Doubling Ground Rent clause on our property - first we knew about it!

AdrianC

princeofpounds said:

couriervanman said:

So in 100 years the ground rent will have increased from £100 to £800 what's the problem

The problem is:

a) Many lenders will no longer lend on properties that have onerous leases, such as those with ground rents that double too quickly. And yes, it may not make much practical difference, but the industry has moved to new standards and will not accept it any more.

b) Doubling ground rents run the risk of entering the 'AST trap', whereby the type of lease automatically changes to an AST once the ground rent is above a specified figure (250 outside London, 1000 inside). There was a surprise legal decision a few years back that decided that would give freeholder the right to end the lease early in certain conditions. That is also not acceptable, despite not being a practical risk if care is taken.

The usual rule-of-thumb is that 25-yr doublers are fine, because the increases are not far away from inflationary. 10-yr doublers are where the issue is.

And the OP's ground rent won't hit £250 until it goes from £200 to £400 in the year 2059.

princeofpounds

AdrianC said:

princeofpounds said:

couriervanman said:

So in 100 years the ground rent will have increased from £100 to £800 what's the problem

The problem is:

a) Many lenders will no longer lend on properties that have onerous leases, such as those with ground rents that double too quickly. And yes, it may not make much practical difference, but the industry has moved to new standards and will not accept it any more.

b) Doubling ground rents run the risk of entering the 'AST trap', whereby the type of lease automatically changes to an AST once the ground rent is above a specified figure (250 outside London, 1000 inside). There was a surprise legal decision a few years back that decided that would give freeholder the right to end the lease early in certain conditions. That is also not acceptable, despite not being a practical risk if care is taken.

The usual rule-of-thumb is that 25-yr doublers are fine, because the increases are not far away from inflationary. 10-yr doublers are where the issue is.

And the OP's ground rent won't hit £250 until it goes from £200 to £400 in the year 2059.

Totally agree, but for whatever reason, the buyer's specific lender has problems with it.

Kyresa

TreeFitter222 said:

We purchased our property at the beginning of 2018 and we're now in the process of selling again.

Shockingly, we have received a letter from our buyer's solicitor stating that there is a doubling ground rent clause (every 25 years) on the lease of our flat, which included the official copy of the lease dated 2014. The letter goes on to say that without a deed of variation being added to the lease, the lender cannot mortgage the property. This is the first time we have ever seen this document!

This is made very ironic by the fact that we are a bit obsessive about looking for a new property without a leasehold, ground rent (including new builds for trimming the verges) or purchasing on an unadopted road.
The only document we received (labelled "Official Copy (Lease)") is dated back to 1981. The new document was created in 2014 but we never saw this while in the process of purchasing.

I approached the management company to ask for a deed of variation to be agreed with the landlord and they have come back with a figure which totals almost £7,000!!!! Bearing in mind that we only pay £100 a year and the ground rent charge is due to double in 2034, this is an incredible amount of money. 

What can we do in this situation? If we had known about this doubling ground rent charge we would never have purchased the property and I'm not sure our lender would have either.

£7,000 is rather a lot if you are just trying to get a Deed of Variation to reduce the ground rent to a peppercorn or alternatively just to state it will never rise above £250.   Are you sure they don't think you want a lease extension (adding more years to your current lease).  You might want to double check!!

withaspritz

We recently sold a flat (completed October 2020) with the same 25 year doubling ground rent, with no issues. The buyer's mortgage was with Natwest if that helps.  Our mortgages on the flat (built 2007) were with both Halifax and Natwest prior to selling, and they didn't have any issue either.  The GR was £125 and due to double in 2032 to £250, which is below the AST trap mentioned above (£251 or above).

Worth noting, our lease stated the doubling would only happen at years 25, 50, 75 and 100 of the 150 year lease starting 2007.  So it wasn't doubling for the whole of the life of the lease just the first 100 years.