Buying Leasehold flat from landlord

stook

Aloha! It is my first thread/post on this forum, so far I was passively following it and absorbing its wisdom. 
So here it is my quick story, my landlord decided to put the flat I am currently renting on the market last year. The flat attracted interest of potential buyers, but none of the viewings ended up in sale, then the lockdown came and things got really quiet. I had decided to step in with my offer, which has been accepted after a few days of consideration. EA informed me about leasehold related fees - service charge, ground rent and parking fee (this one was surprising to me). Having queried other neighbours I learned a few things : 

• some flats have their parking spaces included in their leaseholds and there is no additional fee,
• ground rent ( £250 now and likely to double ) is due to be reviewed after 20 yrs so does parking fee. - I pulled a title register from Land Registry which confirmed the review date without any further details,
• one of the neighbour told me there is ongoing dispute with the building landlord as lease terms do not have defined the review index (is it possible to have a lease agreement without it ?).

I tried to confront EA/landlord about but they seemed to be tight-lipped, just referred me to my solicitor. Trying to find out more about this matter on the forum I found out any problems with ground rent might be a red light for lenders ( not to mention that I have not priced it in my offer ). My questions are : 
- is there any legal way that the seller could be asked to bring GR down ? ( e.g. Deeds of Variation - is it the only one ? )
- is there anything I could do with parking space (like with GR) - I don't have any details about it so it is just speculating
- as I have been living here a while I opted out from taking full survey as it is relatively new building - do I make a mistake ?
- if there are any issues (not damages, but.. e.g. boiler is not doing great) in the flat that would require mending should I try to chase the landlord (as I am still tenant) or... get a survey to get them listed ?

Thanks so much for help !

[Deleted User]

Depending on what's wrong with it, replacing a boiler after you buy the flat would be a major expense.  If the flat has other problems, I'd be asking all or sundry if I was crazy to buy it.

rachel230

You have done really well to raise those issues.
What does the lease say about the ground rent doubling? When is this due to happen? Also as the other leaseholders have pointed out, an "open ended" review is problematic and risky. It will only benefit one person - the freeholder!
Have you spoken to the other leaseholders about the service charges? If you are thinking about purchasing the property, they should be your new temporary best friends! They will have all the prior information about the behaviour and financial demands of the freeholder.
Finally as the flat you are interested in is actually owned by the freeholder, you can negotiate the terms of the lease e.g. to include your own parking space, lower g/r and less onerous ground rent terms.
The worst thing is to be stuck with a bad freeholder.

dogshome

So the flat was on the market pre- Covid and despite viewings failed to sell - Now your own investigations have thrown up car parking and ground rent problems, plus an ongoing dispute with the buildings owners - Small wonder your L/Lord wants to sell

davidmcn

rachel230 said:

What does the lease say about the ground rent doubling? When is this due to happen? Also as the other leaseholders have pointed out, an "open ended" review is problematic and risky. It will only benefit one person - the freeholder!

Sounds more like it isn't actually "doubling" but indexed, though ambiguous about what it's indexed to. Lenders are unlikely to have a difficulty in principle with indexed rents, more with those which potentially could rise far in excess of property values or general inflation. If it's ambiguously-drafted, that's not necessarily going to benefit the freeholder.

eddddy

rachel230 said:

Finally as the flat you are interested in is actually owned by the freeholder, you can negotiate the terms of the lease 

@stook - is the flat you're talking about being sold by the freeholder?

You talk about the seller being your landlord - do you mean the seller is the leaseholder of a flat which is currently being rented to you?

AdrianC

stook said:

...EA informed me about leasehold related fees - service charge, ground rent and parking fee (this one was surprising to me)

Welcome to ownership of a flat. They've all been included in your rent until now.

I tried to confront EA/landlord about but they seemed to be tight-lipped, just referred me to my solicitor.

Yep. That's what you're paying him for.

Trying to find out more about this matter on the forum I found out any problems with ground rent might be a red light for lenders

The red light is with ground rent that doubles every ten years. Inflationary, or longer-period doubling, is not an issue.

