Doubling Ground Rent every 25 years

Tom99

If you assume the 125yrs start now and you use a discount rate of 6% then the cost of buying out the ground rent would be:

£475pa fixed for 125yrs = £8,385
£475pa doubling every 25yrs = £11,770

So not that much difference if the 1st review is in 25yrs.

If the 1st double is not 25yrs away the cost will be slightly different.
What is the term remaining and when is the 1st double?

In addition to the above you would have to pay for the reversion in 125yrs time but that would add the same amount to both figure.

£595,000 discounted 125yrs at 5% would be an extra £1,336.

araki

Tom99 wrote: »

If you assume the 125yrs start now and you use a discount rate of 6% then the cost of buying out the ground rent would be:

£475pa fixed for 125yrs = £8,385
£475pa doubling every 25yrs = £11,770

So not that much difference if the 1st review is in 25yrs.

If the 1st double is not 25yrs away the cost will be slightly different.
What is the term remaining and when is the 1st double?

In addition to the above you would have to pay for the reversion in 125yrs time but that would add the same amount to both figure.

£595,000 discounted 125yrs at 5% would be an extra £1,336.

Thank you, I am looking through the draft contract I received but I can't seem to find any date about the doubling. The lease has started on 1st January 2017, I guess the first raise could be in 24 or 23 years? I called some lease extension specialists and they gave me a quote of 18000£ plus costs. One of them suggested that the ground rent is really high and looking at the market in London, I should be in a position to negotiate it. He suggested to try to change it at 250£ raising every 33 years. I highly doubt the developers will ever accept. But I could try to negotiate and walk away in any case. I am really worried about the idea of buying a flat that I can't resell in 10 years because of this clause. I am not sure I will have 19000£ to spend on the leasehold extension. I read threads on this forum of people stuck in a flat because buyers didn't have their mortage approved because of the 25 years doubling clause. Would you just walk away, waiting to find a place without this renewing clause?

AdrianC

araki wrote: »

Thank you, I am looking through the draft contract I received but I can't seem to find any date about the doubling. The lease has started on 1st January 2017

So the doubling will be on 1st Jan (2017+25) = 2042.


Doubling every 33 years will be the equivalent of an annual 2.95% increase, except the cumulative difference over the period would be a snidge under 53%.

araki

bouicca21 wrote: »

see post 10

Thank you. I was aware of the £1000 limit, but I am a bit confused on this. The ground rent is currently 475, and in 25 years will be 950£ and in 50 years will be 1900. Would you say that the limit will remain the same through the years?

Tom99

araki wrote: »

Thank you, I am looking through the draft contract I received but I can't seem to find any date about the doubling. The lease has started on 1st January 2017, I guess the first raise could be in 24 or 23 years? I called some lease extension specialists and they gave me a quote of 18000£ plus costs. One of them suggested that the ground rent is really high and looking at the market in London, I should be in a position to negotiate it. He suggested to try to change it at 250£ raising every 33 years. I highly doubt the developers will ever accept. But I could try to negotiate and walk away in any case. I am really worried about the idea of buying a flat that I can't resell in 10 years because of this clause. I am not sure I will have 19000£ to spend on the leasehold extension. I read threads on this forum of people stuck in a flat because buyers didn't have their mortgage approved because of the 25 years doubling clause. Would you just walk away, waiting to find a place without this renewing clause?

You can wait 2yrs and do a statutory lease extension.

The suggestion of negotiating a non-statutory deal now is silly, you will be held over a barrel.

The quote of £18,000 is high, maybe these 'specialists' will then be able to get you a bargain for their high fee?

How long has the seller owned the property? If they bought it in Jan 2017 then by the time you complete they will have owned it for 2yrs so they could serve a statutory extension notice and assign it to you. You can then complete the lease extension/buy out ground rent now rather then waiting 2yrs.

araki

Tom99 wrote: »

You can wait 2yrs and do a statutory lease extension.

The suggestion of negotiating a non-statutory deal now is silly, you will be held over a barrel.

The quote of £18,000 is high, maybe these 'specialists' will then be able to get you a bargain for their high fee?

