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    • KierNet
    • By KierNet 12th Jun 19, 7:02 PM
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    KierNet
    Ground Rent question
    • #1
    • 12th Jun 19, 7:02 PM
    Ground Rent question 12th Jun 19 at 7:02 PM
    Hi MSE!

    I'm currently in the process of buying my first flat with my girlfriend. It's been going all too well so far. An offer was accepted on a lovely two bed flat. Fairly close to work for my girlfriend, bit of a drive for me, but doable.

    My solicitor has got the leasehold details today and told us that its 250 a year which is high, but it increases by 250 every ten years. She has said this is unusual. I trust her completely as shes a family friend I've known for my whole life (my mum used to work with her before she had kids).

    I'm going to phone tomorrow, but everything I've read online so far says this is a bad thing! We have four years until it increases to 500 a year. Whilst we can manage this fairly easily, am I right in thinking if we sell (which I'm planning to do in two/three years) it could cause a problem.

    Is this the case? Its a 125 year lease.

    I'm leaning towards walking away at the moment.

    Any advice would be great. I've had a look through the forums and not found anything yet...sorry if its asked a lot!

    Thanks
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Page 1
    • rachel230
    • By rachel230 12th Jun 19, 7:17 PM
    • 73 Posts
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    rachel230
    • #2
    • 12th Jun 19, 7:17 PM
    • #2
    • 12th Jun 19, 7:17 PM
    Doubling ground rent every 10 years is a problem and you will have trouble selling going forward.
    Join the National Leasehold Campaign Facebook group and post your question there. Many people are trapped in unsaleable homes due to this very issue.
    • KierNet
    • By KierNet 12th Jun 19, 7:19 PM
    • 2,563 Posts
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    KierNet
    • #3
    • 12th Jun 19, 7:19 PM
    • #3
    • 12th Jun 19, 7:19 PM
    Doubling ground rent every 10 years is a problem and you will have trouble selling going forward.
    Join the National Leasehold Campaign Facebook group and post your question there. Many people are trapped in unsaleable homes due to this very issue.
    Originally posted by rachel230
    Thanks, I'll have a look at that group now.

    It's not doubling, but adding 250 every ten years. I'd be running away if it was doubling!
    What is pi? Where did it come from?
    • rachel230
    • By rachel230 12th Jun 19, 7:27 PM
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    rachel230
    • #4
    • 12th Jun 19, 7:27 PM
    • #4
    • 12th Jun 19, 7:27 PM
    Apologies misread as doubling!
    • bouicca21
    • By bouicca21 12th Jun 19, 10:23 PM
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    bouicca21
    • #5
    • 12th Jun 19, 10:23 PM
    • #5
    • 12th Jun 19, 10:23 PM
    I’d want to double check the clause. Adding an increase of 250 is unusual, doubling is more common.
    • Tom99
    • By Tom99 13th Jun 19, 2:40 AM
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    Tom99
    • #6
    • 13th Jun 19, 2:40 AM
    • #6
    • 13th Jun 19, 2:40 AM
    You might not get a mortgage with those terms but if you did you need to factor into any offer you made the cost of buying out the ground rent using a statutory lease extension.
    You will have to wait 2yrs to do that or if the seller has owned the flat for 2yrs or more they can serve a section 42 notice which you take over.
    If you discounted the ground rent at say 6% its current value might be c 12,000, then you have to pay both sides fees so say at least 15,000 and maybe more.
    The only bright-side is that changes to the way and cost of lease extensions are being proposed which may bring down the total cost a bit but those changes may be years off or may never happen.
    • always_sunny
    • By always_sunny 13th Jun 19, 8:53 AM
    • 7,268 Posts
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    always_sunny
    • #7
    • 13th Jun 19, 8:53 AM
    • #7
    • 13th Jun 19, 8:53 AM
    My solicitor has got the leasehold details today and told us that its 250 a year which is high, but it increases by 250 every ten years. She has said this is unusual. I trust her completely as shes a family friend I've known for my whole life (my mum used to work with her before she had kids).
    Originally posted by KierNet
    I would walk away...that's a lot of money for GR which will also cost a fair bit when you have to extend in 40 years time (before it drops too close to 80 years)!
    EU expat working in London
    • BBH123
    • By BBH123 13th Jun 19, 9:41 AM
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    BBH123
    • #8
    • 13th Jun 19, 9:41 AM
    • #8
    • 13th Jun 19, 9:41 AM
    My advice is to walk away.
    • Tom99
    • By Tom99 13th Jun 19, 9:48 AM
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    Tom99
    • #9
    • 13th Jun 19, 9:48 AM
    • #9
    • 13th Jun 19, 9:48 AM
    My advice is to walk away.
    Originally posted by BBH123
    Even if you could reduce the price by 20,000?
    But it may not be mortgageable anyway.
    • chunkytfg
    • By chunkytfg 13th Jun 19, 9:55 AM
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    chunkytfg
    How long is the lease left? if its 125years is it a new property and you'll be the first owner on a brand new lease?
    Those who risk nothing, Do nothing, achieve nothing, become nothing
    MFW #63 0/500
    • 11Carrie11
    • By 11Carrie11 13th Jun 19, 10:01 AM
    • 6 Posts
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    11Carrie11
    I guess you consult your lawyer. Probably, he could solve this problem or give you an advice what you should do in this situation.
    • itwasntme001
    • By itwasntme001 13th Jun 19, 10:28 AM
    • 341 Posts
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    itwasntme001
    Using a discount rate of 7% (which is pretty standard), the capitalized value of the ground rent is under 10k. Essentially this means that you can pay this amount upfront so that there is no ground rent anymore to pay during the lease. The fair value of the property would be the value of a identical property with no ground rent less 10k. Keep that in mind in terms of the price you are buying it for.



    It is an unusual ground rent to go up by a constant 250 every ten years, but that does not mean a lender would say no. I would check with the lender first. A solicitor does not know anything about valuations. Have you got a valuation done for the property by a surveyor?


    In comparison a 125 year lease with 250 ground rent doubling every 10 years costs 25k, and doubling every 25 years costs 4.5k. So your lease is somewhere between the two.
    • always_sunny
    • By always_sunny 13th Jun 19, 11:08 AM
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    always_sunny
    Even if you could reduce the price by 20,000?
    But it may not be mortgageable anyway.
    Originally posted by Tom99
    I would calculate how much it'd cost to get rid of the GR and the discount from there.
    That's what I did when I bought mine (and I was pretty naive to the LH business)... at the end the choice was a GR similar to the OP with a long lease or buy with a short lease and then extend at a peppercorn which is what I did... the OP though doesn't have that option.

    I reckon high GR is becoming increasingly a no-no and don't think I would want to be stuck with it.
    EU expat working in London
    • KierNet
    • By KierNet 14th Jun 19, 1:53 PM
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    KierNet
    Thanks for the advice, that group mentioned earlier was great.

    Spoke to my solicitor on the phone yesterday and she advised it would be hard to sell in three/four years time (when we would be looking at moving). We decided to pull out of buying it.

    Its a shame as it was almost the perfect place for us, but everything happens for a reason. We will find somewhere else in the future .

    In a way its a good thing, I'm starting a new job in two weeks with six months training. I don't fancy moving at the same time!
    What is pi? Where did it come from?
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