Ground Rent doubling itself every 20 years

jumperabv3

I own a property where the ground rent is £400/year.

It started in 2012 and in 2032 it's supposed to jump to £800/year.

In 2052 it will jump to £1600/year.

As I'm overseas I'm using a letting agent, and I know there is plenty of time until 2032 but nonetheless if I'd want to sell the property I think this would be a huge downsize, correct?

My letting agent told me "I think these clauses can be changed as they have been found to be unfair." - is he right? Can a solicitor work this out with the landlord company (who's getting paid the ground rent) and revoke/cancel the clause saying the ground rent will be doubled every 20 years? Is feasible/doable to do so?

Would appreciate your feedback.

anselld

You can do a statutory lease extension provided you have owned for 2 years.
That will delete the ground rent entirely but it will come at a cost which will be quite high given the onerous terms you are trying to buy out of.

Whilst the terms are onerous they are not illegal or unfair as things stand. The law may change in due course but who knows when/if.

jumperabv3

anselld wrote: »

You can do a statutory lease extension provided you have owned for 2 years.
That will delete the ground rent entirely but it will come at a cost which will be quite high given the onerous terms you are trying to buy out of.

The lease is for 250 years from 2012.
I did own the property since 2012 (I didn't live there as I'm overseas but I do own it).
The property in 2012 was priced £400k

Can you estimate, roughly, just an estimate, how much would a statutory lease extension cost with these given details? Just need to crunch numbers to estimate if it's worth it or not.

Tom99

jumperabv3 wrote: »

The lease is for 250 years from 2012.
I did own the property since 2012 (I didn't live there as I'm overseas but I do own it).
The property in 2012 was priced £400k

Can you estimate, roughly, just an estimate, how much would a statutory lease extension cost with these given details? Just need to crunch numbers to estimate if it's worth it or not.

If you discount the rising ground rent at say 6% you get to about £16,000 and at 6.5% to about £13,500 add say £2/3,000 for fees so maybe budget for £15,000 to £20,000.
You will need a surveyor who specialises in lease extensions to give you a more accurate figure.

jumperabv3

Tom99 wrote: »

If you discount the rising ground rent at say 6% you get to about £16,000 and at 6.5% to about £13,500 add say £2/3,000 for fees so maybe budget for £15,000 to £20,000.
You will need a surveyor who specialises in lease extensions to give you a more accurate figure.

Does the freeholder have to agree to what the surveyor would say or they are free to reject it and then I will pay to the surveyor but get "nothing" in return?

Shall I approach the freeholder directly and try and see what they say?

da_rule

jumperabv3 wrote: »

Does the freeholder have to agree to what the surveyor would say or they are free to reject it and then I will pay to the surveyor but get "nothing" in return?

Shall I approach the freeholder directly and try and see what they say?

The freeholder doesn’t have to agree, but if you get into a dispute you can then go to the tribunal who will calculate and set the price.

The statutory route is the only route guaranteed to (a) remove the need to pay ground rent, and (b) add 90 years to the lease. There’s nothing to stop you approaching the freeholder directly and see what they will offer but they aren’t obliged to reply (or even worse they could just string you along).

Whilst they can ignore the statutory notice, you can then apply to the tribunal for a new lease to be imposed.

jumperabv3

da_rule wrote: »

The freeholder doesn’t have to agree, but if you get into a dispute you can then go to the tribunal who will calculate and set the price.

The statutory route is the only route guaranteed to (a) remove the need to pay ground rent, and (b) add 90 years to the lease. There’s nothing to stop you approaching the freeholder directly and see what they will offer but they aren’t obliged to reply (or even worse they could just string you along).

Whilst they can ignore the statutory notice, you can then apply to the tribunal for a new lease to be imposed.

They actually offered to sell the freehold in 2016 but I had to get other owners to agree and many of them didn't want to participate (if we were doing so then I'd have paid around £5,000 only based on their offer back then, it was "cheap" in my opinion but only 3 other owners were with me on this and that wasn't enough).

I think they are interested in getting cash and they do reply to emails quite quickly, I have a good communication with them.

I assume if I will have a lease with 0 ground rent whilst the others in the building still paying it - that will make the property more valuable and easier to sell in the future, correct?

I don't mind involving a surveyor or a solicitor, I'm paying my accountant every year to file taxes in the UK as I can't do it by myself but I was thinking perhaps it's worth just shooting an email to the landlord because:

a) We got plenty of time until 2032 so the ones in need for more cash is them, not me, thankfully
b) Maybe they will make a reasonable offer - but if they do - for how long will it be valid?
c) Is this expense tax deductible? If so maybe I should pay after April 2020 to deduct it from next year's taxes which could be higher (this year had several things to fix in the property).

Would appreciate your feedback again.

jumperabv3

I've just seen on the website of the landlord - it says:

"If the lease on your flat is older than 200 years, you cannot extend it."

Does it mean I cannot request a statutory lease extension from them before 2062 ? (lease is 250 years, 200 years or less would be on 2062)

Tom99

jumperabv3 wrote: »

I've just seen on the website of the landlord - it says:

"If the lease on your flat is older than 200 years, you cannot extend it."

Does it mean I cannot request a statutory lease extension from them before 2062 ? (lease is 250 years, 200 years or less would be on 2062)

No. You use the statutory process.
As said above you can approach the freeholder outside the statutory process but it's likely the 1st thing they will ask for is £500-£1000 to provide a valuation and that will be money down the drain if you don't like the answer.
In your case it makes sense to use the statutory process, not because you want a longer lease but because you want to buy out the ground rent.
As you say timing is not urgent and one thing to bear in mind is the possible changes the government might make over the next few year to the lease extension process.

The Law Commission has recently produced its report on the valuation options for the government to consider and there are a couple of possible changes which may help you:

– [FONT=Verdana, sans-serif]Online calculator for premiums using prescribed rates for valuing ground rent and reversion. (this should reduce the fees paid quite a bit)

– Cap value of ground rent based on 0.1% of market value. For example if a flat is worth £250,000 with a new long lease then any ground rent above £250pa would be ignored. (this would obviously help you as most of the increases in ground rent would be ignored when calculating the price you pay)

But there is a downside as another option is to make changes which would reduce the premium only available to resident leaseholders which would exclude you. [/FONT]
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jumperabv3

Thanks Tom,

Do you have any recommendation for someone who can start the statutory process if it's allowed to ask for it in the forum? I literally know no solicitors in the UK, the one I did know unfortunately passed away from cancer a few years ago. Is it possible for example to start the process with you via messages? (it sounds to me like you're a solicitor and you're very knowledgeable).

I'm only asking if this is allowed, if not then apologies. Thanks.

kazzamunga

We got a deed of variation done for a similar problem on a new-build flat bought in 2014, and it cost about £700 to do this with a solicitor.
https://pmpl.co.uk/taylor-wimpey-ground-rent-review-assistance-scheme/

Obviously we were lucky because the developer paid for it, but £700 wasn't that unreasonable anyway. I'm not sure why some people are saying it would be thousands, but maybe it's different in this case.