The ground rent issue

Miranda25

Hi All,

Based on the article:

https://www.mplaw.co.uk/insights/news/the-ground-rent-issue/#:~:text=Repossession,right to repossess the property.

Can anyone explain to me - what should I watch when buying a flat with lease granted before 30th June 2022 please?

My possible plans are to buy a flat in London, live for 5-10 years and sell it.
I want to make sure that I can sell the flat and it is not staying on Rightmove for a year without any viewings.

What do you all do? Do you just buy a flat or you do immediately deed of variation or lease extension please?

Would those ground rent issues stop you from buying a leasehold please?
(we are talking about London so not so many options to buy freehold on a single income)

Many thanks 

user1977

Miranda25 said:

Can anyone explain to me - what should I watch when buying a flat with lease granted before 30th June 2022 please?

My possible plans are to buy a flat in London, live for 5-10 years and sell it.
I want to make sure that I can sell the flat and it is not staying on Rightmove for a year without any viewings.

What do you all do? Do you just buy a flat or you do immediately deed of variation or lease extension please?

It depends what the lease says.

Obviously, 99% (or so) of leases will have been granted before 30 June 2022, so it will take a very long time for them to be regarded as unusual or difficult to market.

Miranda25

user1977 said:

Miranda25 said:

Can anyone explain to me - what should I watch when buying a flat with lease granted before 30th June 2022 please?

My possible plans are to buy a flat in London, live for 5-10 years and sell it.
I want to make sure that I can sell the flat and it is not staying on Rightmove for a year without any viewings.

What do you all do? Do you just buy a flat or you do immediately deed of variation or lease extension please?

It depends what the lease says.

Obviously, 99% (or so) of leases will have been granted before 30 June 2022, so it will take a very long time for them to be regarded as unusual or difficult to market.

so what should I watch when I look at Rightmove please? how to be on a safe side?

CSI_Yorkshire

You don't want clauses including rapidly increasing ground rents, and you don't want a lease approaching 80 years.

Miranda25

CSI_Yorkshire said:

You don't want clauses including rapidly increasing ground rents, and you don't want a lease approaching 80 years.

How can I know about rapidly increasing ground rents please? Is it OK to ask estate agents about it?

CSI_Yorkshire

Miranda25 said:

CSI_Yorkshire said:

You don't want clauses including rapidly increasing ground rents, and you don't want a lease approaching 80 years.

How can I know about rapidly increasing ground rents please? Is it OK to ask estate agents about it?

You can ask, and that's what it suggests you do on many of the adverts.  It's written in the lease that your solicitor would be reviewing, but I'm guessing you would want to know before that point.

Some screenshots from listings:

NameUnavailable

Miranda25 said:

user1977 said:

Miranda25 said:

Can anyone explain to me - what should I watch when buying a flat with lease granted before 30th June 2022 please?

My possible plans are to buy a flat in London, live for 5-10 years and sell it.
I want to make sure that I can sell the flat and it is not staying on Rightmove for a year without any viewings.

What do you all do? Do you just buy a flat or you do immediately deed of variation or lease extension please?

It depends what the lease says.

Obviously, 99% (or so) of leases will have been granted before 30 June 2022, so it will take a very long time for them to be regarded as unusual or difficult to market.

so what should I watch when I look at Rightmove please? how to be on a safe side?

If buying in London then the AST thing becomes a problem if the ground rent exceeds or could exceed £1K.

My advice - look for a flat that has a share of freehold, it should then also have a peppercorn ground rent AND a long (over 900 years) lease, although there are many SoF with leases under 100 years.

You also need to consider the service charges. A SoF flat should be better in that respect as you won't have some 3rd party freeholder looking at the leaseholders as cash cows for him to milk dry!

mark_cycling00

It's ok to ask but they genuinely may not know. It you're serious about a place then they will try to find out but at the early stage in the process they'll probably be relying on the honesty of the seller rather than requesting all the leasehold documents. 

Many, many apartments are 'peppercorn' ground rent which means 'free' and the seller may have no idea what you're talking about because they'll never get asked to pay the peppercorn and may not be aware what ground rent is.

Please search this forum to see how much of an issue ground rent is.

Leases are a very different issue and tragically many elderly people lose their homes because they're unaware that their lease is due to expire, or that their home is now unsellable due to a very short lease.

In my place we were offered a heavily discounted legal fee to extend every apartment from 100 to 999 years, so long as every owner in the block agreed to it.

Sadly the majority simply didn't care. So instead of £1000 we each had to do it ourselves for £2,500 or so.

Don't forget that service charges can be relatively horrific in a small development and you can be paying £2500+ a year for very little "service"

In a larger place at least you'll be getting that gym, parking and gardens 

CSI_Yorkshire

And that article you linked to explains why you (and your mortgage lender) don't want a ground rent to get to £1000pa - so it's all about how quickly it would get to that level.

Miranda25

CSI_Yorkshire said:

Miranda25 said:

CSI_Yorkshire said:

You don't want clauses including rapidly increasing ground rents, and you don't want a lease approaching 80 years.

How can I know about rapidly increasing ground rents please? Is it OK to ask estate agents about it?

You can ask, and that's what it suggests you do on many of the adverts.  It's written in the lease that your solicitor would be reviewing, but I'm guessing you would want to know before that point.

Some screenshots from listings:

Thank you.
Yes, I would like to know before that point as I do not want to waste my time and an agent's time on viewings if the flat is not suitable on the basis of ground rent.

Miranda25

mark_cycling00 said:

It's ok to ask but they genuinely may not know. It you're serious about a place then they will try to find out but at the early stage in the process they'll probably be relying on the honesty of the seller rather than requesting all the leasehold documents. 

Many, many apartments are 'peppercorn' ground rent which means 'free' and the seller may have no idea what you're talking about because they'll never get asked to pay the peppercorn and may not be aware what ground rent is.

Please search this forum to see how much of an issue ground rent is.

Leases are a very different issue and tragically many elderly people lose their homes because they're unaware that their lease is due to expire, or that their home is now unsellable due to a very short lease.

In my place we were offered a heavily discounted legal fee to extend every apartment from 100 to 999 years, so long as every owner in the block agreed to it.

Sadly the majority simply didn't care. So instead of £1000 we each had to do it ourselves for £2,500 or so.

Don't forget that service charges can be relatively horrific in a small development and you can be paying £2500+ a year for very little "service"

In a larger place at least you'll be getting that gym, parking and gardens 

Thank you Mark.

What would be a very short lease please? Below 80 years. I am going to live for 5-10 years.
To be on a safe side - shall I go for leases above 100 years old? Or still it could impact a saleability of the flat in 5-10 years time please?

Why elderly people lose their homes? Because they do not have money to extend the leases?