Escalating Ground rent over £250

Buyer1684

I am in the process buying a flat outside of London, with 104 years left on the lease. The ground rent will double to £300 in 4 years' time, then double every 25 years thereafter. I have asked for a deed of variation DoV as I dont want to experience any difficulties if I want to sell or remortgage in the future. The sellers solicitor is saying the Freeholder is  reluctant to agree to a DoV and wants to know if my mortgage company is insisting on it. My solicitor still thinks its best to get one even if the current lender i have lined up is agreeable.What i wanted to find out is does the the DoV need to cap the Ground rent at £250 for the rest of the term or could it just request that the Freeholder agrees to notify the mortgagee company if they intend to reposses the property due to Ground rent arrears. This way they Freeholder will not lose any income, and the mortgage company should be happy also. Then, as the new leaseholder, I will  apply to extend the lease before 80 years is left on the current lease. Once this happens, I understand there will be no ground rent to pay at all. Does anyone know if this will work ? I just want of to get things moving or make a decision to walk away.

anselld

If you are planning to do a statutory lease extension anyway and the lender is ok with the current lease in the meantime then there is no point getting DoV now as it will just add unnecessary delay and expense.  

itsthelittlethings

Don’t buy with a doubling ground rent.

anselld

itsthelittlethings said:

Don’t buy with a doubling ground rent.

It is not particularly onerous at 25 year intervals and as the OP points out they intend to remove it via a statutory lease extension.  It is not an issue at the right price (allowing for likely extension costs).

Albermarle

itsthelittlethings said:

Don’t buy with a doubling ground rent.

Inflation over 25 years,  mean the increase in real terms will be small, or even negative 

RHemmings

If you wish to sell before you've extended the lease, that may reduce the number of buyers interested in your property. Even if it works for you, it may put others off. 

eddddy

Buyer1684 said:

Then, as the new leaseholder, I will  apply to extend the lease before 80 years is left on the current lease. Once this happens, I understand there will be no ground rent to pay at all. .

That's correct - if you do a statutory lease extension, the ground rent will reduce to zero.

Part of the cost of a statutory lease extension is paying a 'lump sum' to compensate the freeholder for the loss of future ground rent.

• Under the current rules, the lump sum compensation for the lost ground rent might be around £5k to £6k

• So the total cost of a statutory lease extension might be £8k to £12k (including the ground rent compensation)  - depending on the market value of the flat

• Plus legal and valuation costs - which might be around £4k

Buyer1684 said:

The sellers solicitor is saying the Freeholder is  reluctant to agree to a DoV and wants to know if my mortgage company is insisting on it. My solicitor still thinks its best to get one even if the current lender i have lined up is agreeable.What i wanted to find out is does the the DoV need to cap the Ground rent at £250 for the rest of the term or could it just request that the Freeholder agrees to notify the mortgagee company if they intend to reposses the property due to Ground rent arrears.

Most mortgage lenders say they accept either type of DoV - cap the ground rent at £250, or a 'mortgagee protection' clause.

If you want to cap the Ground Rent at £250 - I imagine the freeholder will ask for a lump sum to compensate them for loss of future ground rent increases. (And they are free to ask for any amount of 'lump sum' that they choose.)