Ground rent ban on new leases takes effect TODAY – what you need to know

eddddy

mojo293 said:

As it goes, I will be looking to purchase the freehold if I can and it's a reasonable cost (Vendors were quoted circa £2000 when the enquired), mainly to remove the risk of it being sold on to another 3rd party who may decide to change the lease and inflate the ground rent costs.

The 3rd party (new freeholder) cannot change the lease terms or change the ground rent terms - unless you agree.

But the lease might already say that the ground rent increases - for example, every 25 years - so that will continue to be the case.



Be very careful about relying on that quote of £2000 for the freehold.

Was it a recent written quote from the freeholder? Have you seen it? Or did it come from a salesperson when the house was initially bought from the developer?  There are stories of developers' salespeople 'fibbing' about how much the freehold would cost (e.g. they say £2k, but it later turns out to be £20k)

To be honest, even if it was a written quote, it is not binding on the freeholder. They can change their quote/offer at any time, by any amount.

Maybe think about getting a proper valuation from an independent valuer for buying the freehold. Plus bear in mind that the fees could be a few thousand on top.

diystarter7

Surely those buying freehold houses knew the risks and the benefits.

mojo293

eddddy said:

mojo293 said:

As it goes, I will be looking to purchase the freehold if I can and it's a reasonable cost (Vendors were quoted circa £2000 when the enquired), mainly to remove the risk of it being sold on to another 3rd party who may decide to change the lease and inflate the ground rent costs.

The 3rd party (new freeholder) cannot change the lease terms or change the ground rent terms - unless you agree.

But the lease might already say that the ground rent increases - for example, every 25 years - so that will continue to be the case.



Be very careful about relying on that quote of £2000 for the freehold.

Was it a recent written quote from the freeholder? Have you seen it? Or did it come from a salesperson when the house was initially bought from the developer?  There are stories of developers' salespeople 'fibbing' about how much the freehold would cost (e.g. they say £2k, but it later turns out to be £20k)

To be honest, even if it was a written quote, it is not binding on the freeholder. They can change their quote/offer at any time, by any amount.

Maybe think about getting a proper valuation from an independent valuer for buying the freehold. Plus bear in mind that the fees could be a few thousand on top.

Cheers for that. Yeah it all seems to be verbal at what was quoted and when, but my solictor have said the company who collects the ground rent for the freeholder charges £90 for a valuation which is valid for 3 months.

Its not something immediate, but I'll definitely get a valuation at some point. To approach them 'informally' can be done any time, but to go down the 'Formal' (statutory?) route, I'll have to have been the leaseholder for at least 2 years.

eddddy

mojo293 said:

my solictor have said the company who collects the ground rent for the freeholder charges £90 for a valuation which is valid for 3 months.

They call it a valuation, but...

.... just to be clear - you'd be paying them £90 to make you an offer.  There's no guarantee that their offer will be fair or reasonable.

It could be much more expensive than the statutory route.

If you ask for their offer within the first 2 years, they might even be a bit sneaky and quote an extra high offer price, because they know you can't go down the statutory route.

But on the other hand, they might be fair.

legalfreak

I know a similar question was asked above but there still seems to be some uncertainty imho for me at least.

If from tomorrow, I complete a sale of my flat held on a long lease, is it the case that I am (merely) 'assigning' my existing lease to the buyer and therefore the Act does not apply? Is the Freeholder approving the 'assignment' or are they approving a 'new lease' to the buyer?

The article here uses the words ' The new law guarantees that if you buy a leasehold property which has a new lease  - in other words a brand new leasehold property or an one where a new lease is taking effect'. What does the latter mean?

Which? in their piece of the 10th of June say 'Anyone buying a house or flat on a long lease from 30 June won't need to pay any ground rent.' Sounds like it does apply to an existing lease on an older property and not only a new build.

After looking at the Act I do think Which? are right here.

user1977

legalfreak said:

The article here uses the words ' The new law guarantees that if you buy a leasehold property which has a new lease  - in other words a brand new leasehold property or an one where a new lease is taking effect'. What does the latter mean?

