Ground rent doubling every 10 years

joanne1971

kmmr but that all works on the basis that they will sell it. We have cash so can choose to buy or not, our solicitor is telling us no one will be able to get a mortgage on those terms. Which is basically our problem - we can take a loss to a certain extent but need to be able to sell once mil passes on.

kmmr

The freehold is different to the leasehold. Does someone own the leasehold now?

It may be slightly different if they the leaseholder and the freeholder are the same person.

kmmr

This is how I would think it works:

Builder builds his houses. This costs a lot of money, and he has borrowed a lot to do the build. So at the end (or even during the build) he contacts Veritas and offers them the ground rental income/the freehold.

Veritas buys all the ground rents/freehold, at say, £80k per lease. They would work out the current value the same way I did, although they would get a bulk discount, and be a bit more sophisticated in the calculation.

So £80k x 70 leases - £6.4m. Builder is quids in! He can then take his time building the rest of the houses, or renting them out, or slowly selling them off. Or paying off the massive loan he took out to do the building work.

The thing is, at this stage Veritas has paid a lot for the ground rent income streams. Why would they take a huge discount so soon?

However, if Grant Bovey actually own the freehold, then no-one has paid money for it, so they may agree to extinguish it to sell the property now. The place is largely unsellable with that ground rent in place, so if the freeholder is Grant Bovey, then they may need to take a hit. However, they would presumably then increase the house price to reflect that.

Sorry if that is complex. There is a big industry in buying and selling ground rents, insurance companies, trusts etc are looking for nice safe secured long term cash flows.

joanne1971

Ok, Iam not sure about these terms. but I'll tell you what I know.

i have lived around here all my life and the land was owned by Silcocks - who were a travelling fair.

As far as I know they sold it to Woodgate Place which was the management company that built the flats and several 4/5 bed homes on the plot.

The houses were sold freehold, I think.

The flats leashold.

The houses and flats were build in 2006.

The orginal ground rent was £120.

The deed of variation to the lease was from 2007 putting the rent up to £350 with the doubling clause.

The deed was between imagine homes, Woodgate place and Veritas investments. All companies involved had the same address and all the signatures on the deed of variation are that same.

So basically I assume all these companies have the same ownership and now have all gone bust. But iiam not sure if they have the freehold or just leasehold. I dont undertand the system enough.

joanne1971

Just want to say kmmr thanks you for your advice and taking the time to reply - i really, really appreciate it.

kmmr

joanne1971 wrote: »

The houses and flats were build in 2006.

The orginal ground rent was £120.

The deed of variation to the lease was from 2007 putting the rent up to £350 with the doubling clause.

OK, so presumably this is when the freehold was sold.

joanne1971 wrote: »

The deed was between imagine homes, Woodgate place and Veritas investments. All companies involved had the same address and all the signatures on the deed of variation are that same.

Which would be the case, as no leaseholder would agree to these terms. That doesn't mean it's illegal or immoral. The owners have sort of split the value of the flat. Part of the value of the flat has been changed to an income stream, and is owned by Veritas.

Now the builder can sell the lease to you for a slightly reduced price, and still continue to get a decent income from the property forever. Or, as mentioned above, more likely he sold it for money at the time to get some cash now - and someone else gets the income stream.

Does that make sense?! I am terrible at explaining things.

joanne1971 wrote: »

So basically I assume all these companies have the same ownership and now have all gone bust. But iiam not sure if they have the freehold or just leasehold. I dont undertand the system enough.

When a company goes bust, the assets are then sold to repay debts. So the assets still exist, and the administrator has a duty to try and get as much money, in a timely manner, as possible to pay the debts.

kmmr

The things is, from Veritas's point of view - the owner of the lease HAS to keep paying the ground rent.

Veritas don't care whether the lease is sold from Grant Bovey to you. If you don't buy it, Grant Bovey has to pay the ground rent - so for the moment they have an income stream that is not dependant on you buying the lease. Grant Bovey must be paying it now, and whoever owns the lease has to keep paying.

Veritas don't care who owns the lease. If whoever owns it stops paying the rent, then they reclaim it (after a long and difficult process, but possible). A fantastic secured long term investment.

p.s. feel free to click the thanks button! It's does wonders for my ego.

joanne1971

If we go back to the house price - I think the price of the flat is too cheap (well would have done before i knew of the ground rent situation). After looking at other flats today, the only one similar (and not even as nice and for our puposes not as close to us) was up for sale at £119,000. I have to say over priced, so that make me even more realise what a bargin (but obviopusly not with the ground rate issue) the flat is.

kmmr

joanne1971 wrote: »

Hi

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.

I would suspect that only a few have the change made in 2007. But you can check both the statements above.

You'd have to spend a fair bit of time on the land registry site, but for each flat you can download the summary of the freehold information. That lists the rent (I think!!). If they are all owned by the same freehold, lots of this may be on the same document.

If you want, PM me the postcode and I will see if I can work it out. Lets see if there really have been mortgages on flats with this lease amendment! Or... and this would be a shock... the EA could be talking out his ...:eek:

joanne1971

btw how do i press the the thanks button? As i really want to do it but dont know where it is. It says in my bit i have thanked people b4 but no idea how!

Back to grant bovey - as i undertand it he owns/ owned imagine homes, woodgate place ane veritas so he is ust paying himself presumably.