Ground rent increase every 5 years linked to RPI

the_usher

Hello,

I am in the process of buying a flat. The seller has just finished negotiating with the landlord to extend the lease as it had run to below 50 years. With the new lease the ground rent will start at £250 (value of flat is £200,000) with increases every 5 years in line with RPI.

Does anyone know much about this type of lease, specifically if having the increases linked to RPI is a bad thing?

Thanks!

benjus

The alternatives are usually having it linked to the value of the property (which will probably rise faster than RPI over the long term) or having it increase by a fixed amount. RPI is probably the lesser evil. Although if the seller had extended the lease under the statutory process, it would be at a peppercorn rent. Do you know why this was not done?

the_usher

Thanks for the reply.
I don't know the answer to that. Please can you explain what the difference is between the statutory process and the way they have extended the lease?

benjus

the_usher wrote: »

Thanks for the reply.
I don't know the answer to that. Please can you explain what the difference is between the statutory process and the way they have extended the lease?

The Leasehold Reform, Housing and Urban Development Act 1993 gives leaseholders the legal right to extend their lease by 90 years with no ground rent if they meet certain criteria; the landlord (usually the freeholder) cannot refuse the extension if they go through this process. Alternatively the leaseholder can negotiate with the landlord under their own terms to extend the lease. This could be because the leaseholder doesn't meet the criteria to extend through the Act, or because the landlord is offering better terms than the Act.

See http://www.lease-advice.org/information/faqs/#LeaseExtension