Ground rent woes

Meph79

So it turns out we have a unmortgageable  house, only discovering this when our lender of 13 years (Santander) refused to give our buyer a mortgage due to a ground rent clause that has always been there. 

Our ground rent clause is confusing to say the least, referring to the value never being more than £1 less of the figure specified in the rent act and linked legislation, but ignoring that (as everyone seems to do) our rent appears to double every 20 years. We started on £200 and it is due to rise in 7 years. 

Sadly when we challenged the clause when we first bought the property the conveyancer, recommended by the developer, advised it was “standard and perfectly satisfactory” and that we should be able to buy the freehold for a few thousand - yeah not likely! 

We passed on details of the comments we’d had to the Estate Agent when we had the offer and accepted a £7.5k reduction in price. Unfortunately 4 months into the sale  (don’t get me started on NBM law!) it was flagged as an issue and we’ve now been told it will take 3 months to sort a deed of variation to align with RPI. 

This seems excessively long, is that standard given all the RPI DoVs that must be happening? 

Also, why are lenders stepping outside of the CMA’s pledge? This covers those who have a ground doubling more frequently than 20 years but our freeholder wouldn’t even have a conversation with us until there was proof of a lender’s rejection because ours doubles every 20 years. 

Also, does anyone have experience with negligence claims for the original conveyancer? We have all the original emails and letters. 

Thanks! 

AdrianC

You have no negligence claim.

At the time, lenders were not rejecting 20-yr-doubling ground rent.
It was indeed fairly "standard".
You clearly found it "perfectly satisfactory", else you wouldn't have bought the place.

Now, nearly a decade and a half (including one major global pandemic and one major global financial crash) later, it appears at least one lender has changed their mind. Yes, they can do that.

You KNOW for a fact that same lender were accepting those conditions back then, because they lent to you...

But if your freeholder want proof of a rejection to lend, surely you have that?

Meph79

Thank you for your response and something we have considered and is not our priority. Would say though that obviously the CMA disagree else there wouldn’t now be a ‘scandal’ around these type of terms. 

Copy of rejection received and issued to the freeholder. 

[Deleted User]

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NameUnavailable

It's to do with ground rent levels and AST's - ground rent over £250 outside London or £1000 in London means that your lease is in fact an AST and you have the risk of losing your property if you failed to pay the ground rent - lenders are worried in those circumstances as they don't have control of the risk.

Shaztastic3000

[DELETED USER] said:

Hopefully the freeholder will let you buy your way out, otherwise as you say your house is practically worthless.

Don't expect the government to help you. If they won't do anything about cladding they won't help you with this either 

As mentioned in the post, a DoV is being arranged

AdrianC

Meph79 said:

Would say though that obviously the CMA disagree else there wouldn’t now be a ‘scandal’ around these type of terms.

Most of the issue is around very short doublers - around 10yrs.

25yr doublers work out to around the typical rate of inflation, less if you take into account the total paid.
Your 20yr doubler is a bit shorter than that, but not much.

Tokmon

Meph79 said:

So it turns out we have a unmortgageable  house, only discovering this when our lender of 13 years (Santander) refused to give our buyer a mortgage due to a ground rent clause that has always been there. 

Our ground rent clause is confusing to say the least, referring to the value never being more than £1 less of the figure specified in the rent act and linked legislation, but ignoring that (as everyone seems to do) our rent appears to double every 20 years. We started on £200 and it is due to rise in 7 years. 

Sadly when we challenged the clause when we first bought the property the conveyancer, recommended by the developer, advised it was “standard and perfectly satisfactory” and that we should be able to buy the freehold for a few thousand - yeah not likely! 

We passed on details of the comments we’d had to the Estate Agent when we had the offer and accepted a £7.5k reduction in price. Unfortunately 4 months into the sale  (don’t get me started on NBM law!) it was flagged as an issue and we’ve now been told it will take 3 months to sort a deed of variation to align with RPI. 

This seems excessively long, is that standard given all the RPI DoVs that must be happening? 

Also, why are lenders stepping outside of the CMA’s pledge? This covers those who have a ground doubling more frequently than 20 years but our freeholder wouldn’t even have a conversation with us until there was proof of a lender’s rejection because ours doubles every 20 years. 

Also, does anyone have experience with negligence claims for the original conveyancer? We have all the original emails and letters. 

Thanks! 

So how much was the freehold when you tried to buy it and why didn't you go ahead with buying it at the time?

Meph79

We weren’t offered to buy it by the developer, only years later after it was sold on to a management company. I haven’t got their original offer (a frustration) but think it was between £8k - £14k. At that time, circa 2010, we did not have that kind of money and based on our original conveyancer’s comments we were completely ignorant to there being an issue until 4 months into the sale. Even our current conveyancer believed the first clause offered protection, Santander clearly didn’t. 

Whilst I’ll accept we could have refused the terms, when your legal advisor is telling you they’re fine you tend to believe them. Granted hindsight is wonderful. 

Tokmon

Meph79 said:

We weren’t offered to buy it by the developer, only years later after it was sold on to a management company. I haven’t got their original offer (a frustration) but think it was between £8k - £14k. At that time, circa 2010, we did not have that kind of money and based on our original conveyancer’s comments we were completely ignorant to there being an issue until 4 months into the sale. Even our current conveyancer believed the first clause offered protection, Santander clearly didn’t. 

Whilst I’ll accept we could have refused the terms, when your legal advisor is telling you they’re fine you tend to believe them. Granted hindsight is wonderful. 

I don't think the ground rent would have been an issue at all when you first purchased, but if i was in your position i would have been questioning a yearly £200 cost simply because i wouldn't want to be paying ground rent on a house when there was no need. I would have tried to get it removed or at least looked at purchasing the freehold as soon as i could; asking how much it would be when making the purchase. 

Meph79

Got all the emails where we did exactly that, challenged the amount, asked them to explain the increase terms, asked how much it would be to purchase etc. Naively I know but we were persuaded that it was all reasonable and misinformed regarding the sale price.