Could you have a look at the terms of lease for flat - anything onerous?

Fufu3333

Looking to buy a flat and wonder if you would be able to review parts of the lease below and advise if you see anything I should be wary of before I put in an offer:

The ground rent is 160.  Service Charge Contribution-£1069.23 and there is another Current Estate Service Charge Contribution of £210.43.  Does this add up to make the Service Charge circa 1300.00? 

ONE HUNDRED AND SIXTY POUNDS (£160.00) per annum or such greater sum per annum as may be due in accordance with the provisions of the Ninth Schedule.

THE NINTH SCHEDULE - Review of Ground Rent

1. In this Schedule the following definitions shall apply:

1.1 "Review Date": the tenth anniversary of the Term and every tenth anniversary of that date.

3. The amount of the annual Ground Rent shall be revised on each Review Date to the greater of (and the revised Ground Rent shall be referred to herein as "the Revised Ground Rent"):

3.1 the Ground Rent per annum payable immediately before the relevant Review Date or,

3.2 the indexed rent determined pursuant to this clause ("the Indexed Rent").

4. The Indexed Rent shall be determined at the relevant Review Date by multiplying the Ground Rent then payable by the All Items index value of the RPI for the month before the month in which the relevant Review Date falls, then dividing t he product by the All Items index value of the RPI for the Base RPI Month.

5. The Landlord shall calculate the Indexed Rent as soon as reasonably practicable following the relevant Review Date and shall give the Tenant writ ten notice of the Indexed Rent and the Revised Ground Rent as soon as reasonably practicable after they have been calculated.

6. If the Revised Ground Rent has not been calculated by the Landlord and notified to the Tenant at least five working days before the relevant Review Date, the Ground Rent payable from that Review Date shall continue at the rate payable immediately before that Review Date. No later than five working days after the Revised Ground Rent is not notified by the Landlord to the Tenant, the Tenant shall pay the shortfall (if any) between the amount that it has paid for the period from the Review Date until the Rent Payment Date following the date of notification of the Revised Ground Rent and the amount that would have been payable had the Revised Ground Rent been notified on or before that Review Date.

Anything in the lease I should check for?

Thank you

AdrianC

Seems straightforward. Ground rent goes up by RPI inflation every decade. Not an issue for lenders.

£1,070 + £210 is certainly pretty close to £1,300.

MaryNB

Check for any rules that may impact on any future plans - e.g. no pets allows, not allowed to let it out. 

Fufu3333

Ok. good. Is the ten year increase ok?

Just noticed it says:

LR6. Term for which the property is leased

The term is as follows: 999 years from 1st January 2018. (Is this ok?)

No rules that I can see regarding pets or subletting.

Landlord is Hillreed Homes Limited. Anyone have any experience with them?

AdrianC

Fufu3333 said:

Ok. good. Is the ten year increase ok?

The issue with ground rent increases is when they double in ten years, so they increase far more rapidly than inflation - they become "more expensive" over time.

Doubling in 25yrs is about inflationary, usually. They stay about the same real cost.

Inflationary increases are, by definition, inflationary...

MaryNB

Fufu3333 said:

Ok. good. Is the ten year increase ok?

Just noticed it says:

LR6. Term for which the property is leased

The term is as follows: 999 years from 1st January 2018. (Is this ok?)

No rules that I can see regarding pets or subletting.

Landlord is Hillreed Homes Limited. Anyone have any experience with them?

That term is as good as it gets. Any relatively new flats near me start at 125 or 140. It's generally only much older flats in my area that are 999 years.

eddddy

Fufu3333 said:

Service Charge Contribution-£1069.23 and there is another Current Estate Service Charge Contribution of £210.43.  Does this add up to make the Service Charge circa 1300.00? 

The service charge is your share of the bills - for stuff like buildings insurance, building maintenance, building repairs, grounds maintenance plus probably a management fee.


I suspect that what you've been told is that this year, the share of the bills for 'your' flat is estimated to be £1069 + £210.


It's an estimate so it might end up being more or less than that. And next year (and in future years), it might be more or less than that. It could be a lot more, if some major repairs are needed. Or if there are some insurance claims, the buildings insurance bill might shoot up.



(If the lease started in 2018, I guess the building is about 3 years old.  So hopefully it won't require any big maintenance jobs for a few years yet - which should stop the service charge bill going up too much.)

Fufu3333

Thanks very much for your advice. 

One other query which I have just noticed on the copy lease:  

9.2  Not to underlet the Property except as a whole and then not without first providing the Management Company with the names of the proposed underlessee and the address for service of the tenant For the avoidance of doubt the obligations relating to underletting contained in paragraphs 9.2 and 9.3 of this Schedule shall not apply to any lettings by way of Assured Shorthold Tenancy Agreements for terms not exceeding three years.

9.3  Not to assign or part with possession of the Property as a whole without first procuring that the assignee enters into a direct covenant with the Landlord and the Management Company in the form set out in the Seventh Schedule to observe and perform the covenants and conditions on the part of the Tenant contained in this Lease including this Clause 9.

May eventually like to rent this property out after a few years.  Would that be a possibility?

 

Slithery

Fufu3333 said:

May eventually like to rent this property out after a few years.  Would that be a possibility?

Yes. Nothing in your lease prohibits it.

user1977

Fufu3333 said:

9.2  Not to underlet the Property except as a whole and then not without first providing the Management Company with the names of the proposed underlessee and the address for service of the tenant For the avoidance of doubt the obligations relating to underletting contained in paragraphs 9.2 and 9.3 of this Schedule shall not apply to any lettings by way of Assured Shorthold Tenancy Agreements for terms not exceeding three years.

9.3  Not to assign or part with possession of the Property as a whole without first procuring that the assignee enters into a direct covenant with the Landlord and the Management Company in the form set out in the Seventh Schedule to observe and perform the covenants and conditions on the part of the Tenant contained in this Lease including this Clause 9.

May eventually like to rent this property out after a few years.  Would that be a possibility?

Assuming you do so using an AST (would be odd not to), then yes, none of that is relevant - see bit in bold.