Ground rent doubling every 10 years

joanne1971

Hi

We are all set to buy a 2 bedroom flat for my mother in law (cash). It is absolutely perfect, ground floor, just around the corner from us, walk in shower, nicely decorated and even furnished.

It is actually owned by Grant Bovey's company so a few in reletively new complex (6 yrs old) have been up for sale recently due to his liquidity probs.

Anyway all progressing nicely until the solicitor informs us she would advise against puschase as the ground rent £350 a year will double every 10 years for the first 50 years. So about £22,000 in 50 years time. She said with this sort of lease the property might not get a mortgage when we come to sell on.


We are likely to been looking at selling within the next 10 years as mother in law is very elderly.

There are about 70 flats in the complex (all with same lease and I know several have sold with mortgages.) Estate agent is basically saying the solicitor is scare mongering as the rise will be accounted for by cost of living increases and although has been raise before with the other flats people have usually gone ahead and mortgages have not been a problem.

What do you think? In the short term it is a disaster if we dont go a head with the sale, she cant manage in her own home and we have already had the property cleared on the basis of her moving into the much smaller flat.

joanne1971

Btw my parents bought their house 44 years ago for £3,500 and it is now worth about £150,000 so I see what he means a bit about cost of lving increases, but it does seem excessive.

I just keep thinking all the others are selling so maybe we are worrying needlessly.

martinsurrey

Doubling every 10 years is equivalent to an annual increase of 7%, so unless your estate agent gets 7% pay increases every year, they don’t know what they are talking about.
You can buy and in 2 years do a statutory lease extension, you will have to pay a fair bit for it, but it will take the ground rent down to £nil (and add 99 years onto the lease).

joanne1971

Hi

Thanks for your reply can you tell me more about what a statutory lease extension means?

joanne1971

Really need some more advice - we need somewhere for mother in law and we need it quick so have to decide by tomorrow what to do.

Biggles

Sounds like the solicitor is trying to put you off for some reason. As Martinsurrey says, just 7%pa would double the rent every 10 years, so any flat might be the same unless they say otherwise.

How come the solicitor 'knows' this but you haven't seen it in the lease? And what sort is 'this sort of lease'??

joanne1971

i have seen the lease. It says £350 doubling on each 10th anniversary for the first fifty years.

The lease is a deed of variation it seems to be between a management company and an investement company BUT all have the same adreess and signatures on the lease.

Mrs_Arcanum

The solicitors maths may be out as I only make it £11,200 in 50 years time. So only a 3.5% annual increase over time.

10 = £700
20 = £1,400
30 = £2,800
40 = £5,600
50 = £11,200

Biggles

Mrs_Arcanum wrote: »

The solicitors maths may be out as I only make it £11,200 in 50 years time. So only a 3.5% annual increase over time.

10 = £700
20 = £1,400
30 = £2,800
40 = £5,600
50 = £11,200

It's £11,200 after 50 years sure enough, but that's around 7.2% annually.

But look on the bright side: after that, it's zero percent for the rest of your life!
;-)

Mrs_Arcanum

Biggles wrote: »

It's £11,200 after 50 years sure enough, but that's around 7.2% annually.

But look on the bright side: after that, it's zero percent for the rest of your life!
;-)

I just halved the 7% quoted earlier (I am not good at percentages)

Richard_Webster

I wouldn't touch it - doubling every 25 yaers maybe - but not ever 10. Lenders may be windy and really it should be down valued to take into account the increases.

If you go for a lease extension remember that part of what you pay for it takes into account these rent increases so the figure you will pay will be very high!