Is it possible to change ground rent to peppercorn?

Hold_on

I live in a new build since 2019 and me, along with everyone who bought up until some point last year, pays a ground rent. But we found out that newer residents do not and just pay peppercorn

Is there anything we (older residents) can do to reduce/change our ground rent? Has anyone been in a similar position?

eddddy

Hold_on said:

Is there anything we (older residents) can do to reduce/change our ground rent? Has anyone been in a similar position?

Do you own a house or a flat? The options might be different.

For both houses and flats - you can try to negotiate with the freeholder to reduce the ground rent to zero/peppercorn.

Assuming the freeholder agrees to enter into negotiations with you, then it's a case of agreeing a price for reducing the ground rent. But there's nothing to stop the freeholder asking for a stupidly high price.

Or the freeholder might just ignore your request and/or refuse to discuss it.


If it's a flat, you can probably get the ground rent down to zero/peppercorn by doing a statutory lease extension.

If it's a house, you can probably buy the freehold - then there's no ground rent.


What is your current ground rent? Does it increase?

Hold_on

eddddy said:

Hold_on said:

Is there anything we (older residents) can do to reduce/change our ground rent? Has anyone been in a similar position?

Do you own a house or a flat? The options might be different.

For both houses and flats - you can try to negotiate with the freeholder to reduce the ground rent to zero/peppercorn.

Assuming the freeholder agrees to enter into negotiations with you, then it's a case of agreeing a price for reducing the ground rent. But there's nothing to stop the freeholder asking for a stupidly high price.

Or the freeholder might just ignore your request and/or refuse to discuss it.


If it's a flat, you can probably get the ground rent down to zero/peppercorn by doing a statutory lease extension.

If it's a house, you can probably buy the freehold - then there's no ground rent.


What is your current ground rent? Does it increase?

Thanks for the response

It's a flat. So most of us in our building pay a ground rent of a couple hundred or so, but then the new residents of the building don't. It does increase every 10 years I believe by RPI

Sorry to sound dense but do we have a right/ability to do a statutory lease extension considering our lease essentially started 3 years ago?

eddddy

Hold_on said:

Sorry to sound dense but do we have a right/ability to do a statutory lease extension considering our lease essentially started 3 years ago?

If you've owned the property for over 2 years, you can usually do a lease extension.

It sounds a bit daft when the lease is only 3 years old, but it's a way of reducing the ground rent to zero at a 'fair' price.


There are leasehold reforms being discussed which would allow you to reduce your ground rent to zero, without extending your lease. That might reduce the cost by £1k or £2k.

The leasehold reforms should also reduce the professional fees you have to pay by something like £1k to £3k.

But these reforms have been under discussion for years, so discussion could continue for a number more years (or they might not happen).

Hold_on

eddddy said:

Hold_on said:

Sorry to sound dense but do we have a right/ability to do a statutory lease extension considering our lease essentially started 3 years ago?

If you've owned the property for over 2 years, you can usually do a lease extension.

It sounds a bit daft when the lease is only 3 years old, but it's a way of reducing the ground rent to zero at a 'fair' price.


There are leasehold reforms being discussed which would allow you to reduce your ground rent to zero, without extending your lease. That might reduce the cost by £1k or £2k.

The leasehold reforms should also reduce the professional fees you have to pay by something like £1k to £3k.

But these reforms have been under discussion for years, so discussion could continue for a number more years (or they might not happen).

Thank you, that's really useful!

I imagine we can do an extension but as you said before, I imagine the freeholder can just tell us no because it's not in their benefit?

eddddy

Hold_on said:

I imagine we can do an extension but as you said before, I imagine the freeholder can just tell us no because it's not in their benefit?

No - just to clarify. You have a statutory right to do a statutory lease extension, which reduces the ground rent to zero. The freeholder can't stop you. (Although there are a few qualification criteria).

Here's some info about doing that: https://www.lease-advice.org/advice-guide/lease-extension-getting-started/



But you have no statutory right to reduce the ground rent to zero without a lease extension. So the freeholder can say "no".

But the potential benefit to the freeholder of saying "yes" is you would be paying them a few grand now as a lump sum, instead of drip-feeding them £200 per year.

NameUnavailable

Hold_on said:

eddddy said:

Hold_on said:

Is there anything we (older residents) can do to reduce/change our ground rent? Has anyone been in a similar position?

Do you own a house or a flat? The options might be different.

For both houses and flats - you can try to negotiate with the freeholder to reduce the ground rent to zero/peppercorn.

Assuming the freeholder agrees to enter into negotiations with you, then it's a case of agreeing a price for reducing the ground rent. But there's nothing to stop the freeholder asking for a stupidly high price.

Or the freeholder might just ignore your request and/or refuse to discuss it.


If it's a flat, you can probably get the ground rent down to zero/peppercorn by doing a statutory lease extension.

If it's a house, you can probably buy the freehold - then there's no ground rent.


What is your current ground rent? Does it increase?

Thanks for the response

It's a flat. So most of us in our building pay a ground rent of a couple hundred or so, but then the new residents of the building don't. It does increase every 10 years I believe by RPI

Sorry to sound dense but do we have a right/ability to do a statutory lease extension considering our lease essentially started 3 years ago?

Be aware of the problems with ground rents above £250 if you are outside of the London area (£1K in London). If your GR is over £250 your lease becomes an assured tenancy which gives the freeholder powers to forfeit your lease if ground rent becomes overdue.

This also makes it very difficult for anyone to get a mortgage (even if you are under £250 now but the review clause means it will eventually rise above £250 will be a problem with most lenders).

eddddy

NameUnavailable said:

This also makes it very difficult for anyone to get a mortgage (even if you are under £250 now but the review clause means it will eventually rise above £250 will be a problem with most lenders).

I think most mortgage lenders will lend if the buyer arranges indemnity insurance.

But the indemnity insurance only protects the mortgage lender, and not the homeowner. So the homeowner can still lose their equity if the lease is forfeited.