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25Yr. Ground Rent review

WreckDiver
WreckDiver Posts: 12 Forumite
edited 9 June 2017 at 8:46PM in House buying, renting & selling
Hello all,

I am in the process of buying a leasehold flat and have just been sent the below in regards to the lease extention the vendor is in the process of completing.

The new lease will include:
i A new ground rent of £150 per annum to increase every 25 years by the higher of the increase in the Retail Price Index or to twice the current ground rent as at the month immediately preceding each rent review period.

ii Costs recovery clause should the Landlord wish to pursue costs in respect of any further breach.

I have seen references to leases that include one or the other, but not both.

I would be greatful for any opinions.

Many thanks
«1

Comments

  • WreckDiver
    WreckDiver Posts: 12 Forumite
    Any thoughts? I posted the question on the Leasehold page on Facebook but as expected the opinions are quite biased against Leaseholds in general so all responces are "don't touch" and "all rent reviews that double are bad." I cannot affort a Freehold and it is my understanding that 25Yr rent reviews are not that uncommon and less of a concern then 10Yr reviews. My main concern is whether the either/or approach to the rent review is uncommon enough to raise problems down the line.

    Many thanks
  • BrassicWoman
    BrassicWoman Posts: 3,202 Forumite
    First Anniversary Name Dropper First Post Mortgage-free Glee!
    RPI has been running around 5% so 5% for 25 years = 125%

    Sounds ok to me, depends if you think prices of retail goods are about to go mad and wages will not keep up. It seems a small gamble to me. Depends how young you are too, and how far off the next review is.
    2021 GC £1365.71/ £2400
  • WreckDiver
    WreckDiver Posts: 12 Forumite
    Thank you, do you think it is unusual for the lease to include an either/or rent review? The lease is being extended now so the review is 25yrs away so is not a huge concern. I may ask for the RPI to be removed so that I at least know the exact figures.
  • eddddy
    eddddy Posts: 16,436 Forumite
    First Anniversary First Post Name Dropper
    So this is an informal lease extension.

    As you may know, a statutory lease extension would reduce the ground rent to zero.

    The downside of the £150 and rising ground rent is that it would make buying the freehold more expensive - which might impact the value of the flat.


    (It's difficult to predict the sentiment of buyers in the future. If a buyer had the choice of two flats - one with £0 ground rent and one with £150 rising ground rent - how much would that influence them?)
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Name Dropper First Anniversary First Post I've helped Parliament
    BrassicWoman wrote: »
    RPI has been running around 5% so 5% for 25 years = 125%

    Sounds ok to me, depends if you think prices of retail goods are about to go mad and wages will not keep up. It seems a small gamble to me. Depends how young you are too, and how far off the next review is.

    5% compounded over 25years is 338.64%
  • BrassicWoman
    BrassicWoman Posts: 3,202 Forumite
    First Anniversary Name Dropper First Post Mortgage-free Glee!
    getmore4less wrote: »
    5% compounded over 25years is 338.64%


    ahh ok! Less good then. But still not awful.
    2021 GC £1365.71/ £2400
  • getmore4less
    getmore4less Posts: 46,882 Forumite
    Name Dropper First Anniversary First Post I've helped Parliament
    BrassicWoman wrote: »
    ahh ok! Less good then. But still not awful.

    £187.5 or £507.96
  • WreckDiver
    WreckDiver Posts: 12 Forumite
    Thank you getmore4less, please can you clarify the £187.50 or £507.96 for me? What does this relate to?
  • bouicca21
    bouicca21 Posts: 6,513 Forumite
    First Anniversary Name Dropper First Post
    I think the rpi or double is pretty good. And as I have discovered elsewhere on this forum at some stage in the future you can always go for another formal extension that reduces the ground rent to zero. Probably not worth it for you but maybe of interest to a future purchaser.
  • WreckDiver
    WreckDiver Posts: 12 Forumite
    Thank you bouicca21, that is realy reassuring.
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