Leasehold Property £1.40 Yearly Ground Rent - £72 Notice of Assignment Charge

chaotic_j

Hi,

We're purchasing a leasehold property with a yearly £1.40 ground rent. It's collected by Morgoed Estates. There are hundreds of years left on the lease.

Apparently once the sale has gone through, they charge £72 for a 'Receipted notice of assignment' are they allowed to do this?

I believe it involves 5 minutes work updating contact details on file and sending confirmation so seems excessive.

Also, they offer a freehold purchase option for £450 but given it's a £70k 2 up 2 down terrace withna small back yard and the ground rent is only £1.40 it doesn't seem worth it?

Thanks in advance!

eddddy

chaotic_j said:

Apparently once the sale has gone through, they charge £72 for a 'Receipted notice of assignment' are they allowed to do this?

I believe it involves 5 minutes work updating contact details on file and sending confirmation so seems excessive.

Assuming the lease requires you to submit a notice of assignment - the law allows the freeholder / managing agent to charge a 'reasonable' admin fee for dealing with it.


Last time I looked (probably a couple of years ago), a tribunal seemed to agree that £50+vat per hour was a reasonable fee for admin work (plus costs - like postage etc).  So maybe £72 is a bit steep.

So I guess your options include...

• Just pay it anyway - as that's the easy option

• Threaten to challenge the at tribunal - to see if they'll reduce the fee

• If they won't reduce the fee - pay it under protest, then pay £100 to go to tribunal - and get your £100 plus part of the £72 back, if you win.

chaotic_j said:

Also, they offer a freehold purchase option for £450 but given it's a £70k 2 up 2 down terrace withna small back yard and the ground rent is only £1.40 it doesn't seem worth it?

As you say, it's not worth it just for saving £1.40 a year.

But it will probably release you from many of the leasehold covenants, for example, like:

• Having to pay a £72 fee for a notice of assignment
• Having to get consent and pay a fee for making any alterations
• Having to get consent and pay a fee in order to sublet

• It might also mean that you don't have to pay for a management pack, licence to transfer, etc when you eventually sell

There may (or may not) be other covenants which you are released from



Edit to add...

In addition to the £450 - it's very likely that the freeholder will want you to pay their legal fees, and you'd have to pay your own legal fees.

If you want, you can make a counter offer - at less than £450 (perhaps a lot less than £450)

chaotic_j

Thanks @eddddy I will take a look at the lease but it was written in the late 19th century so a bit full on.

Would the tribunal be a Land Registration Tribunal?

We have a summary of the covenants;

- Landlord reserves the right to enter your property from time to time subject to notice to inspect condition in terms of compliance with repairing obligations. If you fail to keep the property in a good state, Landlord may serve a Notice to Repair or arrange repair themselves and pass costs onto you.
(Would this ever be something that could happen in this day and age - seems outrageous)?

- Pay rent on time.
(OK)

- You will be responsible for payment of Council Tax rates and other outgoings.
(OK)

- Keep the property repaired and maintained.
(OK but what business is it of the Freeholder)?

- Front of property must be kept open plan. Not use as garden/driveway. No gate fence wall must be erected not of the original plan)
(OK - it's straight onto the street anyway)

- Must not obstruct roads, footpaths and common access.
(OK)

- Keep property insured against loss, damage, fire to full value.
(OK but what business is it of the Freeholder)?

- In the event property is destroyed, rebuild and reinstate.
(OK)

- Not to do anything on the property deemed a nuisance, annoyance or damage the property.
(OK)

We want to rent the property out so potential permission to sublet and a fee is of concern.. but nothing above states permission required?

Regarding purchase of Freehold, a copy of this years ground rent demand seems to suggest the £450 is all in from their side? It is too much in my opinion, as is the £72.

Would purchasing the Freehold negate the need for the £72 'Notice of Assignment'? What would be a fair price to pay for the Freehold?

Thanks so much.

chaotic_j

Found a leaflet on their website that says they fill in all the paperwork for you, or pass details to your solicitor. The only additional fee is Land Registry of £45.

NameUnavailable

chaotic_j said:

We have a summary of the covenants;

- Landlord reserves the right to enter your property from time to time subject to notice to inspect condition in terms of compliance with repairing obligations. If you fail to keep the property in a good state, Landlord may serve a Notice to Repair or arrange repair themselves and pass costs onto you.
(Would this ever be something that could happen in this day and age - seems outrageous)?

If you weren't maintaining the property then yes.

- Pay rent on time.
(OK)

- You will be responsible for payment of Council Tax rates and other outgoings.
(OK)

- Keep the property repaired and maintained.
(OK but what business is it of the Freeholder)?

Because it's their property - you are just leasing it.

- Front of property must be kept open plan. Not use as garden/driveway. No gate fence wall must be erected not of the original plan)
(OK - it's straight onto the street anyway)

- Must not obstruct roads, footpaths and common access.
(OK)

- Keep property insured against loss, damage, fire to full value.
(OK but what business is it of the Freeholder)?

