Ground Rent increases every 21 years. HELP

jonnygee2

[QUOTE
]2023 £220,000 6 £1,320,000
2044 £345,714 6 £2,074,286
2065 £543,265 6 £3,259,592 [/QUOTE]

Not sure where you managed to get the future values of the property from?

You can look at the percentage rise in the last 21 years here; https://www.nationwide.co.uk/about/house-price-index/house-price-calculator

But that doesn't actually tell you what will happen in 60 years time. In some areas, prices have risen 440% in 21 years and therefore it is obviously possible the same will happen to your property in between, say, 2023 and 2044 - and if I was a buyer that's what I would be looking at.

SmashedAvacado

davidmcn wrote: »

Are people here expecting the ground rent to decrease in real terms? I don't see anything unduly onerous about it being indexed so it remains (at most) roughly 0.09% of the value of the leasehold, which is all that the clause seems to do.

The "scandal" is about those where the ground rent increases in ways which are exponential or bear no relation to any actual inflation or increase in property values.

100% agree with this

OP - when you break it down, the clause isnt onerous. Its just unusual. Unusual isnt always a good thing. If you love the house then think carefully before you throw the baby out with the bathwater

Tom99

[FONT=Verdana, sans-serif]So far your flat has risen in value by 40% (195/140) so a ground rend review if today would be £125 + 40% = £175pa, hardy a big deal.[/FONT]

[FONT=Verdana, sans-serif]If the review in 2023 throws up a ground rent then of say £250pa, which is not too high by comparable standards, it will mean you flat is then worth £280,000, a profit to you of £85,000 so not to bad.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]Also remember you can always buy out the ground rent and reduce it to £0 with a lease until 2217 in two year time, or immediately if the current vendor has owned for more than two years ans assigns a section 42 notice to you. Given the ground rent is not that high, and there will still be 107 yrs left on the lease, the buy out price will not be enormous, say something like £4,000 plus say £2,000 costs.[/FONT]

[FONT=Verdana, sans-serif]The only thing I would be concerned about is exactly how the review clause is phrased. Is the whole building value just the sum 6 flat lease values or does it include the freehold value as well? Is there any other stipulation on how that value is to be ascertained and also what provision is there for ascertaining the value if you cannot agree, is an expert 3rd party or arbitrator provided for. The cost of establishing the new ground rent could be high if you choose to dispute what the freeholder says it should be at the time.[/FONT]

Smellyonion

Exponential ground rents are the ones to be wary of. Ie doubling every so often.

This one seems more normal but slightly odd. We could have a property surge when the house prices x10 during your ground rent renew then /10 for the year after...locking you in to a 21 year.

Unlikely but still possible.

da_rule

Wait 2 years then start the statutory lease extension. You will have to pay a premium, but given the length of the lease left this might not be too much. This will get rid of your liability to pay ground rent.

abi_93

da_rule wrote: »

Wait 2 years then start the statutory lease extension. You will have to pay a premium, but given the length of the lease left this might not be too much. This will get rid of your liability to pay ground rent.

Could you please explain the statutory lease extension a little bit? How would this help?

abi_93

Thanks to everyone who has responded, it has been so helpful. �� I thought I would add the actual wording of the ground rent review clause for clarity.

"The Rent shall be subject to review on each twenty-first anniversary of the Commencement Date and shall then be the sum of the Rent plus such sum as shall be the difference (in percentage terms) between the Review Value of the Block and the First Value of the Block BUT so that such reviewed shall never equal or exceed such a sum as would in appropriate circumstance create inhibition of the premium capable of being charges on an assignment of the Demised Premises in the same manner as set out in Section 127 and Schedule 18 Part II of the Rent Act 1977 or any amending or similar legislation in which case the Rent shall be £1.00 less than sum which would otherwise be charged rather than the amount which created an inhibition on the premium."

Tom99

abi_93 wrote: »

Thanks to everyone who has responded, it has been so helpful. �� I thought I would add the actual wording of the ground rent review clause for clarity.

"The Rent shall be subject to review on each twenty-first anniversary of the Commencement Date and shall then be the sum of the Rent plus such sum as shall be the difference (in percentage terms) between the Review Value of the Block and the First Value of the Block BUT so that such reviewed shall never equal or exceed such a sum as would in appropriate circumstance create inhibition of the premium capable of being charges on an assignment of the Demised Premises in the same manner as set out in Section 127 and Schedule 18 Part II of the Rent Act 1977 or any amending or similar legislation in which case the Rent shall be £1.00 less than sum which would otherwise be charged rather than the amount which created an inhibition on the premium."

What is the definition of 'Review Value of Block' and 'First Value of Block'?

abi_93

Tom99 wrote: »

What is the definition of 'Review Value of Block' and 'First Value of Block'?

“the Block”
means the Building forming part of the Estate in which the Demised Premises are situate

“the First Value of the Block”
means the total of the open market value selling prices achieved by the Lessor of all the Dwelling in the Block and the certificate of a director of the Manager as to the amount of such selling prices shall be accepted as conclusive as to fact unless manifestly incorrect.

“the Review Value of the Block”
means the total of the open market value selling prices of all the Dwellings in the Block which the Lessor or in the event that Lessee serves a counternotice in accordance with Clause 3.2 then the charted surveyor referred to in Clause 3.2 considers on each review would be achieved on a vacant possession sale without encumbrances And such charted surveyor is to assume that each Dwelling is being sold individually and that its sale is in no way inhibited by the sales of any other Dwelling in the Block

Tom99

abi_93 wrote: »

“the Block”
means the Building forming part of the Estate in which the Demised Premises are situate

“the First Value of the Block”
means the total of the open market value selling prices achieved by the Lessor of all the Dwelling in the Block and the certificate of a director of the Manager as to the amount of such selling prices shall be accepted as conclusive as to fact unless manifestly incorrect.

“the Review Value of the Block”
means the total of the open market value selling prices of all the Dwellings in the Block which the Lessor or in the event that Lessee serves a counternotice in accordance with Clause 3.2 then the charted surveyor referred to in Clause 3.2 considers on each review would be achieved on a vacant possession sale without encumbrances And such charted surveyor is to assume that each Dwelling is being sold individually and that its sale is in no way inhibited by the sales of any other Dwelling in the Block

[FONT=Verdana, sans-serif]The lease therefore provides a route to establish the reviewed ground rent if you cannot agree. You don't quote Clause 3.2 but I would assume that clause provides for the appointment of a Chartered Surveyor to act as expert and determine the required value.[/FONT]
[FONT=Verdana, sans-serif]The definition of Review Value is a little vague, for example what lease term is to be assumed, is it the unexpired terms of the actual leases (now 21 yrs less) or an assumed long enough term not to reduce the likely sale price?[/FONT]