PLEASE READ BEFORE POSTING
Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.Flat Purchase - Escalating Ground Rent
akorn77
Posts: 207
Forumite
Hi All,
I've found a flat I'm very interested in, however it has an escalating ground rent and I'm very worried about it impacting future re-sale. I think the seller is aware of this, and seems to be super keen to shed it - she even offered to sell it to me chain free! Any thoughts?
Lease - 236 Years
Ground Rent - £150; doubling every 25 years.
Thanks
I've found a flat I'm very interested in, however it has an escalating ground rent and I'm very worried about it impacting future re-sale. I think the seller is aware of this, and seems to be super keen to shed it - she even offered to sell it to me chain free! Any thoughts?
Lease - 236 Years
Ground Rent - £150; doubling every 25 years.
Thanks
0
Comments
-
year 25 GR = 300
year 50 = 600
year 75 = 1200
year 100 = 2400
year 125 = 4800
year 150 = 9600
year 175 = 19000
year 200 = 40k
year 225 = 80k0 -
SmashedAvacado wrote: »year 25 GR = 300
year 50 = 600
year 75 = 1200
year 100 = 2400
year 125 = 4800
year 150 = 9600
year 175 = 19000
year 200 = 40k
year 225 = 80k
Yep...I was planning to live in the flat and then BTL it for a while and then sell up. Time horizon maybe 15-25 years but the re-sale worries me. I'm aware some lenders will decline it0 -
Lets look at it objectively.
How can you say some lenders will decline it...your making an assumption that is years in the future even by your own resale timeline.
The monetary value of a doubling ground rent in 25 years will be inline with current earnings no doubt.
When is the next doubling due to happen?
Is it pending soon...if not then I'm not too sure I would be worried by the situation.
Service charges on leasehold escalating would be something that I would be looking at more closely as you have less control over those increases year on year.in S 38 T 2 F 50
out S 36 T 9 F 24 FF 4
2017-32 2018 -33 2019 -21 2020 -5 2021 -4 20220 -
Most lenders are Ok with doubling every 25 years - it's every 10 years that can be an issue. We've just bought one that doubles every 25 years, and others have sold in the same block without a problem. I think it's pretty standard in some areas, especially amongst more modern flats. (ours is 11 years old)0
-
Doubling every 25 years is equivalent to just under 3% annual inflation - which is higher than the current general UK rate but historically fairly modest. The "defect" is that it isn't linked to the actual rate of inflation (or, more relevantly, property prices), but it's unlikely to become outrageously high in real terms. I wouldn't be overly concerned about it - as above, something like doubling every 10 years would be more onerous.0
-
need_an_answer wrote: »Lets look at it objectively.
How can you say some lenders will decline it...your making an assumption that is years in the future even by your own resale timeline.
The monetary value of a doubling ground rent in 25 years will be inline with current earnings no doubt.
When is the next doubling due to happen?
Is it pending soon...if not then I'm not too sure I would be worried by the situation.
Service charges on leasehold escalating would be something that I would be looking at more closely as you have less control over those increases year on year.
Broker is checking but he said some may not accept double rents.
Next increase is in 20300 -
Lease - 236 Years
Ground Rent - £150; doubling every 25 years.
Are you sure that the lease says the ground rent doubles throughout the whole 236 year period?
Often, the doubling stops at maybe 100 or 125 years.
This link gives an overview of lenders' current attitudes on ground rents (but their attitudes may change over time):
https://www.cml.org.uk/lenders-handbook/englandandwales/question-list/1852/
As examples:Nationwide Building Society
Unacceptable - advise Issuing Office (Will be declined):
...- Ground Rent greater than 0.5% of the property value
- Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) – acceptable if doubles every 20 years or more
Barclays Bank
Doubling ground rents:- Should not double more frequently than every 20 years
- Should not continue to double after 125 years
- Ground rent up to 0.1% of the current market value is acceptable
0 -
What David says below, it doesn't appear to be too onerous and should not be a problem.Doubling every 25 years is equivalent to just under 3% annual inflation - which is higher than the current general UK rate but historically fairly modest. The "defect" is that it isn't linked to the actual rate of inflation (or, more relevantly, property prices), but it's unlikely to become outrageously high in real terms. I wouldn't be overly concerned about it - as above, something like doubling every 10 years would be more onerous.
That aside, personally, I think it very unlikely that the leasehold system (as it curently exists) will survive another 20-25 years in England. There is nothing similar in Australia, North America or continental Europe, and England and Wales remain pretty much the only mature jurisdiction in the world to retain leasehold property laws.
Even within the UK, legislation passed by the Scottish parliament in the 2000s, effectively brought leasehold to an end in the Scotland.0 -
Retired_Mortgage_Adviser wrote: »Even within the UK, legislation passed by the Scottish parliament in the 2000s, effectively brought leasehold to an end in the Scotland.0
This discussion has been closed.
Categories
- All Categories
- 342.5K Banking & Borrowing
- 249.9K Reduce Debt & Boost Income
- 449.4K Spending & Discounts
- 234.6K Work, Benefits & Business
- 607.1K Mortgages, Homes & Bills
- 172.8K Life & Family
- 247.4K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.8K Discuss & Feedback
- 15.1K Coronavirus Support Boards