RPI Ground rent review every 7 years - which Mortgage lenders lend?

Garyqms

-I am currently buying a flat which has a Ground Rent review every 7 years when the rent cn be increased by RPI e.g. 2.7% if applied today.
- The property was a new build in 2012 and the ground rent did not increase after the first review date in 2017
- If I buy the property with the lease as is and sell in the future to a buyer who requires a mortgage the risk is some mortgage lenders wont lend on it making the flat more difficult to sell e.g.some lenders require a 21 year review period
- if a future buyer obtains a mortgage I maybe asked to take out an indemnity insurance policy to protect against the possiblity of the landlord taking possession if the ground rent is not paid on time (current cost £50-100)

I dont want to approach the landlord to aks if the deed can be varied as if they say no this would mean indemnity insurance could not be taken out in the future.

My question is have buyers of a property with a similar review clause had major difficulties getting a mortgage?

NOTE: this is an RPI review after 7 years and not an automatic doubling of the ground rent

eddddy

Garyqms wrote: »

I dont want to approach the landlord to aks if the deed can be varied as if they say no this would mean indemnity insurance could not be taken out in the future.

No - that's almost certainly not the case.

What you mustn't tell the landlord is that an indemnity policy exists, or that you intend to get one (or informing the landlord of anything that makes the landlord more likely to forfeit the lease).

Trying to re-negotiate the ground rent won't make the landlord more likely to forfeit the lease.


But having said that, don't necessarily expect re-negotiating the ground rent with the landlord to be easy.

(One route would be to wait 2 years and then get a statutory lease extension, which has the side effect of reducing ground rent to zero. But you'd need to get an estimate of the cost.)

AdrianC

I can't see any lenders having an issue with RPI increases - no matter if they're annual or whatever.

Are you getting confused with doubling-every-decade clauses?

getmore4less

If they don't increase at a review date does it still reset the index

RPI 2012 to 2019 is 18%

rachel230

Ground rent linked to rpi is also considered onerous in many cases. In some cases it has proved to be more onerous than doubling g/r. Every 7 years is extremely onerous. Remember it is usually backtracked I.e. in 7 years time it will be the total of rpi going back for 7 years. On top of that do you know who the managing agent is (and Google for their reviews). Do you know how much the ongoung( (and usually annually increasing) service charges are? Do you have covenants and permission fees (in some cases you are charged for permission to own a pet/change front door colour/put up a shed etc. Do your homework. 7 year rpi increase is not good.
Join national leasehold campaign group and post on there. Read leaseholder stories in there and do your research carefully before committing.
The scandal is not just about doubling ground rents. It is much deeper and far spread than that.

SmashedAvacado

A cluster of misunderstandings on this thread

RPI increase means inflationary increase - no lenders should have a problem with that.
Indemnity insurance is not a fix for matters such as this
Even if indemnity insurance was a fix, it would depend on the policy wording as to what / who you can speak to - typically an insurance policy to cover the enforcement of a right by a third party would be invalidated if you went and told the third party about the issue.

AdrianC

Inflation is hardly "onerous".

Remember, the longer the interval, the lower the total spend - because you're still paying 2012 price until 2019 with seven years. So annual inflationary rises would, in your terms, be positively usurious, right?

SmashedAvacado

rachel230 wrote: »

Ground rent linked to rpi is also considered onerous in many cases. In some cases it has proved to be more onerous than doubling g/r. Every 7 years is extremely onerous. Remember it is usually backtracked I.e. in 7 years time it will be the total of rpi going back for 7 years. On top of that do you know who the managing agent is (and Google for their reviews). Do you know how much the ongoung( (and usually annually increasing) service charges are? Do you have covenants and permission fees (in some cases you are charged for permission to own a pet/change front door colour/put up a shed etc. Do your homework. 7 year rpi increase is not good.
Join national leasehold campaign group and post on there. Read leaseholder stories in there and do your research carefully before committing.
The scandal is not just about doubling ground rents. It is much deeper and far spread than that.

I don'f think this is accurate. When you have an RPI increase say every five years, it takes into account inflation over that 5 years. Similarly if it is every 6 years - or 7 years or whatever. They are not onerous because basically in real terms the cost to the owner is the same. That's what inflation shows. It is expected that wages, pensions etc increase at around inflation, so it ought to be no issue. Can you point to any lenders (and the relevant handbook entry) that expressly have an issue with an RPI increase?

rachel230

SmashedAvacado wrote: »

A cluster of misunderstandings on this thread

RPI increase means inflationary increase - no lenders should have a problem with that.
Indemnity insurance is not a fix for matters such as this
Even if indemnity insurance was a fix, it would depend on the policy wording as to what / who you can speak to - typically an insurance policy to cover the enforcement of a right by a third party would be invalidated if you went and told the third party about the issue.

Mortgage companies certainly do have a problem with onerous rpi terms. Read their handbook.
Also points to note - as the Leasehold scandal grows, there is much more awareness and these properties can be hard to sell on. Many people are now finding they are trapped due to being unable to sell. They may have people wanting to buy but the sale falls through due to solicitor advising not to go through due to lease and/or mortgage company pulling out.
If you think g/r rpi increases are not onerous and only doubling ones are, you are wrong.

SmashedAvacado

rachel230 wrote: »

Mortgage companies certainly do have a problem with onerous rpi terms. Read their handbook.
Also points to note - as the Leasehold scandal grows, there is much more awareness and these properties can be hard to sell on. Many people are now finding they are trapped due to being unable to sell. They may have people wanting to buy but the sale falls through due to solicitor advising not to go through due to lease and/or mortgage company pulling out.
If you think g/r rpi increases are not onerous and only doubling ones are, you are wrong.

I have checked the handbook. What they have a problem with is rent escalation "above and beyond rpi" None of them have an express issue with an RPI increase (other than barclays who mention that they dont want RPI increases more than every five years). None of the other mention any objection to the frequency of an RPI increase.- they mention an objection to frequency of doubling and other "beyond RPI" clauses

rachel230

OP I repeat..this is an onerous lease.
Do your homework. Do not listen to random people on the internet. It is not their money.
I have been involved with the leasehold scandal for over three years.
Even if you are granted a mortgage, if you want * your * home to be a never ending income stream for strangers then go ahead. But don't say you weren't warned.