Like I said above, it applies to any new lease for a residential property. Whether it's a newbuild property or not is irrelevant. You could grant a new lease of an ancient property - the same rules apply.

And it does not apply to assigning an existing lease. See section 1(1) of the Act:

"In this Act a “regulated lease” means a lease which meets the following conditions—

(a)it is a long lease of a single dwelling,

(b)it is granted for a premium,

(c)it is granted on or after the relevant commencement day, otherwise than in pursuance of a contract made before that day, and

(d)when it is granted, it is not an excepted lease,"

GDB2222

user1977 said:

legalfreak said:

The article here uses the words ' The new law guarantees that if you buy a leasehold property which has a new lease  - in other words a brand new leasehold property or an one where a new lease is taking effect'. What does the latter mean?

Like I said above, it applies to any new lease for a residential property. Whether it's a newbuild property or not is irrelevant. You could grant a new lease of an ancient property - the same rules apply.

And it does not apply to assigning an existing lease. See section 1(1) of the Act:

"In this Act a “regulated lease” means a lease which meets the following conditions—

(a)it is a long lease of a single dwelling,

(b)it is granted for a premium,

(c)it is granted on or after the relevant commencement day, otherwise than in pursuance of a contract made before that day, and

(d)when it is granted, it is not an excepted lease,"

Can I check this, please.

I'm Big Developer PLC, with a large field I have bought. Last year, I split it into 100 plots, and I assigned/sold those leases to  Subsidiary Ltd, long before this new legislation came into force. The 100 plots are on leases with £££££ ground rents.

The subsidiary now builds houses on those plots. There's a serious question here whether the subsidiary can sell those houses with the existing £££££ ground rent leases, or not?

user1977

GDB2222 said:

user1977 said:

legalfreak said:

The article here uses the words ' The new law guarantees that if you buy a leasehold property which has a new lease  - in other words a brand new leasehold property or an one where a new lease is taking effect'. What does the latter mean?

Like I said above, it applies to any new lease for a residential property. Whether it's a newbuild property or not is irrelevant. You could grant a new lease of an ancient property - the same rules apply.

And it does not apply to assigning an existing lease. See section 1(1) of the Act:

"In this Act a “regulated lease” means a lease which meets the following conditions—

(a)it is a long lease of a single dwelling,

(b)it is granted for a premium,

(c)it is granted on or after the relevant commencement day, otherwise than in pursuance of a contract made before that day, and

(d)when it is granted, it is not an excepted lease,"

I'm Big Developer PLC, with a large field I have bought. Last year, I split it into 100 plots, and I assigned/sold those leases to  Subsidiary Ltd, long before this new legislation came into force. The 100 plots are on leases with £££££ ground rents.

The subsidiary now builds houses on those plots. There's a serious question here whether the subsidiary can sell those houses with the existing £££££ ground rent leases, or not?

Those are existing leases so (as far as I can make out) aren't caught by the new legislation.

GDB2222

I'll just add that if the subsidiary company is selling an existing lease, with a new house built on it, it's not a lease "granted on or after the relevant commencement day".

My point is: Don't assume. Double-check!

legalfreak

user1977 said:

legalfreak said:

The article here uses the words ' The new law guarantees that if you buy a leasehold property which has a new lease  - in other words a brand new leasehold property or an one where a new lease is taking effect'. What does the latter mean?

Like I said above, it applies to any new lease for a residential property. Whether it's a newbuild property or not is irrelevant. You could grant a new lease of an ancient property - the same rules apply.

And it does not apply to assigning an existing lease. See section 1(1) of the Act:

"In this Act a “regulated lease” means a lease which meets the following conditions—

(a)it is a long lease of a single dwelling,

(b)it is granted for a premium,

(c)it is granted on or after the relevant commencement day, otherwise than in pursuance of a contract made before that day, and

(d)when it is granted, it is not an excepted lease,"

I agree with you. On a tangential matter it shows that even an organisation as reputable as Which? can make this mistake. In their article they also mentioned 'new' leases but then they wrote the sweeping statement I quoted. I would argue that they confused things.