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    • michaelsft
    • By michaelsft 17th May 19, 4:25 PM
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    michaelsft
    Solicitor unhappy with escalating ground rent - help!
    • #1
    • 17th May 19, 4:25 PM
    Solicitor unhappy with escalating ground rent - help! 17th May 19 at 4:25 PM
    Hi all, I'm in need of a little guidance and I hope some can offer some words of wisdom. Long story short, at a late stage in my purchase of a new flat (M21 - Chorlton) my solicitor has advised me to pull out on the basis that there is an escalating ground rent clause which goes:

    £100 - first 25 years (10 years remaining at this stage)
    £200 - 2nd 25 years
    £400 - 3rd 25 years
    £800 - 4th 25 years
    £1600 - 5th 25 years

    Now, I don't think these prices themselves are outrageous but my solicitor has decided we must seek a deed of variation to get rid of this and that it'll cause many problems when selling in the future. She feels very strongly about it. My mortgage broker and estate agent don't seem particularly phased by the rate so I'm in a bit of a tiff. The sale has been going on for too long already and the buyer of my current flat is eager and willing to move at a moments notice.

    If I pull out of my sale I would still sell mine and rent somewhere while looking for somewhere else but that's a whole new level of annoyance. Storing things, paying rent, moving stuff twice. Obviously it would be easier to just go ahead with the current sale (much much easier) but I don't know who's advice to take - my solicitor or pretty much everyone else I have spoken to.

    All comments and advice are greatly appreciated.
    Thanks for reading
    Michael
    Debt free wannabee...
Page 1
    • Tom99
    • By Tom99 17th May 19, 4:34 PM
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    Tom99
    • #2
    • 17th May 19, 4:34 PM
    • #2
    • 17th May 19, 4:34 PM
    Doubling every 25yrs is not too bad added to which the initial ground rent at £100pa is quite low. The rent will not exceed £200 for the next 35yrs.
    The problem will be if your solicitor is also acting for your mortgage co but most mortgage co's now have their own rules about what the will or will not accept.
    You can buy out the ground rent after 2yrs using the lease extension legislation or if the current seller has owned for 2yrs they can serve notice now which you take over immediately.
    • ACG
    • By ACG 17th May 19, 4:50 PM
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    ACG
    • #3
    • 17th May 19, 4:50 PM
    • #3
    • 17th May 19, 4:50 PM
    Estate agents wants to sell the house.
    Mortgage broker - hopefully has your best interests at heart, but still gets paid if you take out your mortgage so should be taken with a pinch of salt.

    Solicitor is the one you should be listening to.

    Chorlton is the one part of South/West Manchester I am not too familiar with. I grew up in Burnage, spent 10 years drinking in Didsbury, I live in Cheadle, and my office is in Urmston, so I have spent my life around it but never in it. I know there are parts that are quite in demand and parts less so.

    Assuming your solicitor is able to complete (ie the mortgage lender is not preventing it), then you have the choice of completing in the knowledge that it could be an issue or pulling out or I suppose trying to get the ground rent altered (which will take time and probably cost money).
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • Fire Fox
    • By Fire Fox 17th May 19, 5:02 PM
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    Fire Fox
    • #4
    • 17th May 19, 5:02 PM
    • #4
    • 17th May 19, 5:02 PM
    They are definitely not 'your' estate agent. They are the vendor's estate agent. Your expert legal eagle advises get a deed of variation which is nothing like pulling out.

    Never buy a property simply because you are bored, frustrated or feel too invested financially or time wise. Leasehold purchases are inherently complex because there are more interested/ involved parties. You are not at a late stage until after exchange of contracts.
    Declutterbug-in-progress.⭐️⭐️⭐️ ⭐️ Trainee Rosie the Riveter.
    • michaelsft
    • By michaelsft 17th May 19, 5:09 PM
    • 33 Posts
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    michaelsft
    • #5
    • 17th May 19, 5:09 PM
    • #5
    • 17th May 19, 5:09 PM
    My Estate Agent (on my sale not the purchase) was pretty balanced on it (purple bricks so he doesn't care, he's getting paid either way), he acknowledges that it's not ideal but also got me to look into what it really means. In 110 years someone will be paying £130 a month in ground rent. What will £130 a month mean to the average property holder in 110 years time - my guess is, very little really. Everything goes up in cost and besides, it'll have been renegotiated by that point anyway. From memory once a property has 90 years left on the lease it's getting due to be extended so all the terms can be changed then. My mortgage advisor has been brilliant with me for years and he seems utterly unconcerned by it.

