Doubling ground rent

chareth_cutestory

I have a flat that I am struggling to sell which has a 10 year doubling ground rent clause, currently £250 a year until 2028.

The freeholder is a company called Pier Management, who have said that they are converting all the ground rents to RPI-linked via deeds of variation, but that they are going through all of their properties systematically, and will not make exceptions for any individual as lots of people are in the same position of either trying to sell or to remortgage.

The problem is that I initially had a cash buyer lined up for a quick sale, so I moved in with my girlfriend in September and have been paying two sets of bills since then, and that sale has since fallen through. Pier still insist that they can't make exceptions and that a deed of variation will be done in the next 12 months, which is obviously going to be 12 months of paying double bills including energy bills and a mortgage now outside of a fixed term. I've told them that I can't afford this and their answer is basically "too bad".

My estate agent has told me that no bank will issue a mortgage with a doubling ground rent clause. I don't know how true that is since I got a mortgage in 2018, and then a new fixed-term in 2020, but is proof from the freeholder that the rent is due to be fixed good enough to secure a mortgage? Also is there anything that I can do to speed up the process when Pier refuse? They handle the cost except for my solicitor's fees, but obviously if I can pursue this outside of their own process then that would be quicker, but I imagine they can just refuse to agree to a deed of variation except on their own terms.

propertyhunter

Can you rent the property out for a year to cover your bills? 

dimbo61

Not sure how many views this post has had but I think your right and Pier Management hold all the Power here.
Could you rent out the property for a year or two ? 
See how your relationship develops !
Your girlfriend was paying all her bills and mortgage before you met and you had to cover your bills and mortgage.
Could you get a Lodger ?
Be very very careful you don't sign your flat over to any of the companies offering to Guarantee you rent each month with professional tenants on a Long term sub lease agreement.

anselld

RPI linked rises every 10 years will not necessarily make it easier to mortgage since many providers object to ground rents above £250 or that are likely to rise above £250 in the near future.  (outside London)  It is better but it is still not good. 

Can you not seek another cash buyer in the meantime.

chareth_cutestory

dimbo61 said:

Your girlfriend was paying all her bills and mortgage before you met and you had to cover your bills and mortgage.
Could you get a Lodger ?

She was looking to sell the house before we met as she couldn't afford to pay the bills by herself any more. I have more than enough money to pay both sets of bills (especially as the mortgage on my flat is only £300p/m and I obviously get most of that back when I finally sell), but she can't afford to pay the house bills by herself so we'd have to sell.

I can't really get a lodger as the flat is almost empty, but I could potentially rent it. That just locks me in for another 6-12 months though and probably means evicting someone at the end of it.

saajan_12

chareth_cutestory said:

I have a flat that I am struggling to sell which has a 10 year doubling ground rent clause, currently £250 a year until 2028.- are you in London or outside? If outside, then even the 250 will be a problem re creation of an AST

The freeholder is a company called Pier Management, who have said that they are converting all the ground rents to RPI-linked via deeds of variation, - are they charging for the variation, and who is paying for legal costs? what will the new terms be eg new formula, frequency of revaluations..? 
but that they are going through all of their properties systematically, and will not make exceptions for any individual as lots of people are in the same position of either trying to sell or to remortgage. - unfortunately they are not  required or incentivised to in the buying process.. best you can do is offer an extra fee to change their mind..

The problem is that I initially had a cash buyer lined up for a quick sale, so I moved in with my girlfriend in September and have been paying two sets of bills since then, and that sale has since fallen through. - can you look for another cash buyer?
Pier still insist that they can't make exceptions and that a deed of variation will be done in the next 12 months, which is obviously going to be 12 months of paying double bills including energy bills and a mortgage now outside of a fixed term. - can you let out the property for 12 months, and then sell with tenants in situ if they don't want to leave? Tenants in situ might affect your sale price, but so will selling with a poor lease for cash buyers only, I've told them that I can't afford this and their answer is basically "too bad". 

My estate agent has told me that no bank will issue a mortgage with a doubling ground rent clause. I don't know how true that is since I got a mortgage in 2018, and then a new fixed-term in 2020, - lease terms have been scrutinised much more closely in recent years, so yes lenders are more sensitive to this now. If your remortgage was with the same lender, then they already had exposure to that property/lease, so the 2020 decision doesn't indicate much.. 
but is proof from the freeholder that the rent is due to be fixed good enough to secure a mortgage? - unlikely, the full terms / cost of this aren't yet clear - what if the buyer can't afford to pay whatever fee the freeholder wants to vary the lease? Also if freeholder's proof was set in stone then there would be a lease variation signed 
Also is there anything that I can do to speed up the process when Pier refuse? They handle the cost except for my solicitor's fees, but obviously if I can pursue this outside of their own process then that would be quicker, but I imagine they can just refuse to agree to a deed of variation except on their own terms.  

Sounds super annoying.. the options I can suggest are:

1. Remarket for a cash buyer now
2. Let for 12 months and then sell with tenant in situ if they don't want to leave 
3. Get statutory lease extension with peppercorn ground rent -> this backstops the timescale if their 12 months isn't reliable, and might incentivise a buyer

[Deleted User]

Have you asked if they will let you buy it out for a lump sum?

anselld

There is also the thought with how things are going ...

   Doubling every 10 years equates to about 7.2% per annum.

   Current RPI increase 8.2% per annum.

Hopefully that is a short term issue.

K_S

chareth_cutestory said:

I have a flat that I am struggling to sell which has a 10 year doubling ground rent clause, currently £250 a year until 2028.

The freeholder is a company called Pier Management, who have said that they are converting all the ground rents to RPI-linked via deeds of variation, but that they are going through all of their properties systematically, and will not make exceptions for any individual as lots of people are in the same position of either trying to sell or to remortgage.

The problem is that I initially had a cash buyer lined up for a quick sale, so I moved in with my girlfriend in September and have been paying two sets of bills since then, and that sale has since fallen through. Pier still insist that they can't make exceptions and that a deed of variation will be done in the next 12 months, which is obviously going to be 12 months of paying double bills including energy bills and a mortgage now outside of a fixed term. I've told them that I can't afford this and their answer is basically "too bad".

My estate agent has told me that no bank will issue a mortgage with a doubling ground rent clause. I don't know how true that is since I got a mortgage in 2018, and then a new fixed-term in 2020, but is proof from the freeholder that the rent is due to be fixed good enough to secure a mortgage? Also is there anything that I can do to speed up the process when Pier refuse? They handle the cost except for my solicitor's fees, but obviously if I can pursue this outside of their own process then that would be quicker, but I imagine they can just refuse to agree to a deed of variation except on their own terms.

@chareth_cutestory Limited to the mortgage related points -

- you mention being out of the fixed rate, is a product-switch/product-transfer/rate-switch (staying with your current lender and picking a new product, no underwriting or assessment involved usually) not an option? Your lender might offer flexible tracker/discount products with low/no ERC which might overall work out better than staying on the SVR.

- a 10-year doubling ground-rent clause, starting at £250 is definitely a big barrier for a mortgage. Most lenders will consider doubling no more frequently than 20/21 years. There may be specialist lenders like Norton or Together who will consider at a high interest rate, but as a seller there's no way you are going to be able to guide buyers to that option.

- The ground rent exceeding £250 is not an insurmountable issue on it's own, depends on the value of the flat, where it's located, etc.

- The confirmation from the freeholder of a future variation in the lease is unlikely to satisfy a mortgage lender.