Ground Rent Increases - What are others doing?

Rajibear

Dear All, I purchased an apartment in 2011 and it has ground rent charges of £500 p.a. for the apartment and £250 p.a. for the car parking space (which is in a separate building to the apartment).

In my lease it indicates that the ground rent is reviewed every 10 years and a variable factor (it is complicated how they calculate it) is applied to determine the ground rent for the next 10 years. A few years back the review was carried out and the ground rent has increased to £679.68 for the apartment and £339.84 for the car park space.

My question is, what can I do about this as there has been a lot of news about not being able to sell or mortgage an apartment in the future with ground rents that escalate to high levels?

I have also seen that a new act came into force where new leasehold homes can only have peppercorn rents.

An article on the gov.uk website also shows that the Competition and Markets Authority had succeeded to bring action or persuade a number of freeholders to remove these kind of clauses from leases.

I see in one case the freeholder sold the freehold to the leaseholders at a discount.

I am generally concerned that the value of my apartment will go down from here on in, if after all a buyer is able to buy an apartment with zero ground rent or one that has for example £2000 per year, they would prefer the zero.

Can I as a leaseholder, either on my own, or as a group with the others in the block or even the development, approach the freeholder to remove these clauses?

Will they even entertain the idea?

Or should we wait for further acts in the leasehold reform to come?

Is my original solicitor liable in anyway if they didn’t flag this up? They may have done but I didn’t understand the implications.

Are any of you in the same situation and what, if anything, are you doing?

Thanks,

Raj

user1977

As I understand it, there are not yet any legislative changes relevant to you. So if you wanted to change the rent arrangement now, you'd have to do a deal with the freeholder, which would no doubt include paying a lump sum to compensate for the rent they'd be forgoing in the future.

Yes, your solicitor should have explained it to you at the time. They couldn't however have explained to you how such rents would be viewed in the market 11+ years in the future.

eddddy

Rajibear said:

Can I as a leaseholder, either on my own, or as a group with the others in the block or even the development, approach the freeholder to remove these clauses?

Your options include...

Collective Enfranchisement
The leaseholders can club together and compulsorily buy the freehold of the building - it's called "Collective Enfranchisement"
See: https://www.lease-advice.org/advice-guide/ce-getting-started/

Then you would all jointly be able to change the ground rent for all the flats. But you'd all have to agree to put money towards the purchase, and agree all the terms.

Depending on your type of lease, it might also mean that you all become responsible for managing the building - insuring it, maintaining it, repairing it, etc. You might see that as good thing or a bad thing.


Statutory Lease Extension
You have the statutory right to extend your lease - in return for a payment. Whilst you probably don't want an extended lease, it reduces your ground rent to zero at the same time.
See: https://www.lease-advice.org/advice-guide/lease-extension-getting-started/


"Buying out" your ground rent
Currently, you don't have the statutory right to do this - but the government are talking about leasehold reforms that might include this. But there's no timescale for implementing this.

Essentially, you would pay your freeholder a lump sum, in return for reducing your ground rent to zero.


Competition and Markets Authority investigation
The CMA are investigating developers/freeholders for breaching consumer protection laws - for misleading consumers and/or having unfair contract terms about ground rents.

Some developers/freeholders have 'voluntarily' agreed to change their lease ground rent terms - to avoid the investigation and to avoid reputational damage.

You could check the info here, to see if your developer/freeholder is on the list: https://www.gov.uk/cma-cases/leasehold