Ground rent increase linked to RPI

eddddy

RedCannon94 said:

Having spoken with some more people on this, we'll definitely push the vendor to begin the process. One question fro you is how long would this take them to get into a position where it's been passed over and we can manage it post-move in? 

The vendors just need to serve notice on the freeholders. In simple terms, that just means sending a 'standard document' to the freeholder saying they want to buy the freehold. And another document assigning rights to you.

It's normally done between exchange and completion.

So any delay would just be due to the solicitor having a busy schedule, and being unable to prepare the documents for a while. Plus I expect the vendor's solicitor might want to prepare the documents, and your solicitor check the document, etc - which all takes time.

RedCannon94 said:

Fully aware of the costs associated. Fortunately in a situation where over the coming years where we would be able to cover the cost of this. Calculators online vary on what we'll pay. Some say 3-5k with others closer to 10k. Any calculators you suggest for getting quotes? 

I'm not aware of any calculators that handle ground rents that increase with RPI.  Which ones did you use to get your figures? (If you simply used a fixed ground rent of £200 or £250, you would get a huge underestimate of price.)


I've based my figure of £10k+ on what a RICS valuer told me about the valuation process for ground rents that increase with RPI. But I can't guarantee it's correct. And it was based on many years of low RPI. The tribunals might take a different approach with the much higher recent RPI - which might make freehold prices higher.

RedCannon94

eddddy said:

RedCannon94 said:

Having spoken with some more people on this, we'll definitely push the vendor to begin the process. One question fro you is how long would this take them to get into a position where it's been passed over and we can manage it post-move in? 

The vendors just need to serve notice on the freeholders. In simple terms, that just means sending a 'standard document' to the freeholder saying they want to buy the freehold. And another document assigning rights to you.

It's normally done between exchange and completion.

So any delay would just be due to the solicitor having a busy schedule, and being unable to prepare the documents for a while. Plus I expect the vendor's solicitor might want to prepare the documents, and your solicitor check the document, etc - which all takes time.

RedCannon94 said:

Fully aware of the costs associated. Fortunately in a situation where over the coming years where we would be able to cover the cost of this. Calculators online vary on what we'll pay. Some say 3-5k with others closer to 10k. Any calculators you suggest for getting quotes? 

I'm not aware of any calculators that handle ground rents that increase with RPI.  Which ones did you use to get your figures? (If you simply used a fixed ground rent of £200 or £250, you would get a huge underestimate of price.)


I've based my figure of £10k+ on what a RICS valuer told me about the valuation process for ground rents that increase with RPI. But I can't guarantee it's correct. And it was based on many years of low RPI. The tribunals might take a different approach with the much higher recent RPI - which might make freehold prices higher.

That's good to know that it shouldn't take long to address. We'll wait for the solictor to confirm for sure that indemnity is needed and then we'll get her to inform the vendor's solictor of us wanting this.

I assume there's no cost associated to the vendor for starting this process? (Outside of some minor legal fees at a push)

Can't recall exactly which calculator but honestly we're expecting to pay a decent whack regardless so will let the experts determine this in the future. Suggest we reach out to get a quote on this soon so that we can knock a suitable amount off the offer on the property?

RedCannon94

eddddy said:

RedCannon94 said:

Having spoken with some more people on this, we'll definitely push the vendor to begin the process. One question fro you is how long would this take them to get into a position where it's been passed over and we can manage it post-move in? 

The vendors just need to serve notice on the freeholders. In simple terms, that just means sending a 'standard document' to the freeholder saying they want to buy the freehold. And another document assigning rights to you.

It's normally done between exchange and completion.

So any delay would just be due to the solicitor having a busy schedule, and being unable to prepare the documents for a while. Plus I expect the vendor's solicitor might want to prepare the documents, and your solicitor check the document, etc - which all takes time.

RedCannon94 said:

Fully aware of the costs associated. Fortunately in a situation where over the coming years where we would be able to cover the cost of this. Calculators online vary on what we'll pay. Some say 3-5k with others closer to 10k. Any calculators you suggest for getting quotes? 

I'm not aware of any calculators that handle ground rents that increase with RPI.  Which ones did you use to get your figures? (If you simply used a fixed ground rent of £200 or £250, you would get a huge underestimate of price.)


I've based my figure of £10k+ on what a RICS valuer told me about the valuation process for ground rents that increase with RPI. But I can't guarantee it's correct. And it was based on many years of low RPI. The tribunals might take a different approach with the much higher recent RPI - which might make freehold prices higher.

Brought the initial point up today with the vendor / solictors and they're arguing it's not a simple process to begin this. It'll take months according to them + means we'll need to actually purchase the freehold before completion which seems mad to me. Surely just them playing dumb to avoid extra work?

eddddy

RedCannon94 said:

Brought the initial point up today with the vendor / solictors and they're arguing it's not a simple process to begin this. It'll take months according to them + means we'll need to actually purchase the freehold before completion which seems mad to me. Surely just them playing dumb to avoid extra work?

It sounds like somebody has misunderstood something.

• Which solicitor is objecting - the seller's or the buyer's (yours)? If it's the seller's, have you discussed it with your own solicitor. 

• Does the solicitor work for a 'full service' solicitor firm - or something like an 'online conveyancing company'. (It's likely that an online conveyancing company won't get involved with something like this, and won't understand how it works.)

Just to emphasise - the route you want to follow is:

1. The vendor serves notice on the freeholder...
2. The vendor assigns the benefit of the notice to you...
3. The sale completes...
4. You complete the freehold purchase process...

So note that on the date you complete, you will own a leasehold house which has a ground rent of £200 with RPI increases. (You won't own a freehold house until sometime later.)  So you will need a mortgage for a leasehold house which has a ground rent of £200 with RPI increases - is that OK with your mortgage lender?



So just to clarify, is the solicitor saying...

• Leasehold law doesn't allow you to do steps 1 to 5 above? (If so, they are wrong.)

• Your mortgage lender won't allow you to do steps 1 to 5 above - even with indemnity insurance? (Maybe that's possible.)

• The vendor and/or the house don't qualify for buying the freehold? (e.g. Because the vendor hasn't owned the house for 2 years.)

FWIW, here's a random solicitor's website that confirms what I'm saying, plus some other sources: 

https://www.monarchsolicitors.com/guides-articles/assigning-rights-for-lease-extensions-and-freehold-purchases/

https://www.kww.co.uk/wp-content/uploads/2019/01/home-truths-v5.pdf (See last page)

https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2020/07/ENF-Report-final.pdf (Section 10.29 on page 605)