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    • Pegasus87
    • By Pegasus87 8th Jul 17, 7:03 PM
    • 2Posts
    • 0Thanks
    Pegasus87
    Escalating Ground Rent and Purchase of Freehold
    • #1
    • 8th Jul 17, 7:03 PM
    Escalating Ground Rent and Purchase of Freehold 8th Jul 17 at 7:03 PM
    Hi,

    I am looking to purchase a property valued at £675,000 but am quite hesitant to proceed after learning of the ground rent provisions in the lease. The relevant provisions are set out below:


    Lease Term: 250 years from 1 June 2000
    Remaining Lease Term: 233 years
    Current Ground Rent: £350 rising to £5,600
    Ground rent Review Mechanism:
    1 June 2000 (during the first 50 years) – Ground rent (GR) payable is £350.00
    From 2050 (during the second 50 years) – GR payable is £750.00
    From 2100 (during the third 50 years) – GR payable is £1,400.00
    From 2150 (during the fourth 50 years)- GR payable is £2,800.00
    From 2200 (during the final 50 years) – GR payable is £5,600.00

    My questions are:

    (1) Do you think that the ground rent is excessive?
    (2) What would be the cost of buying the freehold?


    Thanks!
    Last edited by Pegasus87; 08-07-2017 at 9:19 PM.
Page 1
    • anselld
    • By anselld 8th Jul 17, 7:25 PM
    • 5,253 Posts
    • 4,790 Thanks
    anselld
    • #2
    • 8th Jul 17, 7:25 PM
    • #2
    • 8th Jul 17, 7:25 PM
    Doubling ground rent every 50 years equates to an annual increase of 1.4% pa.
    So the rate of increase is low, however the starting point of £350 is fairly high.

    Purchase cost, who knows? There are various calculators you can try. Can you even buy the freehold on you own?
    • eddddy
    • By eddddy 8th Jul 17, 7:25 PM
    • 4,937 Posts
    • 4,588 Thanks
    eddddy
    • #3
    • 8th Jul 17, 7:25 PM
    • #3
    • 8th Jul 17, 7:25 PM
    Is it a house or a flat?

    Assuming it's a house, as a starting point, you could ask the seller to get a price from the freeholder for buying the freehold.

    (It's likely that the freeholder will propose a ridiculously inflated price for the freehold, but that might work in your favour. It gives you ammunition to negotiate the leasehold price down from £675k.)
    • Pegasus87
    • By Pegasus87 8th Jul 17, 9:21 PM
    • 2 Posts
    • 0 Thanks
    Pegasus87
    • #4
    • 8th Jul 17, 9:21 PM
    • #4
    • 8th Jul 17, 9:21 PM
    Do you think that the ground rent of £350pa for a property valued at £675,000 is excessive for SW London?
    Last edited by Pegasus87; 08-07-2017 at 9:31 PM.
    • anselld
    • By anselld 8th Jul 17, 10:00 PM
    • 5,253 Posts
    • 4,790 Thanks
    anselld
    • #5
    • 8th Jul 17, 10:00 PM
    • #5
    • 8th Jul 17, 10:00 PM
    Do you think that the ground rent of £350pa for a property valued at £675,000 is excessive for SW London?
    Originally posted by Pegasus87
    That is impossible to answer without knowing the property. If the ground rent is high it will devalue the property in relation to the same property with a lower rent. It is a package, you cannot consider ground rent in isolation.
    • da_rule
    • By da_rule 8th Jul 17, 11:02 PM
    • 2,471 Posts
    • 2,200 Thanks
    da_rule
    • #6
    • 8th Jul 17, 11:02 PM
    • #6
    • 8th Jul 17, 11:02 PM
    When the property was valued, what assumptions did the valuer make about the lease? They tend to make a general assumption rather than actually investigate the lease themselves. Also, if it is a house, did they realise it was leasehold?

    The process and cost for buying the freehold (for a house) or a share of the freehold (for a flat) depends on whether you can negotiate an informal agreement with the freeholder or go down the statutory route.
    • eddddy
    • By eddddy 9th Jul 17, 11:24 AM
    • 4,937 Posts
    • 4,588 Thanks
    eddddy
    • #7
    • 9th Jul 17, 11:24 AM
    • #7
    • 9th Jul 17, 11:24 AM
    Do you think that the ground rent of £350pa for a property valued at £675,000 is excessive for SW London?
    Originally posted by Pegasus87
    Assuming it's a house, as I suggested, the best way to measure this is to find the cost of buying the freehold.

    If, for example, the cost of buying the freehold is £15k, you can then decide whether £690k for that freehold house is a good price.
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