19th Mar 17, 3:36 PM
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    Freecall
    In fairness though the government should intervene further to make freeholder not profitable at all cause essentially they are nothing but middle men.
    Originally posted by always_sunny
    I don't get the middle men bit at all.

    As the owners of freeholds, our tenants (leaseholders) pay us ground rent. Although it gives a relatively small return it forms part of a balanced investment portfolio.

    Scrap the return on investment and the value of the investment will fall to zero.

    I understand that in some political philosophies ownership of property is considered to be theft but even in your world where no one is allowed to own anything, I don't see how freeholders could be described as 'middle men'.
    • always_sunny
    • By always_sunny 19th Mar 17, 6:18 PM
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    always_sunny
    I don't get the middle men bit at all.

    As the owners of freeholds, our tenants (leaseholders) pay us ground rent. Although it gives a relatively small return it forms part of a balanced investment portfolio.

    Scrap the return on investment and the value of the investment will fall to zero.

    I understand that in some political philosophies ownership of property is considered to be theft but even in your world where no one is allowed to own anything, I don't see how freeholders could be described as 'middle men'.
    Originally posted by Freecall
    What do Freeholders do? What benefit do they add to leaseholders?
    How come beside England and Wales pretty much no other country has them?

    They own the land (I assume) and the property (walls) and they get (with new reforms) peppercorn rent for long time. If there is upkeep required on the premises, they charge leaseholders.

    Freeholders don't really serve any purpose beside collecting small revenue.
    Flats with high ground rent are of course a money machine.
    Expat with an EU passport
    • always_sunny
    • By always_sunny 19th Mar 17, 6:24 PM
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    always_sunny
    Someone has to own, manage and maintain the building in situations where there are multiple properties within a building.

    If fairness, who is going to do that in your non-profit world?
    Originally posted by anselld
    In the rest of the world, larger blocks have independent organisation running the upkeep of the whole building and charge back owners with a clear bills, etc. no need to have leases for x years.
    Owners are also representative and decide because they will foot the bill.

    Their purpose is to keep the building running and pay off their payroll, not to make profit.
    The person who buys the flat should own it!
    Expat with an EU passport
    • davidmcn
    • By davidmcn 19th Mar 17, 7:30 PM
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    davidmcn
    Already possible in most cases under the Leasehold Reform Act 1967 and the Commonhold and Leasehold Reform Act 2002. Right to buy freehold, right to manage, etc, etc.
    Originally posted by anselld
    But still with this cumbersome separate leasehold/freehold structure. And new developments don't (typically) come with the freehold in the first place.
    • Chanes
    • By Chanes 19th Mar 17, 10:57 PM
    • 841 Posts
    • 522 Thanks
    Chanes
    Houses should be sold as Freehold. The new leasehold houses seem to be a licence to print money. I know one person who bought a new house and was asked for £2,500 for permission to build a conservatory by the Freeholder. I think it was a Taylor Wimpey build and they sold off the Leases to an investment company. They enquired about buying the Freehold and after paying for the inquiry they were told £40,000.
    • jbainbridge
    • By jbainbridge 20th Mar 17, 6:45 AM
    • 1,693 Posts
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    jbainbridge
    The current problem seems to be leasehold houses which have excessive ground rent charges ... The owners are now finding that they are unable to sell them.
    • always_sunny
    • By always_sunny 20th Mar 17, 12:13 PM
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    always_sunny
    The current problem seems to be leasehold houses which have excessive ground rent charges ... The owners are now finding that they are unable to sell them.
    Originally posted by jbainbridge
    Flats as well. it's not uncommon to have flats with £300/year GR doubling every 10 or 20 years.
    I went to see a flat (newly converted) a while ago and between GR and SC was £1500/year for 1 bed! Why?
    Expat with an EU passport
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