Revised GR terms good?

fussyhumanbeing1

Hi Again, I am negotiating my lease (125 years) for a new flat (first lease, victorian conversion) I'm proposed to exchange contracts on soon.

The initial GR terms were set at - £400 pa doubling every 25 years.

After my bank refused to lend on these terms, they changed it to:

- £400 pa to be reviewed with RPI every 10 years, cannot exceed £1 below the "low rent maximum" currently set out in the housing act, which is currently £1000 but can change I guess.

I am still trying to get them to change the 10 year RPI reviews to 25 year reviews - is this revised deal (at 10 years) a significant improvement for me? (the planned leaseholder)

Thanks

Tom99

[FONT=Verdana, sans-serif]Does not sound any better to me. If you assume inflation at 2.5% pa and £1,000 pa always stays the max under the new deal:

[/FONT] [FONT=Verdana, sans-serif]Total rent to yr 50: Old £30,000; New £34,065[/FONT]
[FONT=Verdana, sans-serif]Total rent to yr 125: Old £310,000; New £109,065[/FONT]
[FONT=Verdana, sans-serif]Net Present Value of ground rent discounted at 6%: Old £9,927; New £9,791

[/FONT] [FONT=Verdana, sans-serif]The NPV of the ground rent is what you would pay under a lease extension to 'buy out' the ground rent.

[/FONT] [FONT=Verdana, sans-serif]So the old and the new look roughly equal at 2.5% inflation but that could well be a conservative RPI figure.

[/FONT] [FONT=Verdana, sans-serif]Assuming you can agree 25 yr reviews to inflation, again inflation 2.5% pa and max rent £1,000 the NPV of new will be £8,708. An improvement but not much of an improvement.

[/FONT] [FONT=Verdana, sans-serif]The problem is that £400 doubling every 25 yrs only equates to 2.81% pa inflation, which is not that much and could easily be less than actual RPI.

[/FONT] [FONT=Verdana, sans-serif]Try reducing the £400 pa to £300 pa, that will be far more valuable.[/FONT]