Deed of Variation .. Ground Rent, Shall I Walk

jaqui59

Hi everyone ...

I am in the process of purchasing a Leasehold Flat and my Solicitor has brought something to my attention which he says needs careful consideration.

This is what he has written to me ....

"Apparently future ground rent is not a fixed and known sum until each 25th anniversary and that any future lender might have an issue with this type of arrangement and could refuse to lend or insist that the rent review clause is amended. A Deed varying in the terms of the Lease could be refused by the Landlord (as the Landlord would usually want all of the Leases to be on similar terms) or the Landlord could charge a premium and legal costs for agreeing to a Deed of Variation to vary the future Ground Rent"

Also, it appears that the Ground Rent is due to double every 25 years ... This year is its 25th Anniversary and it will be going up to £350.00.

Its solely up to me on this one, as I don't have to get a mortgage, but the thought of possibly not being able to sell it in the future because of this problem is making me think I should walk away.

Im finding this a very difficult decision to make, and any opinions would be really appreciated )

happycamel_2

I'd say never buy leasehold, either own it properly with freehold or rent.

zzzLazyDaisy

I don't know where you live, but in England it is very unusual to find a flat that is not leasehold.

jaqui59

Thankyou ...

I would like to buy freehold, but they are always out of my price range, and not really in areas I would like to live in.

GDB2222

It's becoming more common for the ground rent to rise in line with inflation. What increase provision is actually specified in your lease?

martinsurrey

jaqui59 wrote: »

Hi everyone ...

I am in the process of purchasing a Leasehold Flat and my Solicitor has brought something to my attention which he says needs careful consideration.

This is what he has written to me ....

"Apparently future ground rent is not a fixed and known sum until each 25th anniversary and that any future lender might have an issue with this type of arrangement and could refuse to lend or insist that the rent review clause is amended. A Deed varying in the terms of the Lease could be refused by the Landlord (as the Landlord would usually want all of the Leases to be on similar terms) or the Landlord could charge a premium and legal costs for agreeing to a Deed of Variation to vary the future Ground Rent"

Also, it appears that the Ground Rent is due to double every 25 years ... This year is its 25th Anniversary and it will be going up to £350.00.

Its solely up to me on this one, as I don't have to get a mortgage, but the thought of possibly not being able to sell it in the future because of this problem is making me think I should walk away.

Im finding this a very difficult decision to make, and any opinions would be really appreciated )

Use this as a point to get a price reduction, buy it, then in 2 years do a statutory lease extension (you will have to pay for it).

This will reduce ALL future ground rent to peppercorn (£nil) and extend the lease by a further 90 years, resale should then be a lot easier.

jaqui59

martinsurrey wrote: »

Use this as a point to get a price reduction, buy it, then in 2 years do a statutory lease extension (you will have to pay for it).

This will reduce ALL future ground rent to peppercorn (£nil) and extend the lease by a further 90 years, resale should then be a lot easier.

Thankyou ...

So, obtaining a Lease Extension means the ground rent will be a peppercorn forever? Or will it be reviewed again in 25 years?

tim123456789

Your post is confusing:

you say that the GR is not known until every 25th anniversary,

but then you say it doubles every 25 years

which is it?

tim

GDB2222

tim123456789 wrote: »

Your post is confusing:

you say that the GR is not known until every 25th anniversary,

but then you say it doubles every 25 years

which is it?

tim

I already asked that question, but the OP has not answered/doesn't know.

Besides that, the cost of extending the lease will take into account whatever the lease says about ground rent increases.

Some people are hard to help.

jaqui59

Im not hard to help ... Honest ) Im just out of my depth and trying very hard to understand. Maybe I shouldn't have started the thread if I couldn't fully understand any answers given.

How I simply see it, is that on this 25th Anniversary the Ground Rent has doubled, but as future ground rents are not a fixed or known sum, who knows what will happen on the next Anniversary, and that I am unhappy with and will probably decide not to purchase.

My Solicitor has informed me that this arrangement is indeed a peculiar one, and he will be calling the Landlord of the block tomorrow to see if anything can be done.

GDB2222

jaqui59 wrote: »

Im not hard to help ... Honest ) Im just out of my depth and trying very hard to understand. Maybe I shouldn't have started the thread if I couldn't fully understand any answers given.

How I simply see it, is that on this 25th Anniversary the Ground Rent has doubled, but as future ground rents are not a fixed or known sum, who knows what will happen on the next Anniversary, and that I am unhappy with and will probably decide not to purchase.

My Solicitor has informed me that this arrangement is indeed a peculiar one, and he will be calling the Landlord of the block tomorrow to see if anything can be done.

There *has* to be some formula in the lease to determine the ground rent. It can't simply be up to the freeholder to dream up a figure every 25 years. If it were left up to the freeholder, he could make it £1 billion a year, say, so the flat would have no value.

So, you need to know from your solicitor exactly what the lease does say about the ground rent formula. My guess is that the figure will either double again in 25 years time (which is not too bad, given there's likely to be inflation over the next 25 years) or it will be linked to the Retail Prices Index (which again is not a big problem for you).

But it's pointless guessing, isn't it?