Bought flat, ground rent arrears, what's the process?

artyboy

So as we half expected, the flat we just bought had some GR arrears - nothing big and we accepted this might be the case, and that it wasn't worth paying to solicitor extra to arrange a retention.

Thing is, the GR demand is in the name of the last owner, and apparently the freeholder wants arrears cleared before they will update the account into our name as the new owner.

There's a part of me that just wants this done and is inclined to pay. But at the same time, if it's not being formally demanded to us, are we really liable at all or should the freeholder just sort it out with the old owner? Is there any risk to us as the new owners if we do not pay something that's not been properly invoiced to us?

loubel

Was the ground rent not apportioned on completion? You wouldn't usually use a retention for ground rent. Either the seller should have settled the arrears or made an allowance on the purchase price so that you could settle it. Have you checked with your solicitor that this didn't happen?

artyboy

A retention was what our solicitor suggested, but what they wanted to charge for arranging this was (we thought at the time, and has turned out to be the case) more than the arrears themselves, which are basically a couple of hundred quid.

The reality was that were were up against the wire to get this property completed, and we got it for a decent price, so it was a risk we were prepared to run with. I was just expecting that if there were any arrears, they would bill us as the new owners, rather than invoice the old owner. Our sol has just sent that invoice to us and told us to pay the freeholder directly, which sounds a bit... odd...

So while I'll pay it if needed, and it's not a hill I'm going to die on, it does appear this isn't our debt to settle... 

loubel

I don't understand why the ground rent position wasn't known on completion? Did you complete without obtaining replies to leasehold enquiries from the freeholder?

Regardless, you are now responsible for paying the ground rent. The freeholder is not obliged to apportion this and go after the previous owner.

artyboy

loubel said:

I don't understand why the ground rent position wasn't known on completion? Did you complete without obtaining replies to leasehold enquiries from the freeholder?

Regardless, you are now responsible for paying the ground rent. The freeholder is not obliged to apportion this and go after the previous owner.

Ok, that last bit makes it clear enough then, and I'll pay, thanks!

As for the 'why', it was known that the ground rent hadn't been demanded by the freeholder for the last 2 years, so therefore at some point this was bound to arise. But as I said, timing and good price drove us to move ahead regardless, and accept the risk. It's more that the actual way it's now being demanded looks like it wasn't our issue. But I guess it is!

ExEstateAgent

I wouldn't be very happy with the solicitor you used. They knew that ground rent for X years was outstanding and they would know from reading the lease how much that amounted to. 

They really should have dealt with this for you IMHO. 

artyboy

ExEstateAgent said:

I wouldn't be very happy with the solicitor you used. They knew that ground rent for X years was outstanding and they would know from reading the lease how much that amounted to. 

They really should have dealt with this for you IMHO. 

No, this was a pragmatic approach that was very much instructed by us, against their advice - if we had delayed exchange/completion even one day longer, I'd have ended up invoking a contingency plan to take a short let on another place at close to 6 times the cost of the ground rent that's now being demanded.

So we always knew this was likely to happen, it's more the way that it is being demanded (not to us but to the last owner) that was puzzling me. 

saajan_12

artyboy said:

ExEstateAgent said:

I wouldn't be very happy with the solicitor you used. They knew that ground rent for X years was outstanding and they would know from reading the lease how much that amounted to. 

They really should have dealt with this for you IMHO. 

No, this was a pragmatic approach that was very much instructed by us, against their advice - if we had delayed exchange/completion even one day longer, I'd have ended up invoking a contingency plan to take a short let on another place at close to 6 times the cost of the ground rent that's now being demanded.

So we always knew this was likely to happen, it's more the way that it is being demanded (not to us but to the last owner) that was puzzling me. 

Its because your completion with the flat seller is irrelevant to the freeholder. As far as the freeholder is concerned, they have a leaseholder (seller) who owes them ground rent. Then upon the relevant forms beign filled AND the ground rent being current, they'll transfer the lease to you. Then anything further is owed by you. 

So the old leaseholder/seller owes the ground rent to the freeholder, but is under no incentive to get it paid since the completion doc didn't make them and the freeholder is unlikely to sue when they can hold the lease transfer hostage.

As another pragmatic step, you could just pay the seller's ground rent bill and hence kick the usual sequence into action of the lease transferring to you. Future bills issued post the transfer will be in your name.