( not to mention that I have not priced it in my offer )

It's something that's part of every single leasehold property. Some are "peppercorn", some aren't.
Service charges are your share of maintaining the structure of the building - somebody's got to pay to do it... Who else would it be?

My questions are : 
- is there any legal way that the seller could be asked to bring GR down ? ( e.g. Deeds of Variation - is it the only one ? )

They're defined in the lease.
Remember that a leasehold flat is simply you having a very long rental on the internal space of that flat. You do not own the structure of the flat. The freeholder owns that.
You can go through the statutory lease extension process, once you've owned the flat for two years, which would lead to a 90yr extension and peppercorn rent - but it will cost. How much will depend on how long the existing lease is, and how much the flat is worth.
https://www.lease-advice.org/calculator/

- is there anything I could do with parking space (like with GR) - I don't have any details about it so it is just speculating

Again, part of the lease.

as I have been living here a while I opted out from taking full survey as it is relatively new building - do I make a mistake ?
- if there are any issues (not damages, but.. e.g. boiler is not doing great) in the flat that would require mending should I try to chase the landlord (as I am still tenant) or... get a survey to get them listed ?

There's not a lot of point in getting a survey done on the entire building - it'd cost a fortune, and the surveyor probably can't get access to most of it.

A survey on the flat itself would just say "Get an expert to check the boiler"... and if you're already talking about buying, then the landlord will be very reluctant to effectively throw you a couple of grand free...

You will need, at the very least, a valuation for your mortgage lender, so they know it's good security for the loan - that would probably be paper-based, without the flat actually being visited. One of the most major factors there is post-Grenfell fire protection... How big a block is it?

MaryNB

If the ground rent goes above £250, the leasehold becomes an Assured Tenancy" meaning it's much easier for the freeholder to take back the leasehold if you're behind on ground rent. A lot of banks won't be willing to take on this risk. I don't know if it becomes an "assured tenancy" if it exceeds £250 during your possession of the leasehold or only at the start if it's above £250. Some banks won't provide a mortgage if ground rent risks going above £250 during the mortgage. If it's above £250 by the time you sell, you could struggle to find a buyer.

eddddy

MaryNB said:

If the ground rent goes above £250, the leasehold becomes an Assured Tenancy" meaning it's much easier for the freeholder to take back the leasehold if you're behind on ground rent. A lot of banks won't be willing to take on this risk. I don't know if it becomes an "assured tenancy" if it exceeds £250 during your possession of the leasehold or only at the start if it's above £250. Some banks won't provide a mortgage if ground rent risks going above £250 during the mortgage. If it's above £250 by the time you sell, you could struggle to find a buyer.

If the flat is in London the ground rent limit is £1000 - it's £250 elsewhere.

The issue arises if/when the ground rent goes over £1000/£250 - it's not based on what the ground rent was at the start of the lease.

But you can get indemnity insurance which should satisfy many lenders. However, the indemnity insurance only protects the mortgage lenders (i.e. it pays off the mortgage). So you could still lose your equity in the property if the lease is forfeited due to non-payment of ground rent.

rachel230

Apologies for thinking potential seller was also the freeholder- don't know where I got that from 🙄
You may want to consider this nightmare case - 
https://www.leaseholdknowledge.com/pensioners-in-former-pit-village-fight-ground-rents-rising-from-10-a-year-to-1100pa-after-a-demand-for-2450pa-was-rejected/

deejaybee

This is something that has been at the back of my mind...To be honest i wasnt aware of the  " £250 ground rent " issue.

The block i live in was built in 2003 with a 130 year lease, so no need to worry about extending lease anytime soon.

However my ground rent is £117.xx every 6 months ( £234.xx ) per annum, so its already perilously close the 250 level, and it goes up by cost of living ( cant remember whether its CPI or RPI ) every 10 years, so its safe to assume that it will be over 250 at the next 10year anniversary ( 2023 ).

Should i think about lease extension ? ( not thinking of selling anytime soon )

Also, regarding cost of lease extension - does it get more expensive for every year less left on existing lease ?  I am aware that the cost can increase significantly at the 80 year remaining mark , with marriage value etc.