Help needed on doubling ground rent

DoaM

Sandy1983 wrote: »

your sums are once per 15 years its actually each year, i've done the math on the last 15 years to demonstrate.

0yr: £150 x15
15yr: £300 x15
30yr: £600 x15
45yr: £1,200 x15
60yr: £2,400 x15
75yr: £4,800 x15
90yr: £9,600 x15
105yr: £19,200 x15
120yr: £38,400 x15 = 576000

I see what you've done ... you're totalling expenditure for each 15 year cycle.

jonsmile

Lokolo wrote: »

That's not right. Your math is wrong.

Doing the maths - it hits £1m overall total at about year 131 and you don't start paying £1m plus a year until around year 195..

Years Total for 15 years Cumulative total
0 2,250.00 2,250.00
15 4,500.00 6,750.00
30 9,000.00 15,750.00
45 18,000.00 33,750.00
60 36,000.00 69,750.00
75 72,000.00 141,750.00
90 144,000.00 285,750.00
105 288,000.00 573,750.00
120 576,000.00 1,149,750.00
135 1,152,000.00 2,301,750.00
150 2,304,000.00 4,605,750.00
165 4,608,000.00 9,213,750.00
180 9,216,000.00 18,429,750.00

AnotherJoe

I suspect the mere fact of the word "doubling" in the lease, will put off many buyers much more than whatever the actuality of the time period and real costs will be is. It may even put off buyers who wouldn't themselves be put off because they can do the maths, but might think they will have an issue with buyers who cant, when they sell.

So, if it was me i would look to spend now to get that changed because that sort of cost may come off the flats value anyway.

cattie

Really the only people you need for advice are here-
http://www.lease-advice.org/

It's a government funded agency helping with all areas of residential leaseholds.

If you believe your ground rent is punitive, then your solicitor should really have warned you of this before completion.

Malthusian

AnotherJoe wrote: »

I suspect the mere fact of the word "doubling" in the lease, will put off many buyers much more than whatever the actuality of the time period and real costs will be is. It may even put off buyers who wouldn't themselves be put off because they can do the maths, but might think they will have an issue with buyers who cant, when they sell.

So if the contract instead said "Ground rent will escalate at 4.75% per annum", which is basically the same thing as doubling every 15 years*, the flat would be more valuable even though the terms are exactly the same?

*except of course that instead of paying £150 for 15 years, you pay £157 in year 2, £165 in year 2, etc etc, so it does actually cost a bit more

hazyjo

Sandy1983 wrote: »

part of the lease agreement was the ground rent to double every 15 years starting at £150.

How does that mean the ground rent will be multiplied by 15 every year, or 15 years, or whatever it is? I'm very confused! Why/how is AFF8879 wrong?

GreatApe

Its not a big problem if wage inflation is about 4.5 - 5.0 % per year

It is a small and possibly big problem no matter how you look at it.
Even if the £150 annual ground rent stays the same in real terms (but goes up in nominal terms) that flat will be worth less than an identical flat where the annual ground rent stays at £150 a year (reducing in real terms).

These doubling ground rent leases can be a problem if inflation stays low for long periods. If we had zero inflation for 30 years (which is roughly where japan is now) then the real terms cost of the ground rent goes to £600 per year. A buyer at that point should factor in that in 30 years ago assuming zero inflation the ground rent would be £2,400 per year.

£2,400 per year vs £150 per year now is a big difference. The flat with the £2,400 per year ground rent would be worth £40,000 less to me than the identical flat next door with a £150 per year ground rent.

DoaM

Where are you getting £40k from? Are you really saying that if both flats were valued (nominally) at £100k you'd only offer £60k for the one with escalating ground rent?

AnotherJoe

Malthusian wrote: »

So if the contract instead said "Ground rent will escalate at 4.75% per annum", which is basically the same thing as doubling every 15 years*, the flat would be more valuable even though the terms are exactly the same?

*except of course that instead of paying £150 for 15 years, you pay £157 in year 2, £165 in year 2, etc etc, so it does actually cost a bit more

Yep, probably. Is that logical? No.

Is it logical that some people (who use a mobile) wont buy a house "near" a mobile phone mast despite the fact that the radiation from their phone by their ear is probably a 10,000x stronger? Or that a phone mast "near" to you will decrease the radiation from the phone by your ear by several times? Nope ............... but it happens.