Mortgage declined due to Ground Rent amount / terms

CadburyPurple

I have reserved a new build apartment outside London for a price of £730k, which has a 999 year lease, service charges around £2,500 and ground rent of £425 p/a for 21 years then increasing with the difference in RPI (between RPI at the time versus at the start of the period) every 21 years.

I'm OK with these figures but Nat West have refused my mortgage due to "onerous ground rent amount and terms". I believe they're nervous primarily about it being considered an AST and then the developer would have a charge over the property, putting the lender at risk. 

This whole situation makes me worried that even if I find a lender willing to lend, I'll have a difficult to sell property on my hands, which worries me as I may well want to move within 5-10 years due to various life uncertainties.

I understand the new law, which got Royal ascent earlier this month and will come into law in the Summer, will mean all new leases can only have peppercorn ground rent. I'm aware that many developers have stopped ground rent already. I know this developer is being greedy! I also know many other leaseholders are already in this position.

I'm trying to get the developer to remove ground rent from the lease, in line with new law, but so far they've said no.

I think I can do a statutory lease extension in two years to force the ground rent to zero but no idea how much this would cost, or even if it's necessary. It certainly seems that it'd be better to sort it now. 

I'm in a quandry as to whether to proceed with this apartment (which I love) or cancel my reservation, losing £500 and my legal fees to date, which could well be up to £2k I don't know yet.

I just don't know whether it's a risk (that it'll be difficult to sell in future) or how big the risk is.

Thoughts, advice, experience would be greatly appreciated please.

canaldumidi

Look for another property but stay in touch with the developer. He'll get the message eventually when his 2nd or 3rd buyer walks away......!

Mimi123456

Agree with canaldumidi. 

Once the new legislation is in force and all new builds start offering peppercorn rent this flat will get less and less attractive for potential buyers down the line. 

Also, for outside London a starting rent above >£250 is a red flag

penners324

Have a similar issue on mine. The mortgage company accepted an indemnity insurance to cover the issue.