    It's starting to feel like a mountain out of molehill. Chorlton is a very desirable place to live and can be very expensive but I found a decent deal here (£198k for a 2 bed flat in a relatively modern 14 year old build is about as good as it gets).

    If I try and get the ground rent altered now it'll push everything back to the point my buyer will probably pull out. I'm not prepared for that to happen but the hassle of storing everything and moving twice and paying rent and everything else that comes with a new place just feels so daunting. Two hours ago I was ready to pull the plug but if I think about it, the costs just don't bother me very much. I have to think, would it really bother other people that much more than me?

    Is someone in 35 years time really going to baulk at £400 a year? Will it ever get that far? The lease should be renewed by then anyway. Am I being too cavalier about it? I've half a mind now just to tell her to go ahead and ignore that. The language she used was very very worrying but should it have been?

    " I am concerned that the escalating ground rent could seriously affect the future marketability of the property and I consider that a deed of variation is obtained from the freeholder. If the seller or freeholder will not agree to this, I must advice you not to proceed with the purchase."

    "As advised, you do need to look at it as a let off really. It could have been much worse if you had gone ahead with the purchase and then has trouble selling in the future."

    Thank you to anyone who posts on here, it may seem like I have made up my mind but I'm really just going through things in my head and all comments are very very welcome. It is a big decision I know so I appreciate you all.
    Debt free wannabee...
    • haras_nosirrah
    • By haras_nosirrah 17th May 19, 5:13 PM
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    haras_nosirrah
    • #6
    • 17th May 19, 5:13 PM
    • #6
    • 17th May 19, 5:13 PM
    lenders don't like doubling every 10 yrs but I believe doubling every 25 yrs isn't an issue.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • michaelsft
    • By michaelsft 17th May 19, 5:15 PM
    • 33 Posts
    • 3 Thanks
    michaelsft
    • #7
    • 17th May 19, 5:15 PM
    • #7
    • 17th May 19, 5:15 PM
    They are definitely not 'your' estate agent. They are the vendor's estate agent. Your expert legal eagle advises get a deed of variation which is nothing like pulling out.
    Originally posted by Fire Fox
    Sorry I was referring to my estate agent who I called for advice on the matter, he's been pretty good to me and I wanted his thoughts on the matter. My 'legal eagle' advises getting a deed of variation but the time and cost involved make this prohibitive and since the terms of the lease aren't particularly heinous it is probably also unlikely it will be amended. Just wheel spinning when the sale/purchase have already taken quite a long time to get anywhere.

    In all likelihood, it would probably mean pulling out if I take her advice, or at least having to leave my place and sort everything else because I don't want to jeopardise my own sale. I guess what I'm trying to make sense of is, is this really a problem or just a pretty common part of many leaseholds.
    Debt free wannabee...
    • Mojisola
    • By Mojisola 17th May 19, 5:15 PM
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    Mojisola
    • #8
    • 17th May 19, 5:15 PM
    • #8
    • 17th May 19, 5:15 PM
    In a hundred years, £1600 probably won't be very much money!
    • michaelsft
    • By michaelsft 17th May 19, 5:16 PM
    • 33 Posts
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    michaelsft
    • #9
    • 17th May 19, 5:16 PM
    • #9
    • 17th May 19, 5:16 PM
    lenders don't like doubling every 10 yrs but I believe doubling every 25 yrs isn't an issue.
    Originally posted by haras_nosirrah
    This is what I've heard today as well. If the bank is happy to lend how worried can I be?
    Debt free wannabee...
    • michaelsft
    • By michaelsft 17th May 19, 5:17 PM
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    michaelsft
    In a hundred years, £1600 probably won't be very much money!
    Originally posted by Mojisola
    Also my thinking. I've read some shocking stories of 10 year doubling that puts the rate up to £10k plus after 50/60 years but this seems like a different kettle of fish.
    Debt free wannabee...
    • TrickyDicky101
    • By TrickyDicky101 17th May 19, 5:23 PM
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    TrickyDicky101
    On the basis of what you've stated, the GR does not even seem to keep pace with long term inflation (let's assume it's the BoE's target rate of 2%) so I personally don't think it is at all onerous.

    Has your solicitor explained why she feels it is a no-no?
    • anselld
    • By anselld 17th May 19, 5:29 PM
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    anselld
    Doubling every 25 equates to an annual inflation of 2.8%.

    It is not a mortgage issue and it is not a problem for most buyers, it is just that there is hysteria about "doubling ground rents" at the moment.

    It is not worth the cost and the delay of doing the legals for a variation even if the freeholder agrees. You can always kill off the ground rent at a later date through a statutory lease extension if you really want to.

