Ground Rent Review on leasehold property.

Eddy657

Hi - we have a property that we bought 7 years ago which is a leasehold property.
We have been paying £222 per year since the purchase. (we have asked to purchase the lease but received a negative reply). Today I received an email from the asset management company on behalf of the owners (Aviva) saying "Following a review of the lease for this property we write to confirm that your ground rent is due for rent review on the 1st May 2021. As per your lease the ground rent is to increase in accordance with the Retail Price Index (RPI) which is a measure of inflation published monthly by the Office of National Statistics. For each subsequent Rent Period, the Annual Rent shall be the higher of the Annual Rent payable during the previous Rent Period and the "current rent guide" calculated in accordance with the following formula: A x B where: C

A = Initial rent 

B = The Review index as prescribed in your Lease 

C = The Base index as prescribed in your Lease

D = B divided by C

Calculated as follows:

A = 222.00

B = 296.9

C = 195

D = 1.522564103

A x D = 338.01

We can therefore advise you that the amount of your new rent, following this review, is 338.01 per annum."

My question is are they allowed to increase the ground rent by such an amount from £222.00 to £338.01 & are they allowed to back-date it?
Thanks.

steampowered

It depends on the terms of your lease. I can't read it from here!

As Aviva are a professional company they are probably correct, but its worth reading your lease to double check.

They are not "backdating" the ground rent. The ground rent is increasing in line with the lease. It sounds like the ground rent under your lease increases every 10 years in line with inflation, which is common. 

m0bov

Did you Sol not raise this as an issue when you purchased? Can affect resale.
I'd do a Statuary lease renewal and do it on peppercorn rate and shed all the increases.

MaryNB

Is your property outside of London? If so be aware the ground rent exceeding £250 means it becomes an assured tenancy which may make selling it a bit more complex if a future buyer's lender takes issue with this.
If it is in London the issue arises when it's over £1000 so you don't have to worry about it.

eddddy

In simple terms, it sounds like your lease says your ground rent is increased periodically in line with inflation.

• You mention a base index of 195 - that looks like the RPI for March 2006
• You mention a base index of 296.9 - that looks like the RPI for March 2021

So the lease you bought probably started in May 2006 with a ground rent of £222, and says that your ground rent is reviewed every 15 years.  (But there are other possibilities as well.)

Assuming that's what your lease says, the ground rent calculation you show seems right.

Are you outside London? If so a ground rent over £250 can be a problem. You need to make sure you always pay the ground rent promptly to avoid having your property repossessed, and it might cause a problem when you sell.


FWIW, if your property is a flat - you can reduce the ground rent to zero, by doing a statutory lease extension
If your property is a house - you could buy the freehold which would remove ground rent
But with an ground rent linked to RPI, both those options might be quite expensive.