Ground Rent Doubling Buyout

eddddy

This sounds a bit like Taylor Wimpey's 'Ground Rent Review Assistance Scheme'.

Did the seller buy directly from a developer (and was it Taylor Wimpey)?

TW are voluntarily converting leases from 10 year Doubling Gound Rents, to leases which increase with RPI (inflation).

But their promotional details suggest that they are doing it at no cost (i.e. not £11k) - apart from legal fees.

See: https://www.taylorwimpey.co.uk/leaseholdfaq

Also, TW's voluntary deal is only available if the person that bought the property directly from TW still owns it. Not to subsequent owners.

Tom99 wrote: »

If you use a 6% discount rate to value the ground rent (which might be a typical rate used in lease extensions) the ground rent is worth £1.1bn, hence £11,000 is a bargain.

If it's a TW lease, typically the ground rent only doubles every 10 years for the first 50 years. (So a lot less bad than suggested here.)

But probably still unmortgageable, and to be avoided - without the 'Ground Rent buy-out'.

Tom99

eddddy wrote: »

If it's a TW lease, typically the ground rent only doubles every 10 years for the first 50 years. (So a lot less bad than suggested here.)

[FONT=Verdana, sans-serif]Yes it certainly would, the rent would be capped at £9,600pa and the present value at 6% would be c£24k rather then £1.1bn![/FONT]

anon_private

As far as I know it has nothing to do with TW. I think that the building was constructed about nine-years ago by Explore Living (Laing O'Rouke). I don't know if the ground rent is capped at fifty years.


I agree that without the ground rent buyout it would not be a good purchase, because, in the event of a sale, I would probably need to find a cash buyer, or be lucky that the purchaser had a mortgage secured with a company that does not consider a doubling of ground rent every ten years a problem.



Do we agree that if the overall price is competitive, the lease length being 989y, and the ground rent buyout is in place (I would check this with the solicitor), then the flat is a good purchase.


I don't have a financial background so I found the numbers confusing.


Regards


Ps. '[FONT=Verdana, sans-serif]the ground rent will be very expensive to buy out.' It will cost £11,000
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Tom99

anon_private wrote: »

Do we agree that if the overall price is competitive, the lease length being 989y, and the ground rent buyout is in place (I would check this with the solicitor), then the flat is a good purchase.

[FONT=Verdana, sans-serif]A 989yr lease at a ground rent of £300pa rising in line with inflation every 10 yrs is probably acceptable and unlikely to put a future purchaser off or call for a discount. Its not the best you could hope for, that would be £0 ground rent, but you could achieve that by extending the lease after 2 years if you wanted to.[/FONT]
[FONT=Verdana, sans-serif]As to whether the price you are paying is correct, that will depend on the local market and I don't think anyone could comment on that unless you provide a link to the property advert.[/FONT]
[FONT=Verdana, sans-serif]Forget the £11,000, you are not paying that and focus on the total price you are paying for the flat. [/FONT]

anon_private

I agree, I will concentrate on the total price.


[FONT=Verdana, sans-serif] '£0 ground rent, but you could achieve that by extending the lease after 2 years if you wanted to.'[/FONT]
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[FONT=Verdana, sans-serif]That of course would cost money.[/FONT]
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[FONT=Verdana, sans-serif]After the first year of the lease extension, would ground rent charges be introduced. If so, these could not double because of the buyout.[/FONT]
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[FONT=Verdana, sans-serif]These are thoughts after two years[/FONT]
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[FONT=Verdana, sans-serif]Ps I have judged the price of the flat in comparison to similar flats in the block (large building - don't know how many have bought out)
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Tom99

[FONT=Verdana, sans-serif]After owning the flat for 2 years you can use the statutory lease extension process to extend the lease by another 90 years and reduce the ground rent to £0pa for the whole of the term.[/FONT]
[FONT=Verdana, sans-serif]The 90yr extra term is not worth anything and would not form part of the cost, but reducing the ground rent to £0pa would come at a cost which is negotiated with the freeholder or if you can't agree, fixed by the Tribunal.[/FONT]
[FONT=Verdana, sans-serif]You would also have to pay both your and the freeholders surveyors and legal fees so its best to take some advice in two years time to see whether the total cost will be worth it.[/FONT]

anon_private

Thanks to all for the information.


Regards