Ground Rent

Kiraodo

I have a leasehold agreement which sets ground rent @£300. After 15 years this will double to £600 and double again on each 15th anniversary. The landlord has offered a variation of the lease terms which states that at each of the 15 year anniversaries the rent is reviewed in line with any increase in the Retail Pricing Index over the remaining period. Thus I assume this could have both positive and negative effect on the amount payable.
Example quoted is
2019 2031 2046 2061 Total
Current ² £300 £600 £1,200 £2,400 £33,000
Proposed £300 £501 £838 £1,336 £25,012
(2) Based on Bloomberg curves Jan 2019
It will cost approx. £450 in fees to change the current arrangement.
Opinions on this deal would be appreciated.

anselld

That is probably a good deal for £450. Better still if the L would accept CPI instead of RPI.

rachel230

I wonder if you are with TW as they were offering this. They aren't offering to be kind - it's because this is hot news and solicitors are being made sure for not pointing out onerous clauses.
You need to be careful. Do not accept any variation until you do your homework. Some rpi increases can be worse than doubling clauses because the rpi is compounded e.g. 10 year increase linked to y
rpi was actually an increase of 30% because the rpi was 10 x 3%!
People are being advised not to accept these deals but to take further advice. If you accept you give up any future claim/compensation.
Go to National Leasehold Campaign for advice as many are in your situation but further down the line.

couriervanman

will you still be there in 15 yrs

da_rule

I would also imagine it would be an upwards only clause, so if there is a negative RPI the rent will stay the same, not go down.

How long have you lived at the property? How long is left on the lease?

Also, if you have a mortgage lender have you spoken to them to see if they’re agreeable to the amendments and asked about any costs they may have?

Tom99

House or flat? Have you worked out a likely price to use the statutory process to buy out the ground rent?

letitbe90

Tom99 wrote: »

House or flat? Have you worked out a likely price to use the statutory process to buy out the ground rent?

How did you get the £33,000/£25,000 figures?

AdrianC

Kiraodo wrote: »

I have a leasehold agreement which sets ground rent @£300. After 15 years this will double to £600 and double again on each 15th anniversary. The landlord has offered a variation of the lease terms which states that at each of the 15 year anniversaries the rent is reviewed in line with any increase in the Retail Pricing Index over the remaining period. Thus I assume this could have both positive and negative effect on the amount payable.
Example quoted is
2019 2031 2046 2061 Total
Current ² £300 £600 £1,200 £2,400 £33,000
Proposed £300 £501 £838 £1,336 £25,012
(2) Based on Bloomberg curves Jan 2019
It will cost approx. £450 in fees to change the current arrangement.
Opinions on this deal would be appreciated.

Frankly, it seems like a no-brainer.

Not so much for the "saving" - you won't see your money back until 2036 on the examples - but it removes a potential major stumbling block on any future sale. People panic at the sight of "doubles" in the lease, without pausing to think about the timeframe and how that compares to inflation over the similar period.

Yes, you're taking a risk on inflation remaining low. Historically, there are periods when it would have outstripped the fixed increase.

SmashedAvacado

It is a no brainer

In terms of why they are offering this, its because it is likely in the future that such doubling clauses will be held to be invalid, and this could mean that you pay zero ground rent. However, that's not at all certain and in the meantime, this change will ensure your property is sell-able and mortgage-able (because it probably isn't at the moment). RPI basically is inflation - and if it does double in 15 years, then its likely that your income will have done to. What you are looking to do is ensure that your rent doesnt double if your income doesnt.

AnotherJoe

What Smashed and Adrian said, do it because it will increase your salability.
I've seen at least one post here where a lender refused the mortgage as a kneejerk reaction, simply because the lease had a doubles every 15 years clause, even though thats not really that bad (unlike the heinous doubles every 10)