Ground rent doubling every 10 years

joanne1971

Really would apreciate your thoughts?

kmmr

Your idea sounds possible, but how have you come to an estimated cost of £10,000. I would expect it would be much much more. The cost of removing the ground rent would be (presumably) the present value of all the future payments. Otherwise, why would a bankrupt company sell off a valuation set of future cash flows.

If you can't resolve it, I wouldn't buy the flat. Even £700 a year is a high-ish ground rent. I think by the time to get to £2800 I wouldn't touch it.

Ulfar

I agree with your idea, but you want them to start the process on the undertaking that you will finish the Leasehold extension with the onerous service charges removing.

I would want this information in writing laying out all the costs you will have to pay.

You also still haven't mentioned how much the service charges are, given the rip off level of ground rent I would be looking at the service charge arrangements very closely.

Your conveyancer sounds like they know what they are doing, listen to their advice.

kmmr

My estimate of the costs of extension is about £111k. Based on 125 year lease, with 119 years to go, and assuming a 4% discount rate. That's quite a generous rate (it should reflect current interest rates), so if they used 3% it move to £198k.

THAT is why the flat is cheaper!

Edited to add: If I do the calculation with £350 unchanging, at 4% discount rate, then the cost is about £9000, which (plus legals) is about what you are quoting. So I suspect your calculator is not adjusting for the doubling ground rent.

joanne1971

Service charge is £120 a month. Includes buildings insurance so seems high but not silly money.

joanne1971

Omg kmmr that is huge. I have looked at an online calculator and talked briefly to a surveyor, I hope you are wrong!!!! I am just thinking that if veritas is owned by the bank surely money now is better than long term waitng around.

joanne1971

I think the current lease is 99 years, so 94 to go.

kmmr

joanne1971 wrote: »

Omg kmmr that is huge. I have looked at an online calculator and talked briefly to a surveyor, I hope you are wrong!!!! I am just thinking that if veritas is owned by the bank surely money now is better than long term waitng around.

Being someone who works in the world of finance, I can tell you they will wait! If they wanted the cash upfront, there are other people who will buy it (such as insurance companies, who have long liabilities to match this kind of asset).

So yes, they'd love the cash upfront, but not a tiny amount. They will want enough to re-invest in a way that gets a similar return.

for 94 years remaining the costs would be £102k at 4% discount factor. Reducing the number of years at the end has a small impact, as they are worth very little now.

kmmr

In fact, if the company is in bankruptcy, then they may not be allowed to sell of such a valuable asset cheaply.

And just to be clear, you would not get a lease extension for that money - you would be just extinguishing the current ground rent.

I know it sounds a lot, but think if someone offered you that level of income for 94 years - or £10k now, what would you accept? Income for life, or a non-life changing amount of money. The income stream is a valuable asset for someone

joanne1971

So do you think the intention is to sell these flats on to a compny rather than individuals.

I understand that Grant Bovey's Imagine homes a sub sid of Veritas owned the whole block (about 70 flats) and they are selling each flat off as the tenents in them leave. There are are about 4 currently up for sale with the agent - I believe they have all now sold - all have the same lease - so dont know if the agent is bluffing.