Because it's their property, you are just leasing it. A bit like expecting a car hire company to let you have a car without full insurance against loss or damage.

- In the event property is destroyed, rebuild and reinstate.
(OK)

If you didn't have insurance - see above - you might not be able to afford to do that?

- Not to do anything on the property deemed a nuisance, annoyance or damage the property.
(OK)

We want to rent the property out so potential permission to sublet and a fee is of concern.. but nothing above states permission required?

Check the lease, it probably has something about subletting.

Regarding purchase of Freehold, a copy of this years ground rent demand seems to suggest the £450 is all in from their side? It is too much in my opinion, as is the £72.

Would purchasing the Freehold negate the need for the £72 'Notice of Assignment'? What would be a fair price to pay for the Freehold?

Thanks so much.

A lease is essentially a long term rental agreement. You don't own the building or land it's on, the freeholder does, hence some of the points above.

Paying £450 to own the building/land seems good value to me. A sellers pack (if you come to sell in the future you will need this from the freeholder) is likely to cost around that. 

eddddy

chaotic_j said:

Would the tribunal be a Land Registration Tribunal?

 It's the First-tier Tribunal (Property Chamber). See: https://www.lease-advice.org/lease-glossary/first-tier-tribunal-property-chamber/

chaotic_j said:

- Keep the property repaired and maintained.
(OK but what business is it of the Freeholder)?

- Keep property insured against loss, damage, fire to full value.
(OK but what business is it of the Freeholder)?

The theory is that the freeholder will get the property back at the end of the lease - and so they want it back in good condition... repaired when required and well maintained... and not a pile of ashes, because it burned down and you couldn't afford to rebuild it.

(The lease might have 800 years left to run - but that's the theory.)

Also, keeping your property well maintained benefits other leaseholders - because it makes the street look nice. It might also benefit the freeholder in the same way, if they own other property in the street.

chaotic_j said:

Would purchasing the Freehold negate the need for the £72 'Notice of Assignment'? 

If you bought the freehold and the leasehold at the same time - no notice of assignment (or fee) would be required.

But realistically, you'd probably end up doing this...

1. You'd buy the leasehold
2. So the £72 fee becomes payable
3. Then you buy the freehold
4. (When you eventually re-sell, the buyer won't have to pay the £72)

chaotic_j said:

What would be a fair price to pay for the Freehold?

Assuming the lease has hundreds of years left...

If you used a legal process to 'compulsorily purchase' the freehold - the freeholder might get around £30, but the legal fees you'd have to pay might be £2k.

So it's just a game of negotiation really. You might offer £400 to the freeholder, with expected legal fees of £1k.

So the freeholder gets an extra £370, and you might save £600 overall.

Bigphil1474

OP, personally I'd regret not buying the freehold at that price. Even though the ground rent is low, owning the freehold is something I've always done.

chaotic_j

Hi,

Thanks @NameUnavailable and @edddy that is some really useful information. It seems I never truly understood the meaning of leasehold until now.

The lease does not expressly state a notice of assignment needs to be made. Also does not specify any consent to let.

We are told the notice of assignment should be made to give the freeholder our details and correspondence address. Can we make the notice of assignment without having to pay £72?

We can look at negotiating the freehold ourselves after the purchase is complete. There are 51 properties on the street, it looks like at least 7 have the freehold, nearly all paid £400.

In terms of challenging the cost to purchase freehold if we feel it's too high/can't come to an agreement with the freeholder, I read something last night about us having to pay their legal fees, is that right?

Thanks very much again.

eddddy

chaotic_j said:

We are told the notice of assignment should be made to give the freeholder our details and correspondence address. Can we make the notice of assignment without having to pay £72?

If you don't pay the £72, the likely outcome will be...

• Your freeholder will not accept the notice as valid
• You will probably be in breach of the lease - for not serving a valid notice
• The freeholder won't recognise you as owners of the leasehold house
• They won't send future ground rent and service charge demands to you
• If, as a result, ground rent and service charges aren't paid - late fees and legal fees will be added, and legal action might be taken

The short answer is... it's probably not a sensible thing to do.

chaotic_j said:

In terms of challenging the cost to purchase freehold if we feel it's too high/can't come to an agreement with the freeholder, I read something last night about us having to pay their legal fees, is that right?

It sounds like you're quoting something very out of context, and perhaps over simplified.

Maybe read these two articles:

https://www.lease-advice.org/faq/i-own-a-leasehold-house-how-do-i-buy-the-freehold/
https://www.lease-advice.org/advice-guide/houses-qualification-valuation/ 

dimbo61

Now you talk about Morgeod estates and ground rent !
The ground rent is £1.40 a year Correct ?
Does it run out in 2037 ? 
I would need to check my old documents at home but I think we bought the Ground rent charge off Morgeod estates for about £85 a few years ago.
6 years back payments and the rest to make up the number of years left at £5 a year.
Please confirm its Ground Rent and not leasehold 

dimbo61

https://www.morgoedestates.com/ground-rents/