House buying + ground rent above £250

Davidbrentssister

Hi, I just wanted to add I am having the same issue. My estate agent said he'd never heard of a lease being classed as an assured tenancy if the ground rent was over £250 a year. I reckon he thought I made it up! But now I realise it's not just me.

The ground rent is £370 a year and has risen £70 in 3 years (which sounds a high % to me but I am not an expert). My solicitor has asked for a deed of variation to cap the rent so hope that is agreed. Otherwise I guess the flat might be unmortgagable I am not sure.

tomintoul91

Hi - just posting as I am in a similar situation. Ground rent of £500 p/a which doubles to £1,000 in 25 years.

Bank was notified of this early in the process (2 months ago) and now just days before we are looking to exchange have said that they are not happy. Solicitors are looking at indemnity insurance to see if this will placate the bank (similar to themax87).

Anyone in this thread had any positive outcomes?

SeekingSomeAdvice

Am I missing something - the banks should have been clearer earlier in the process, but if they are not happy because of a risky clause around ground rent surely they've saved you time and money in the long run by not allowing these loans? Frustrating, but better than not being able to shift the flats in 10 years time.

Has anyone ever managed to get ground rent increases amended?

tomintoul91

It's the more nebulous assured shorthold tenancy risk that the bank looks to be concerned with -that, under current law, the lease would become an AST after 25 years which would give the freeholder significantly more power to forfeit the property and the mortgage lender less protection. The Government have recognised this as a legal loophole in need of change but so far have neglected to do anything.

Fully understand the bank's position here - clearly they need to protect their security. Am hoping that indemnity insurance may give them comfort but not heard any success stories yet...

eddddy

tomintoul91 wrote: »

It's the more nebulous assured shorthold tenancy risk that the bank looks to be concerned with -that, under current law, the lease would become an AST after 25 years which would give the freeholder significantly more power to forfeit the property and the mortgage lender less protection. The Government have recognised this as a legal loophole in need of change but so far have neglected to do anything.

Fully understand the bank's position here - clearly they need to protect their security. Am hoping that indemnity insurance may give them comfort but not heard any success stories yet...

What type of indemnity insurance?

Essentially, the risk is that if you don't pay your ground rent, the freeholder will end your lease (and take back your flat).

Is there an indemnity insurance policy that would pay you a few hundred thousand, if your flat was repossessed because you didn't pay the ground rent?

Tom99

eddddy wrote: »

Is there an indemnity insurance policy that would pay you a few hundred thousand, if your flat was repossessed because you didn't pay the ground rent?

Seems so, but the only indemnify the lender, purchaser would lose out:

https://gcs-title.co.uk/instant-issue/policies-glance/forfeiture-lease/
https://cli.co.uk/news/1059

wjchoihk

This must be pro

tomintoul91

Just FYI - my solicitor found a forfeiture of lease insurance policy for a one-off premium of £95 which appeased the lender. Clearly they do not view it as a huge risk (giving likelihood of legislative change).

millsale

Hi Tomintou91,

Can you send details of the policy please? Also, who was your lender?

Thanks,

Quickcheck

Hi Tomintou91,

Who did you purchase your Indemnity Policy from?

Thanks