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    • SeekingSomeAdvice
    • By SeekingSomeAdvice 8th Nov 18, 1:25 PM
    • 4Posts
    • 0Thanks
    Leasehold in London: What do you think of this ground rent clause?
    • #1
    • 8th Nov 18, 1:25 PM
    Leasehold in London: What do you think of this ground rent clause? 8th Nov 18 at 1:25 PM
    Hi all,

    I regularly visit this forum to get financial advice, so I would like to thank everyone for the help over the years!This is the first time I have posted a question; one which will hopefully be useful for others too.

    We're first time buyers, looking to buy in London. We put in an offer on a flat, which has been accepted. However, this is the clause regarding ground rent:

    "With effect from each Review Date the Ground Rent shall be increased to the greater of:

    (1) the Ground Rent payable immediately prior to the Review Date multiplied by 150%; and
    (2) the Ground Rent payable immediately prior to the Review Date multiplied by the RPI published for the October before that Review Date and divided by the RPI published for the October before the previous Review Date."

    The review dates are 10 years apart, I believe the next one is in 9 years (will find out before buying!). The ground rent is currently £375, and if I understand this clause, this means that the ground rent will increase at least 150%, therefore to £562; 844; 1265, etc...

    To me, this looks pretty bad - the scandal which broke recently warns about ground rents doubling and this looks like it will more than double! Obviously, we are talking to our solicitor and our financial advisor says he does not think that would affect the price of a property in London, but I'd love to hear what this community thinks.

    1. Is this deal particularly bad news, in your opinion, or fairly standard for London?
    2. We can afford the increase, but we cannot afford for the clause to negatively affect the value of our property. Is this likely?
    3. Is it ever possible to negotiate the ground rent clause if buying from another leaseholder rather than the developer/landlord directly?
    4. We cannot afford a freehold property in London on our budget. Is this our only choice or have others come across better options in London?

    Thanks for your time and help!

    Nervous first-time buyers
Page 2
    • burtbot1
    • By burtbot1 10th Nov 18, 6:20 PM
    • 25 Posts
    • 17 Thanks
    Often not recommended on here. Local authorities are renowned for dropping enormous bills through letterboxes of private owners. Usually for re-painting, window replacement, roof repairs/replacement or other major works. Anything ex-LA with a lift, I def wouldn't touch with a bargepole. Expect that to be several thousand at a time. We've had several posts re this, and I've always advised against ex-LA for that reason.
    Originally posted by hazyjo

    Ah yes, good point! We actually checked that all the windows were quite new when we looked around and as it’s a small block with around 50% ownership we figured if wouldn’t be too bad if anything needed doing, which of course is still a risk.
    Having said that, if you offset the massive difference in what you’re paying for service charge and ground rent compared to a private block, it could still be considered a ‘saving’.
    But I would absolutely advise against buying a flat in a massive ex LA property and one with a lift. And a dilapidated one!
    • Lawmanuk
    • By Lawmanuk 14th Nov 18, 8:18 AM
    • 3 Posts
    • 0 Thanks
    Ground rent
    Just to add mortgage lenders also like the ground rent to be not more than 0.1% of the value of the flat at the beginning of the term so if the flat is less than £375,000 the rent may be an issue but as this is London then this may not be a problem
    • chalky_white
    • By chalky_white 14th Nov 18, 8:44 AM
    • 22 Posts
    • 13 Thanks
    It will all work out...
    Increasing Ground Rent by an arbitrary figure is never particularly helpful (which is the 150.00% route) as it ignores the economic circumstances, which RPI does not do (to a point).

    The regularity of increases is also not good, every 10 years allows the Ground Rent to increase quite quickly, particularly with the arbitrary calculation. RPI is unlikely to equate to that amount in 10 years!

    However, you may want to query with the Seller's whether they will enter into negotiations with the Landlord to amend the Ground Rent clause. This is possible, and a number of Landlord will entertain these requests, for a fee. But you would request the Seller cover these costs.

    If the Ground Rent cannot be amended, you should certainly consider whether you wish to proceed. In any event, your Lender may decide this for you.

    A useful tool for arbitrary increases - check what the Ground Rent will be at the end of the term (keep using the multiplier until the Term has expired).
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