Ground rent reviewed every 10 years- issue

Khaderbhai

Hi

I am in the process of purchasing a leasehold flat but it has come to light that the ground rent is reviewed every 10 years. This is an issue because its already at £250 but also because it was due to be reviewed in 2017 (started 2007), but the other side are saying ‘they have not heard anything’ and are not willing to contact the ground rent chargers (Homeground), as they don’t want to run the risk of their client having to pay more if it has gone up. A quick google/search on mse forums of Homeground is also concerning, they sound incompetent at best. Has anyone had this issue before? Would still like to proceed but this ground rent issue needs resolving, can the freehold be bought out or lease changed? Do not want to buy and be lumped with a backdated bill from 2017 for ground rent.

Thanks
K

MovingForwards

Have you obtained a copy of the lease from the land registry (£3), to see what it exactly says about the ground rent? Eg doubles, 1% increase etc.

You can buy the freehold for the whole block, if it's for sale, wouldn't be cheap though.

Could possibly get the lease varied, again this will cost.

Regarding the outstanding GR, an amount would be retained from the sellers sale proceeds to pay it.

Khaderbhai

Thanks. The lease I have only states that it will be £250 and then be reviewed every 10 years, it doesn’t stipulate that it would increase though, is that unusual or am I missing it? 

davidmcn

Khaderbhai said:

Thanks. The lease I have only states that it will be £250 and then be reviewed every 10 years, it doesn’t stipulate that it would increase though, is that unusual or am I missing it? 

There wouldn't be much point in a review clause if the rent didn't increase, so I think you're misinterpreting it. Are you sure what you're reading is actually the lease? What does it say?

tacpot12

I don't think you are missing anything - the lease seems to be missing any sort of cap on ground rent rises - therefore if you buy the property you are writing an open cheque to the owner of the freehold. 

I would tell the buyer that you won't buy, unless the lease is changed to give it a formula for calculating ground rent rises. Let them have the hassle and cost of dealing with Homeground. It will be in their interests to do so; if the property is unsalable because no purchasers is willing to take the risk that Homeground will be reasonable in future, then they are stuck with them anyway so they might as well try to get a fair deal. I can't see Homeground agreeing to it though, there is nothing in it for them, unless they appreciate that they will collect the ground rent more easily if people feel that increases are justified. 

You should ask though why ANY increase in the ground rent is necessary. The purpose of ground rent is to preserve the freeholders rights to the land, so £1 a year would be a sufficient ground rent for this purpose. No sensible freeholder would charge a ground rent of £1 though, because the cost of collection will be much greater. A ground of £30-£50 would make more sense as it will cost about this to collect and account for the ground rent from each flat. So it IS reasonable that ground rent increases in line with the cost of collection, e.g. in line with CPI.  

Have a read of the article here: https://www.ts-p.co.uk/news/the-gbp250-ground-rent-issue in case this is relevant. 

Khaderbhai

Thanks, think you have hit the nail on the head with ‘open cheque’ comment. Can I upload part of the lease here? 

Semple

There should be a lease document/schedule. This would outline the terms of the lease, including base cost, how often the ground rent is paid, how often the ground rent is reviewed, the calculation of the ground rent review, and any other terms and conditions of the lease. 

MovingForwards

Khaderbhai said:

Thanks, think you have hit the nail on the head with ‘open cheque’ comment. Can I upload part of the lease here? 

Yes, just redact the identifying information.