Ground rent compensation offer on new BTL purchase?

Ground rent compensation offer on new BTL purchase?

10:38 AM, 28th March 2018, About 6 years ago 3

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I am buying off-plan flat, BTL investment in Liverpool. The Selling agent offered £300 ground rent be reviewed every 5 years according to RPI rate.

However, that wasn’t the case. The ground rent is £350 doubling in 5 years then to be reviewed every 5 years according to RPI calculations. £700 ground rent in 5 years for a flat which is not built yet in L3 Liverpool sounds too high and may be a problem when selling it in the future.

1 – how do I know what is a fare ground rent price for an area?
2 – I am pulling out – how can I get compensation for the conveyancing costs ?
3 – They are trying to negotiate by adding a clause to the lease – the question is what happens after 10 years? would the increase would be based on £700 ground rent, see offer below:

Developer has agreed to pay 50% of your ground rent after year 5 (when it doubles) meaning you are fixed at £350 per annum for 10 years. We will add a clause to the contract stating this. Please also remember you do not pay ground rent for the first 2 years from completion, so essentially the ground rent will remain at £350 per annum.

·Ground rent after 10 years increases at the rate of RPI
·Good will gesture of £350 payable to you on exchange to cover 1 year ground rent from Agent.

4- Is there an article that show me how the RPI rent increase is calculated?

Many thanks

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Dave Smith

12:49 PM, 28th March 2018, About 6 years ago

I and most Landlords at a large development in Salford (Ladywell Point) were caught out by the 'doubling ground rents scandal', only realising when it first doubled in 2013. Check the start date of the doubling in the lease, as in our case, the 8 years to first double (from £250 to £500) was stated in the lease as 5 years before the flats were built (go figure), so the first doubling came along just 3 years after purchase from new. It is set to double again twice, to £2000pa by 2033. Needless to say, that was the first time most LLs heard about it as it was obviously purposely hidden in the lease spread across numerous clauses on different pages. The developers recommended solicitor (which you were incentivised to use) didn't point it out. (Lesson learned). Rapidly escalating ground rents, permission fees (watch out for extra freeholder fees for permission to let, and 'registration of tenants'), were introduced in the mid noughties, as monetisation of leases became popular as a way of developers making extra income. The developer will also sell the freehold to an investor without giving you right of first refusal. RPI linked Ground Rent reviews are not much better, as could even work out worse than doubling if inflation takes off. New buyers are finding they can't get mortgages on doublers and as awareness increases, so will resistance to purchase, affecting values. Having been caught out once, I would walk away.

You may be able to get refunded from your conveyancer if they didnt tell you about the doubling, or something completely different (as in my case - told me it was to be reviewed after 25years!!). Or if you have any proof of the selling agents advice, that might assist you.
There is a powerful Facebook Group which has been instrumental in making this abhorrent scam public, and fighting for a fairer deal. If interested, please search for National Leasehold Campaign on FB.


11:28 AM, 31st March 2018, About 6 years ago

Walk away now, if you get costs refunded well and good, but otherwise put it down to experience

Claire Smith

13:16 PM, 1st April 2018, About 6 years ago

It's likely to be a problem when you come4 to sell, if not before. Walk away now - the very fact that they haven't been open and honest about this in the first place rings warning bells.

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