Ground Rent Increase with RPI

tomryan89

Does anyone know if Ground Rent of £350 increasing in line with RPI every 5 years would put of mortgage lenders?

usefulmale

I can't see that it would.

Assuming you mean that after every 5th year, the ground rent will increase by whatever the RPI is at that time, assuming that RPI is 10% every 5th year, after 25 years the ground rent would be £564, after 50 years it would be £908, after 100 years it would be £2355.

Chanes

Leasehold properties also have costs for work done on the property too; I read the Freeholder on a new build estate wanted two thousand pounds just to give permission to a tenant for an extension to be built! I would avoid buying a leasehold property, though the peppercorn ones from many, many years ago wouldn't trouble me, I think.

tomryan89

It's on my flat in London which I am trying to sell. I need to extend the lease in order to sell but worried a ground rent increase every 5 years with RPI will put off my buyer and his mortgage lender.

Riggyman

What are you going to do if it does put them off?

tomryan89

Jump out the window

remembermee

Hang on, the rpi increase, is this something that they want to add to your lease when you extend? Or is this something that was the case when you bought the property?

tomryan89

They want to add it to the lease as I extend it.

Nobody will buy the flat without an extended lease -> so I get an offer to extend lease from freeholder (managing company) -> offer included rent review in line with RPI every 5 years -> solicitor says some mortgage lenders will have s problem with 5 years rent review -> screwed

It seems my only option, as I absolutely have to sell and move, is to see if I can ask the freeholder to increase the time between rent reviews in exchange for paying a higher premium

kingstreet

So far, the only lender to respond to the issue of newbuild leasehold ground rent and its increases is Nationwide and this is its recent policy change;-

New Build Property Lease Terms*

Minimum acceptable lease term on new build properties (including office conversions) is 125 years for flats and 250 years for houses.
Maximum starting ground rent on all new build properties with a leasehold tenure is limited to 0.1% of the property value.

Ground rent must be reasonable at all times during the lease term. For example, ground rent escalation should be linked to RPI (Retail Price Index) or a similar index, and unreasonable multipliers of ground rent will not be permitted, for example doubling every 5, 10 or 15 years.

I've heard nothing about existing properties.

tomryan89

Thanks everyone for taking an interest. This is causing me no end of stress and worry.

This is what is making me worried:

https://www.cml.org.uk/lenders-handbook/englandandwales/question-list/1852/

kingstreet

All I can see in the link is the attitude of YBS/Accord/Chelsea/N&P which is one group and Nationwide/TMW (already posted) which is another, a list of lenders' addresses and 'refer to 1.11A'.

Only Barclays says RPI increases have to be referred (which doesn't necessarily mean refusal) and yours will be RPI every five years AUIU.

Have you looked at 1.11A? If so, what does it say?