Onerous Ground Rent

alex864

I apologize in advance if my question will sound daft, but how do we define a onerous ground rent? I am looking at buying a flat with 110 years left on the lease. The ground rent is £200 pa and it doubles every 25 years, so in 15 years’ time as the lease started in 2005. Is this onerous? I am worried Nationwide(my mortgage provider) will not be happy with this. 

AdrianC

25yr doublers are not onerous - they're about the same as inflation.

But ground rent of £250+/yr can bring in issues around tenure - currently. Whether this will still be an issue in 15yrs is another question. Assuming you buy the place, it might be worth considering a statutory lease extension to bring the ground rent down to peppercorn.

alex864

AdrianC said:

25yr doublers are not onerous - they're about the same as inflation.

But ground rent of £250+/yr can bring in issues around tenure - currently. Whether this will still be an issue in 15yrs is another question. Assuming you buy the place, it might be worth considering a statutory lease extension to bring the ground rent down to peppercorn.

Thanks for your answer! That’s exactly what I had in mind to do but obviously can only do it in 2 years’ time 😁 See what government comes up with by then as well. 

ratechaser

If the lease started in 2005, you have 10 years till it doubles and not 15...

davidmcn

alex864 said:

I apologize in advance if my question will sound daft, but how do we define a onerous ground rent? I am looking at buying a flat with 110 years left on the lease. The ground rent is £200 pa and it doubles every 25 years, so in 15 years’ time as the lease started in 2005. Is this onerous? I am worried Nationwide(my mortgage provider) will not be happy with this. 

Nationwide's requirements are under 5.14.9 in the CML Handbook here:
https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/nationwide-building-society/#C9113
"Unacceptable - Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) – acceptable if doubles every 20 years or more"
and see 5.14.11 for their policy in relation to the "higher than £250" point.

ChloeManoey

It doesn't matter that the doubling is 15 years away and rules are likely to change by then. If that is still within the mortgage term you are applying for, they will unfortunately still take issue with it   (it being over £250pa I mean)

alex864

davidmcn said:

alex864 said:

I apologize in advance if my question will sound daft, but how do we define a onerous ground rent? I am looking at buying a flat with 110 years left on the lease. The ground rent is £200 pa and it doubles every 25 years, so in 15 years’ time as the lease started in 2005. Is this onerous? I am worried Nationwide(my mortgage provider) will not be happy with this. 

Nationwide's requirements are under 5.14.9 in the CML Handbook here:
https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/nationwide-building-society/#C9113
"Unacceptable - Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) – acceptable if doubles every 20 years or more"
and see 5.14.11 for their policy in relation to the "higher than £250" point.

Thank you so much for sending this over! That’s great news- I already have an indemnity policy for the escalating ground rent so it looks like it’s going ahead! 😁