How long has the seller owned the property? If they bought it in Jan 2017 then by the time you complete they will have owned it for 2yrs so they could serve a statutory extension notice and assign it to you. You can then complete the lease extension/buy out ground rent now rather then waiting 2yrs.

I didn't know where to find "experts" in leashold extension, therefore I just called surveyors found online. The first one I called, told me that because of the high ground rent, the amount to pay for an extension would be very high and warned me about mortgage problems. I was waiting to receive the contact of a valuer from him. The second one I called gave me the 18000£ quote.
When I raised this concern with my (not really helpful" solicitor, she just told me "maybe around 5000£". Of course the amount charged change a lot my position in regard to this. I am not English and I have learned everything about new buildings, help to buy, buying, leashold, problems concerned with the increase of the ground rent in the past two weeks, therefore I could be confused. Shouldn't the solicitor tell me something about this? She only sent the draft of the contract since I instructed her, nothing more. Can I ask why would you feel it would be unreasonable trying to negotiate a bit with the developers? I am probably not really aware of how the process works.

On the draft of the contract, I only find: Term: 125 years from 1 January 2017. Should I receive also a lease contract to discover for how long the seller has owned the property? The seller is probably still the developer, I think I may be buying from them, but I am not sure.

bouicca21

If you want the flat a reasonable compromise would be to ask the developers to revise the lease so that the ground rent is capped once it reaches £1000. They may not know about that Housing Act provision, it seems few people do. Every buyer will face the same problem so it is in their interest to fix it.

araki

bouicca21 wrote: »

If you want the flat a reasonable compromise would be to ask the developers to revise the lease so that the ground rent is capped once it reaches £1000. They may not know about that Housing Act provision, it seems few people do. Every buyer will face the same problem so it is in their interest to fix it.

That's a great suggestion. I read about the Housing Act, but I thought the 1000limit would change with the passing of time? Probably not. But that's a great suggestion! Thank you!

Tom99

araki wrote: »

I didn't know where to find "experts" in leashold extension, therefore I just called surveyors found online. The first one I called, told me that because of the high ground rent, the amount to pay for an extension would be very high and warned me about mortgage problems. I was waiting to receive the contact of a valuer from him. The second one I called gave me the 18000£ quote.
When I raised this concern with my (not really helpful" solicitor, she just told me "maybe around 5000£". Of course the amount charged change a lot my position in regard to this. I am not English and I have learned everything about new buildings, help to buy, buying, leashold, problems concerned with the increase of the ground rent in the past two weeks, therefore I could be confused. Shouldn't the solicitor tell me something about this? She only sent the draft of the contract since I instructed her, nothing more. Can I ask why would you feel it would be unreasonable trying to negotiate a bit with the developers? I am probably not really aware of how the process works.

On the draft of the contract, I only find: Term: 125 years from 1 January 2017. Should I receive also a lease contract to discover for how long the seller has owned the property? The seller is probably still the developer, I think I may be buying from them, but I am not sure.

[FONT=Verdana, sans-serif]Your solicitor is talking out of their backside, there is no way buying out £475pa doubling every 25yrs is going to only cost £5,000.[/FONT]
[FONT=Verdana, sans-serif]You need to find out who you are buying from, is this through an estate agent or are you negotiating direct with the developer?[/FONT]
[FONT=Verdana, sans-serif]Was the lease from Jan 2017 granted to the seller who is selling the lease to you? Ie will you be the 2nd owner of the property?[/FONT]
[FONT=Verdana, sans-serif]Or is the developer making the 1st sale to you (even though the lease has a start date of Jan 2017) in which case the lease does not yet exist and you can try saying I will only buy at the price I have offered if the ground rent is £250 with a review every 33yrs or whatever.[/FONT]
[FONT=Verdana, sans-serif]If you are buying from the original developer its quite likely they will want to keep all the leases they have sold in the development the same, ie 125yr from Jan 2017 with ground rent review every 25yrs so may be reluctant to agree any change to that.[/FONT]

ThePants999

Bloody negligent of the solicitor to make up a number that's so clearly wrong. If they're that clueless about the costs of lease extension, they should just refuse to guess. But it's not exactly hard to see that an asset that pays £475pa is worth more than £5,000.