Ground Rent

IAND87

I am considering buying a new build flat in London, I am looking at the draft contract ground rent clause in the head lease between the landlord and the freeholder:

"the tenant shall procure that in every underlease of residential unit which is a private housing unit a ground rent of £250 per annum (Ground Rent) will be reserved as payable by the undertenant annually in advance on 1 April each year.

The tenant shall also procure that the Ground rent shall be reviewed annually to increase by the proportionate increase in RPI (or any successor government department or appropriate government body) over the previous year. For the avoidance of doubt the annual review should be upwards only."

This is quite worrying that ground rent could increase and I am going to ask for clarification from my solicitor. Do you have any advice if this clause can be renegotiated?

The more I read the contract the more worried I am that the ground rent plus service charges and any admin charges to management company (they charge whooping fees to get a pet, extend lease etc) will make this not a good idea at all and go back to renting and save a bit more for the next few years to buy a house under freehold

Options I see:
1) accept the clause and proceed to exchange
2) try to renegotiate - can review be done every 10 years? or agree that the ground rent is fixed to £250 p.a.?
3) walk away (I will only loose £500 reservation fee + £200 mortgage valuation fee and £300 upfront fee to solicitors for initial work searches etc.) and continue to rent.
4) ask how much is to buy the freehold

Any help is much appreciated.

Thanks

da_rule

Buying the freehold is likely to be impossible at this stage. The inclusion of "underlease" in your contract indicates that your landlord only themselves has a leasehold interest.

You can always attempt to negotiate a longer review period, you're unlikely to get away with no review at all. You will also find that the admin charges may be quite high every year if the landlord has to calculate the increase every year.

davidmcn

IAND87 wrote: »

I am looking at the draft contract ground rent clause in the head lease between the landlord and the freeholder:

Do you have any advice if this clause can be renegotiated?

You can't renegotiate the head lease, because you're not a party to it. It would make more sense to look at the draft lease between the freeholder and you - what does that say about ground rent? (probably much the same).

Being indexed with RPI is at least less arbitrary than the ones which have rent doubling every so often, with no reference to inflation or property prices.