Ground Rent Charges - Are these increases normal?

luckylouise08

I am just looking over the ground rent charges on the property i have had my offer accepted on. The estate agent told me that the property ground rent is £150 but looking at the papers i have received from the current owner, it states:

Ground Rent:
£150 per annum for first 25 years
£300 per annum for the second 25 years
£900 per annum for the third 25 years
£1200 per annum for the forth 25 years and
£1500 per annum for the remainer of the term

To me the increases seem rather drastic but i am a first time buyer and not sure if i am just being overcautious. Can i have some views please?

flashg67

They do seem huge increases but who knows what £1500 will be worth in 100 years time? I'd suggest that during your likely period of ownership, it's unlikely to be an issue, seeing as it's your first house and I guess you'd probably move within, say 10 years?. Even £300 wouldn't be the end of the world if you decided it was to a long term home.
The terraces where I live had a ground rent of £1 p/a back in the mid 1800's. I guess this provided a nice income for the landowner at the time, but as there was no provision to increase this, most of the lease have been nullified and no longer attract a charge. I guess this leaseholder is thinking a little longer term!

ognum

luckylouise08 wrote: »

I am just looking over the ground rent charges on the property i have had my offer accepted on. The estate agent told me that the property ground rent is £150 but looking at the papers i have received from the current owner, it states:

Ground Rent:
£150 per annum for first 25 years
£300 per annum for the second 25 years
£900 per annum for the third 25 years
£1200 per annum for the forth 25 years and
£1500 per annum for the remainer of the term

To me the increases seem rather drastic but i am a first time buyer and not sure if i am just being overcautious. Can i have some views please?

I have withdrawn from buying properties with escalating ground rent. This is the sign of a greedy freeholder and attempting to extend a lease will be expensive and costly.

Consider who you will sell to when you decide to leave.

anselld

Increase from 150 to 1500 in 100 years equates to an average annual inflation of 2.3% so it is not as drastic as it looks.

If you ever extend via the statutory route ground rent will be eliminated anyway.

maisie_cat

I agree with ognum, it's also so that buying the freehold in the future is expensive because you compensate the freeholder for lost future revenue

eddddy

It's probably the result of a 'cheap' lease extension

The ground rent might affect future saleability and price - it depends on how market opinion of what is an acceptable ground rent evolves.

Had the leaseholder paid more for their lease extension and got the ground rent reduced to zero, it would be a less risky purchase.


(Buying the freehold and/or future lease extensions will definitely be more expensive because of the high ground rent.)

Hoploz

How many years into the lease is it? is the £150 term almost over?

Mortgage companies can be fussy over leases which increase in this way, but in this case it is a set amount on set anniversaries so not too bad. Some leases include an increase linked to the value of the property and these are the ones lenders get most twitchy about.

G_M

Personally I'f be put off by this.

But yes, it is, perhaps not 'normal', but relatively common.