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Extortionate Ground Rent clauses in leasehold

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D_M_E
D_M_E Posts: 3,008 Forumite
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in House buying, renting & selling
For anyone interested, there will be an article/discussion on this on Radio 4's You&Yours programme starting at 12:15pm on Monday 20th (next Monday)

They will be looking at the issue and what the Government could be doing about it.
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  • Dawn248
    Dawn248 Posts: 111 Forumite
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    That's interesting. Wonder if they'll be looking at maintenance charges too? I'm looking to buy a leasehold flat and one worry is if the freeholder can increase the maintenance.ground rent at will. It's already £1000PA.
  • GlamGirlie
    GlamGirlie Posts: 432 Forumite
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    Yes Dawn, they can. Hence it's always better to either just buy a freehold property, or ensure you can buy a share of the freehold.
    I am employed as a manager in a financial services institution. My views are entirely my own.
  • benjus
    benjus Posts: 5,433 Forumite
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    Dawn248 wrote: »
    That's interesting. Wonder if they'll be looking at maintenance charges too? I'm looking to buy a leasehold flat and one worry is if the freeholder can increase the maintenance.ground rent at will. It's already £1000PA.

    If enough leaseholders are committed, you can demand the right to manage the property yourselves. You can then set your own service charges and decide how to spend the money. This is more likely to work if the other leaseholders are mostly owner occupiers rather than landlords.
    Let's settle this like gentlemen: armed with heavy sticks
    On a rotating plate, with spikes like Flash Gordon
    And you're Peter Duncan; I gave you fair warning
  • anselld
    anselld Posts: 8,280 Forumite
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    GlamGirlie wrote: »
    Yes Dawn, they can. Hence it's always better to either just buy a freehold property, or ensure you can buy a share of the freehold.

    Ground rent cannot be increased at will. It is set in the lease. Furthermore it can be wiped out (at a cost) by seeking a statutory lease extension.

    Maintenance charges must reflect reasonable costs incurred by the freeholder in maintaining the building. If they are unreasonable they can be challenged at the First Tier Tribunal.

    There is a lot of hot air about "extortionate" leasehold charges and probably some freeholders and management companies do try it on. However there is adequate legislation and mechanisms in place if leaseholders wish to protect themselves.

    Difficult to see why the gov should need to intervene further, though I don't suppose that will stop them!
  • D_M_E
    D_M_E Posts: 3,008 Forumite
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    There is growing resentment about clauses which double the ground rent every 10 years and such clauses have been deemed to make the subject property unmortgageable and either difficult to sell or unsellable and I think it is clauses such as these that the Government has plans for future legislation on.

    Management fees are a different matter and, as has been pointed out above, the freeholder can set these at whatever they feel they can get away with.
  • deFoix
    deFoix Posts: 213 Forumite
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    I sympathise with people who've signed such sale agreements but there's a fundamental doctrine of English contract law that you cannot escape a bad bargain because you didn't bother to read and understand the contract. This is for a very good reason. I doubt government intervention will help in this regard. Solicitors get paid to advise on such onerous clauses.
  • always_sunny
    always_sunny Posts: 8,314 Forumite
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    Dawn248 wrote: »
    That's interesting. Wonder if they'll be looking at maintenance charges too? I'm looking to buy a leasehold flat and one worry is if the freeholder can increase the maintenance.ground rent at will. It's already £1000PA.

    And you're still looking at it?
    EU expat working in London
  • eddddy
    eddddy Posts: 16,440 Forumite
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    Boler1985 wrote: »
    I sympathise with people who've signed such sale agreements but there's a fundamental doctrine of English contract law that you cannot escape a bad bargain because you didn't bother to read and understand the contract. This is for a very good reason. I doubt government intervention will help in this regard. Solicitors get paid to advise on such onerous clauses.

    The government have intervened massively in the past - through the Landlord and Tenant act etc.

    Legislation has given leaseholders...

    The right to extend leases
    The right to manage
    The right to challenge unreasonable service charges
    The right to a consultation before major works begin
    The right to vary leases in specific circumstances
    etc

    Typically, none of these rights exist in the contracts (leases) that leaseholders have signed.

    So I guess governments have a bit of a history of rescuing leaseholders from bad bargains.
  • always_sunny
    always_sunny Posts: 8,314 Forumite
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    eddddy wrote: »
    The government have intervened massively in the past - through the Landlord and Tenant act etc.

    Legislation has given leaseholders...

    The right to extend leases
    The right to manage
    The right to challenge unreasonable service charges
    The right to a consultation before major works begin
    The right to vary leases in specific circumstances
    etc

    Typically, none of these rights exist in the contracts (leases) that leaseholders have signed.

    So I guess governments have a bit of a history of rescuing leaseholders from bad bargains.

    In fairness though the government should intervene further to make freeholder not profitable at all cause essentially they are nothing but middle men.
    EU expat working in London
  • anselld
    anselld Posts: 8,280 Forumite
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    always_sunny wrote: »
    In fairness though the government should intervene further to make freeholder not profitable at all cause essentially they are nothing but middle men.

    Someone has to own, manage and maintain the building in situations where there are multiple properties within a building.

    If fairness, who is going to do that in your non-profit world?
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