Does this raise any Alarm Bells

Fufu3333

I have viewed a flat and I am interested in putting an offer in.  It is a newish build small block of flats (6 in the block), 4 years old.
Just wonder if anything below raises any alarm bells, in terms of the Ground Rent and Service Charge.  
Are there any other important questions I should be asking?
Thanks for your help.

TERM : 125 years from the 1st January 2016
ANNUAL RENT:
£250.00 per annum for the first period of 10 years of the term
£350.00 per annum for the second period of 10 years
£450.00 per annum for the third period of 10 years
£550.00 per annum for the fourth period of 10 years
£650.00 per annum for the fifth period of 10 years
£750.00 per annum for the sixth period of 10 years
£850.00 per annum for the seventh period of 10 years
£950.00 per annum for the eighth period of 10 years
£1050.00 per annum for the remainder of the Term

DEVELOPMENT SERVICE CHARGE: The aggregate annual maintenance provision for the Development for each Maintenance Year (calculated in accordance with Part 1 of the Fourth Schedule)
CURRENT DEVELOPMENT SERVICE CHARGE CONTRIBUTION:   £939.33 per annum

Fufu3333

Current owner bought the flat in 2017.

knightstyle

Ground rent seems fine but I would want to know who the lease owner is and who manages the development as there are several really bad companies who rip lease holders off.

NameUnavailable

Where is the flat? In January 2026 the ground rent increases to £350 which means that your lease becomes an Assured Shorthold Tenancy if it's outside London. There are legal implications you need to consider and if you are seeking a mortgage you may find some lenders reluctant to do so.

Tiglet2

Quite a lot of lenders do not like 10 year doubling ground rent and may not lend.  Doubling ground rents run the risk of entering the 'Assured Shorthold Tenancy 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).  Where is the flat located?

user1977

Tiglet2 said:

Quite a lot of lenders do not like 10 year doubling ground rent and may not lend.

It increases every 10 years, but by £100, not double. It looks like a low enough rate of increase to satisfy most lenders. Just the AST issue to be concerned about.

AdrianC

Even the steepest increase - £250 to £350 - is only a 40% increase, not double. Subsequent increases are smaller proportions - the final increase, from £950 to £1050 is just 10%.

Fufu3333

Flat is in Kent.  HillReed landlord.

NameUnavailable said:

Where is the flat? In January 2026 the ground rent increases to £350 which means that your lease becomes an Assured Shorthold Tenancy if it's outside London. There are legal implications you need to consider and if you are seeking a mortgage you may find some lenders reluctant to do so.

I wondered about the Assured Shorthold thing. Is this where someone needs to either ask for a Deed of Variation or extend the lease (which already has 125 years remaining)?  Both options involve more costs and seem so long-winded.  Maybe I should just hang on for a house.  

AdrianC

Fufu3333 said:

Flat is in Kent.

Actual Kent-Kent, not a bit of an outer London borough?

Fufu3333

AdrianC said:

Fufu3333 said:

Flat is in Kent.

Actual Kent-Kent, not a bit of an outer London borough?

Yes actual Kent - way out Kent (closer to France).

saajan_12

Fufu3333 said:

I have viewed a flat and I am interested in putting an offer in.  It is a newish build small block of flats (6 in the block), 4 years old.
Just wonder if anything below raises any alarm bells, in terms of the Ground Rent and Service Charge.  
Are there any other important questions I should be asking?
Thanks for your help.

TERM : 125 years from the 1st January 2016  - fairly standard, you have 40+ years before anyone needs to extend, which is plenty. 
ANNUAL RENT: - the total you pay over the lease is approx equivalent to 1.7% inflation, which is pretty good. This is mainly because your increases taper off towards the end, while most leases increase faster in the distant future (that's how compounding works).  Nothing wrong with either way, but lenders may not be familiar with it. Make sure you (or your solicitor) points out its not doubling every 10 years). The charges are front loaded, and in 10 years (2026) it'll be £350, which may be a concern re being treated as an AST. 
£250.00 per annum for the first period of 10 years of the term
£350.00 per annum for the second period of 10 years
£450.00 per annum for the third period of 10 years
£550.00 per annum for the fourth period of 10 years
£650.00 per annum for the fifth period of 10 years
£750.00 per annum for the sixth period of 10 years
£850.00 per annum for the seventh period of 10 years
£950.00 per annum for the eighth period of 10 years
£1050.00 per annum for the remainder of the Term

DEVELOPMENT SERVICE CHARGE: The aggregate annual maintenance provision for the Development for each Maintenance Year (calculated in accordance with Part 1 of the Fourth Schedule) - find what that Fourth Schedule says (what % of the place do you pay, what does it cover, etc). 
CURRENT DEVELOPMENT SERVICE CHARGE CONTRIBUTION:   £939.33 per annum - look at the latest accounts, how much of a sinking fund is there, etc

The ground rent is reasonable. The schedule is atypical, so you may need to push your lender (and future buyer) to get comfortable with it just because its different, not bad at all. The total you pay in 'today's money' is equivalent to ~1.7% inflation which is good, and the increases taper off at the end. 
The only concern is the first increase in 2026 will push it over £250, so can be treated as an AST. Your lender may have concerns about this. 

Re the service charge, the amount isn't immediately unreasonable, but need more info eg
- what features the service charges cover (lifts? gym? concierge? alarms? etc etc)
- what % you pay
- size of sinking fund