Ground rent is 1/1000 of capital value after 90 years

bouicca21

Buying out ground rent, statutory lease extension, = much the same thing

This is off the grid silly. I know I am arithmetically challenged, but doubling £300 five times surely means that by 90 years it will be a whopping £9,600. 1/1000 of the value after 90 years is likely to be a reduction. It will cost a fortune to buy out.

I'd run a mile, very very quickly.

shad7

Tom99 wrote: »

[FONT=Verdana, sans-serif]You can buy out the ground rent in two years time if you are bothered about it, or if the vendor has owned the flat for more than two years they can serve a notice now and assign the notice to you to complete the buy out.[/FONT]

I can see how it is possible to buy out 90 years of doubling rent. But would it be possible to buy out next 909 years of 1/1,000 capital value? How do you calculate the premium for such a buy out?

Tom99

shad7 wrote: »

I can see how it is possible to buy out 90 years of doubling rent. But would it be possible to buy out next 909 years of 1/1,000 capital value? How do you calculate the premium for such a buy out?

[FONT=Verdana, sans-serif]Yes that's possible. Your respective surveyors will discuss how to value that income and if you cannot agree then the tribunal will settle the figure for you.[/FONT]
[FONT=Verdana, sans-serif]In terms of the maths and since you say the current value is £600k, I expect it would be viewed as an income of £600pa in perpetuity but deferred 90 years. The present value is likely to be very little.[/FONT]

westernpromise

The present rate is 1/2000th but it's inflating by 4.73% a year until 90 years hence when it fixes at 1/1000th. It's clear that it's going up faster than inflation now but what it sums to in 90 years' time is anyone's guess because it depends what assumption you make about house prices over 90 years.

I do wonder how capital value will be calculated. But income 90 years from now is worth basically nothing today.

Tom99

westernpromise wrote: »

The present rate is 1/2000th but it's inflating by 4.73% a year until 90 years hence when it fixes at 1/1000th. It's clear that it's going up faster than inflation now but what it sums to in 90 years' time is anyone's guess because it depends what assumption you make about house prices over 90 years.

I do wonder how capital value will be calculated. But income 90 years from now is worth basically nothing today.

[FONT=Verdana, sans-serif]The principle is the same as valuing a reversion at the end of a 90 yr lease.[/FONT]
[FONT=Verdana, sans-serif]If the lease had only 90 yrs remaining then there would be a reversion to a property currently worth £600k in 90 yrs time.[/FONT]
[FONT=Verdana, sans-serif]In order to value that reversion you do not try to predict what house prices will be in 90 yrs time but take the current value and defer it at a slightly lower %age rate.[/FONT]
[FONT=Verdana, sans-serif]That is why on a typical lease extension the reversion might be deferred at say 5% whilst the ground rent is deferred at say 7%[/FONT]