    Your Solicitor's advice to pull out is way OTT. It is a minor annoyance at worst.
    Last edited by anselld; 17-05-2019 at 5:33 PM.
    • michaelsft
    • By michaelsft 17th May 19, 5:32 PM
    • 33 Posts
    • 3 Thanks
    michaelsft
    On the basis of what you've stated, the GR does not even seem to keep pace with long term inflation (let's assume it's the BoE's target rate of 2%) so I personally don't think it is at all onerous.

    Has your solicitor explained why she feels it is a no-no?
    Originally posted by TrickyDicky101
    It was on the grounds that my lender wouldn't give me the money (since quashed by my mortgage adviser) and that it would be hard to sell in the future. It was my plan to live there for a couple of years and then begin negotiating for a lease extension and any amendments anyway so it may well never be a problem.

    I looked at inflation rates and long term trends and came to the same conclusion, that this might end up being cheaper - I believe it's just the optics that are the problem - people might see figures and dislike them but throw a small percentage on there and people don't care.
    Debt free wannabee...
    • michaelsft
    • By michaelsft 17th May 19, 5:33 PM
    • 33 Posts
    • 3 Thanks
    michaelsft
    Doubling every 25 equates to an annual inflation of 2.8%.

    It is not a mortgage issue and it is not a problem for most buyers, it is just that there is hysteria about "doubling ground rents" at the moment.

    It is not worth the cost and the delay of doing the legals for a variation even if the freeholder agrees. You can always kill off the ground rent at a later date through a statutory lease extension if you really want to.
    Originally posted by anselld
    I've read this a lot as well, I really do feel there's an element of hysteria out there due to some truly awful deals but this just seems like it's not a big problem. I've been in a tizz all day about this and am very much enjoying reading and taking on board different perceptions of the issues while drinking a nice glass of red. Trying hard to relax!
    Debt free wannabee...
    • TrickyDicky101
    • By TrickyDicky101 17th May 19, 5:37 PM
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    TrickyDicky101
    Doubling every 25 equates to an annual inflation of 2.8%.

    It is not a mortgage issue and it is not a problem for most buyers, it is just that there is hysteria about "doubling ground rents" at the moment.

    It is not worth the cost and the delay of doing the legals for a variation even if the freeholder agrees. You can always kill off the ground rent at a later date through a statutory lease extension if you really want to.

    Your Solicitor's advice to pull out is way OTT. It is a minor annoyance at worst.
    Originally posted by anselld
    No it doesn't - the GR stays level for 25 years at which it doubles. That is not the same as an annualised 2.8% rate.
    • BeanBelle
    • By BeanBelle 17th May 19, 5:49 PM
    • 2 Posts
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    BeanBelle
    How long is the lease? In 350 years the rent will be £1.6million per year. Sounds that thatís too far away to worry about but itís going to cause you two issues in the mean time. 1. If you want to remortgage then you may have trouble finding a lender. Iíve heard of some refusing to lend on a ground rent that doubles every 25 years (e.g. Barclays). 2. When you want to sell in the future then any solicitor doing their job properly will give your buyer the same advice as you have had. That will put off some buyers and so it might be harder for you to sell. Does your solicitor think that getting it changed will be a simple process? Is there a risk that the freeholder could say no? If it will be straight forward then maybe you could do it after you have bought the place? Good luck whatever you decide.
    • anselld
    • By anselld 17th May 19, 5:50 PM
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    anselld
    No it doesn't - the GR stays level for 25 years at which it doubles. That is not the same as an annualised 2.8% rate.
    Originally posted by TrickyDicky101
    Not precisely, no. The actual equivalent rate would be slightly less than 2.8% but for the purposes of deciding if it is onerous or not it is a close approximation.
    • anselld
    • By anselld 17th May 19, 5:54 PM
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    anselld
    Iíve heard of some refusing to lend on a ground rent that doubles every 25 years (e.g. Barclays).
    Originally posted by BeanBelle
    Barclays allow doubling down to 20 years for a max duration of 125 years.
    • michaelsft
    • By michaelsft 17th May 19, 6:07 PM
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    michaelsft
    It's 125 year lease from 2005 so more than 10 years left at £100 and then doubles every 25 years or until the leasehold is renogtiated and extended.
    Debt free wannabee...
    • BeanBelle
    • By BeanBelle 17th May 19, 6:41 PM
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    BeanBelle
    As the lease is 125 years it feels like it shouldnít be too big a deal then. As you say it would need extending before the GR ever got too high and could be dealt with then
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