Unfair ground rent increase - now can't sell!

Mike_Brighton

Hello,

This is my first post so apologies if this is in the wrong section.

My 2 bed flat was on the market for about 4 weeks then we got a cash buyer who loved it and put an offer in. Our offer on a house was accepted so we are keen to sell the flat - no problems so far.

The buyers solicitor has got back to mine saying that when I extended my lease back in 2001 to 99 years there was a clause put in the extension by the flat's feeholders that said that the new yearly ground rent (for whoever I sell it to) would be 1 quarter of a percent of what I sell it for. I've sold for £190,000 so the new ground rent is £475 per year - up from just £100!! As this quarter percent rule applies every time it's sold on it means that whoever buys the flat will also have a hard time selling it on if the value of the flat continues to increase.

Well now the buyer's pulled out and we're stuck with what the solicitor calls a 'very hard to sell property' which will have a combined ground rent/service charge of about £1700 per year!!

The solicitors that I was using back in 2001 to extend the lease didn't mention a thing to me about this clause. I've got a copy of the lease extension and as it's not written in plain english I still wouldn't know exactley what it meant!

What can I do? I signed the lease extension not knowing that this grossly unfair clause was put in it. Could I try to get the Freeholders to amend the clause? Can my solicitor do anything at all? Is the solicitor from 2001 at all liable?

I feel that I've been put in a catch 22 position where if I hadn't extended the lease (was 63 years when I moved in) then it would be hard to sell but it's equally as hard to sell now!!

Any help appreciated as our dream home is slipping away from us

silvercar

You could ask the freeholder for a price to change the clause to something reasonable. It would mean you taking a financial hit to do it, but at least it would make the place sellable.

notisis

You may also have a comeback against the original solicitor who dealt with the lease extension for you because he didn't explain this particular clause or completely missed it - have a word with your current solicitor as to what he recommends. Is the original solicitor still around? It may well be possible to bring a claim - you can always contact the Law Society/Solicitors Regulation Authority to check and notify them of the problem. Could it possiby also be classed as an unfair contract term and not entirely enforceable? Not sure, but your current solicitor may be able to advise here. I do think you have a case though as no one would have agreed to this if they'd realised what the clause actually meant. However, you don't want costly litigation so some form of compromise in the meantime is preferable if your solicitor can negotiate something with the freeholder. Best of luck.

notisis

Just had another thought - do you have legal expenses/help line with your contents insurance? If so, give them a ring as they may be able to give a bit of advice.

Fire_Fox

Mike_Brighton wrote: »

The buyers solicitor has got back to mine saying that when I extended my lease back in 2001 to 99 years there was a clause put in the extension by the flat's feeholders that said that the new yearly ground rent (for whoever I sell it to) would be 1 quarter of a percent of what I sell it for. I've sold for £190,000 so the new ground rent is £475 per year - up from just £100!! As this quarter percent rule applies every time it's sold on it means that whoever buys the flat will also have a hard time selling it on if the value of the flat continues to increase.

Well now the buyer's pulled out and we're stuck with what the solicitor calls a 'very hard to sell property' which will have a combined ground rent/service charge of about £1700 per year!!

The solicitors that I was using back in 2001 to extend the lease didn't mention a thing to me about this clause. I've got a copy of the lease extension and as it's not written in plain english I still wouldn't know exactley what it meant!

What can I do? I signed the lease extension not knowing that this grossly unfair clause was put in it. Could I try to get the Freeholders to amend the clause? Can my solicitor do anything at all? Is the solicitor from 2001 at all liable?

I feel that I've been put in a catch 22 position where if I hadn't extended the lease (was 63 years when I moved in) then it would be hard to sell but it's equally as hard to sell now!!

Any help appreciated as our dream home is slipping away from us

You may need to put in a complaint about your original solicitor, I would discuss this with your current conveyancing solicitor.

Normally when you extend the lease the ground rent becomes 'peppercorn'. I don't know whether that was the case in 2001 but I know a man who does! Speak to the LEASE telephone advice line (free and excellent) and see if it is possible to retrospectively go to a Leasehold Valuation Tribunal and enforce a change to your long lease on the grounds the clause is unfair or unlawful.


ETA: Looks like the term may not be lawful :j Not sure why you extended your lease back to 99 years instead of adding 90 years, there is a chance you may have to go through the extension procese again to get rid of the unfair clause.

"The right provided by the 1993 Leasehold Reform Act (as amended) is for the grant of a new lease for a term of 90 years, plus the present unexpired term, all at a peppercorn rent (that is, rent free)."
http://www.lease-advice.org/publications/documents/document.asp?item=8


"Variation of Leases (Sections 35-40, Landlord and Tenant Act 1987)

A lease is a contract between the landlord and a tenant. No matter how unsatisfactory the terms may seem, none of the parties to the lease may vary the terms unilaterally. The consent of every party to the lease is required to vary it. Otherwise, the terms of a lease may only be varied by order of the LVT.

Variation of single leases (flats)
Any party to a long lease of a flat may make an application for it to be varied. The grounds for the application to the LVT to vary a single lease are that the terms of the lease fail to make satisfactory provision in certain areas. These are:

• for the recovery of expenditure from one party where it has been incurred on his behalf by another or for his benefit or the benefit of others including him; and
• any other matter to be included in the Regulations."

http://www.lease-advice.org/publications/documents/document.asp?item=18

If your conveyancing solicitor is not familiar with leasehold disputes and the process of an LVT you may wish to appoint someone else to act on your behalf. LVTs are set up to be user-friendly so you don't need legal representation throughout, but it's good to at least have the advice of a professional.

Mike_Brighton

I've read a bit about the 'peppercorn rent'. Does that apply to most flats then?

Thanks for all your replies folks. I'll speak to my solicitor on Monday and see where I stand. I'm certainly not happy with the original solicitor either so will see where I can go on that basis.

SouthCoast

A new one on me. but there are some very sharp players in the Brighton property market.

Speak to your solicitor.

Mike_Brighton

I'd say more con artists!

Seriously, what some of these Freeholders do might be within the law but it's very devious and sneaky.

Fire_Fox

Mike_Brighton wrote: »

I've read a bit about the 'peppercorn rent'. Does that apply to most flats then?

You need to read the whole of those two articles on the LEASE website for yourself, it is an absolute mine of information. It may be the 'peppercorn rent' only applies if you extended your lease under the Leasehold Reform Act, I don't know whether you extending back to 99 years instead of by an extra 90 years is significant. I would suggest you run through all the documents from the extension, see your solicitor served notice as per the legislation.

You will need to get your own head around your rights and what an LVT is and does before you take any action - if you then know more that your current solicitor (sounds like you will) you need a new solicitor. That isn't an insult to your current one, my experience - veteran of a three year service charge dispute - is that few solicitors specialise in this area of law and that many freeholders and management companies are woefully ill informed.

SouthCoast

Mike_Brighton wrote: »

I'd say more con artists!

Seriously, what some of these Freeholders do might be within the law but it's very devious and sneaky.

Nicholas made his money in the Brighton property market.

Read more here:

http://en.wikipedia.org/wiki/Nicholas_van_Hoogstraten