Buying a London flat, issues with ground rent and AST

princeofpounds

Annisele said:

jessb52 said:

 I mean, there are over 50 flats in that complex and surely they must all face the same issue? If it was such a big issue, then no flats would be bought and sold?

I don't know anything about this, but in your OP you said the solicitor said this had "become" an issue for mortgage lenders - i.e. it wasn't before, but now it is. It's entirely possible that in the past, mortgage lenders didn't notice/didn't care, and so people could happily get mortgages for the flats in the past. Your seller may simply be the canary in the coalmine, and all future sales would have this issue.

I'd only take your option 1 (ignore the advice) if the flat was amazing AND if I intended to live in it for the rest of my life - in other words, I'd only buy it if it was the only one that ticked all my boxes and I didn't care about resale value. Otherwise, I'd say "seller's problem" - and either wait for the DoV or walk away entirely.

What changed is that there was a precedent-setting court judgment a few years ago that basically decided that freeholders have more power than is usual to seize back possession of the property if the long lease qualified as an AST.

It was an unintentional side-effect of the creation of ASTs and for many years nobody cared, largely because there was an assumption that the courts would never rule the way that they did, as it was never the intent of the legislation.

Personally I find it remarkable that this wrinkle was not sorted out in subsequent legislation - it's unbelievable how unresponsive government is sometimes - but it's one of the many things in the mix for the next round of leasehold reform. In the meantime, it largely gets sorted out by deeds of variation (where the freeholders are reasonable) or statutory lease extensions (where they are not).

https://www.mishcon.com/news/publications/real_insights_-_property_update_05_2017/assured_tenancy_traps__the_unexpected_ast_05_2017

Racky_Roo

I had a similar issue with my ground rent when I sold last year. I also argued that other flats had sold without issues and we all had mortgages but then I found out it's only become an issue in the last year.

Luckily it turned out for me that we had a sub-lease (which my solicitor failed to spot) and so all the owners of the lease would need to agree to repossess the flat should there be ground rent arrears (including the owner of it) which wouldn't happen so my buyer and her mortgage co were happy to proceed with the sale

jessb52

Thanks all for the advice.

We really do love the flat, and I don't think there's anything else in that area for that cost. However, we think we would only live there for maybe 10 years so it's whether this issue would resolve itself before then, or we go for the statutory lease extension.

We're still undecided! But leaning towards still going for it....?

princeofpounds

If you do, make triply sure that the property qualifies for the statutory lease extension (it probably will, but there are some rare exceptions).

Also, make sure as best you can that the freeholder is reasonable in other respects. That they refused the variation doesn't imply that they are - they are within their rights to do so as it is giving something up - but it also suggests that they are not brimming with co-operative intent.

bouicca21

Remember that a lease extension comes at a cost - it won’t be cheap. I have a doubling ground rent, in my case much lower than this one and capped at £1,000. I think it would probably cost me circa £10-12k to buy it out.