Ground rent doubling every 15 years - Need advice

Snowman12345

Hi guys,

New to the forum but regular forum viewer.

I am a FTB and found my dream home! I have got my AIP and had an offer accepted on the flat, however upon agreeing on the price the EA broke the news to me that the ground rent doubles every 15 years.

The building is 13 years old so is due to double in 2 years. The EA has informed me that the owner has decided to seek legal advice and hopefully expedite this ground rent issue.

Ground rent per Annum is currently £300
Due to increase to £600 a year in 2 years

I have warned the EA that if this clause isn't removed from the ground rent I will be pulling out of the purchase.

How likely do you think it is that the owner will have success in taking this to a solicitor to have it removed? The EA has apparently said the owner is spending a few thousand to action this.

Your thoughts would be helpful?

Thanks

kazwookie

Snowman12345 wrote: »

Hi guys,

New to the forum but regular forum viewer.

I am a FTB and found my dream home! I have got my AIP and had an offer accepted on the flat, however upon agreeing on the price the EA broke the news to me that the ground rent doubles every 15 years.

The building is 13 years old so is due to double in 2 years. The EA has informed me that the owner has decided to seek legal advice and hopefully expedite this ground rent issue.

I have warned the EA that if this clause isn't removed from the ground rent I will be pulling out of the purchase.

How likely do you think it is that the owner will have success in taking this to a solicitor to have it removed? The EA has apparently said the owner is spending a few thousand to action this.

Your thoughts would be helpful?

Thanks

How much is the ground rent as it currently is?

Snowman12345

Currently £300 a year

Due to increase to £600

Cakeguts

Find a different flat.

letitbe90

That is an average increase of 4.8% a year to reach the doubled figure, isn't that bad. Ground rent doubling scaremongering is overblown except for maybe a few cases, maybe if the period was say 10 years making it an increase of 7.2% per year?

And because you don't pay the 4.8% extra a year, it isn't so bad for you, realistically the cost is closer to say 3% a year extra.

If we assumed it started at £600 and you lived there for 30 years, you'd pay 15 years at £600 and 15 years at £1200. Total of £27,000 over 30 years or £900 average per year.

If instead of doubling it increased by 3% a year, the total cost would be £28,545.25, more expensive. If it was to increase by 2% (inflation target) it would be £24340.85, so only slightly cheaper.

Snowman12345

That is an average increase of 4.8% a year, isn't that bad. Ground rent doubling scaremongering is overblown except for maybe a few cases, maybe if the period was say 10 years making it an increase of 7.2% per year?

I know it isn't a huge increase, I am prepared to pay it but I have seen on a few occasions that lenders don't typically like it for a mortgage

csgohan4

walk, not worth the hassle, you will find it hard to resell when you do

Snowman12345

Has anyone ever come across a case of the clause being removed by the management company through a solicitor?

Or is it wishful thinking?

Thanks

letitbe90

Snowman12345 wrote: »

I know it isn't a huge increase, I am prepared to pay it but I have seen on a few occasions that lenders don't typically like it for a mortgage

That is true, I think it is silly they won't accept 15 year doubling which I think is okay (as it equates to around 3% a year in real terms as you don't pay any extra until it doubles). They should really decline on 5/10 year double clauses only.

letitbe90

Snowman12345 wrote: »

Has anyone ever come across a case of the clause being removed by the management company through a solicitor?

Or is it wishful thinking?

Thanks

Wishful perhaps because if they do it for you, they have to do it for everyone. Maybe a more likely scenario would be buying the freehold itself (or a share of the freehold with others), but I don't know how lengthy or expensive that process would/could be (especially since you aren't currently the owner). Probably unfeasible the more I think about it.

Snowman12345

Wishful perhaps because if they do it for you, they have to do it for everyone. Maybe a more likely scenario would be buying the freehold itself, but I don't know how lengthy or expensive that process would/could be (especially since you aren't currently the owner).

Yeah that is how I feel. It's been on the market for 6 months with a 10% price drop. Its priced very well for the area and style. Obviously this is a major issue for buyers.

I have my heart set on the flat with a promise from the EA this should go through, they feel fairly confident.

It is probably fair to say that I should keep looking elsewhere