Ground rent doubles every 10 years – is my property mortgageable?

by Readers Question

10:34 AM, 3rd October 2013
About 5 years ago

Ground rent doubles every 10 years – is my property mortgageable?

Make Text Bigger
Ground rent doubles every 10 years – is my property mortgageable?

I have exchanged contracts on my sale but am worried that my buyer will not be able to secure the mortgage that she needs.

The ground rent is currently £350 a year. It doubles in 2016 and every 10 years after that.

Ground rent would be £2,800 after a typical 25 year term, which seems affordable with inflation. However, at the end of the 125 year lease in 2131, when none of us are around, it would be £1,433,600

I know that collective enfranchisement, deed of variation to the lease to freeze the ground rent, and lease extension are all possible alternative options, but my preference is to sell.

Can anyone shed any light on this? Ground rent doubles every 10 years - is my property mortgageable

If it is mortgageable, which lenders are likely to be most amenable?

Thanks

 

Mike S



Comments

Mark Alexander

10:36 AM, 3rd October 2013
About 5 years ago

Hi Mike

I don't think you have any course to be concerned.

If the purchasers solicitor has exchanged contracts then he must be confident that funds are available to complete the purchase.

Based on what you have said you are only seven years into a 125 year lease, that should not be a cause for concern to any mortgage lender.
.

Annette Stone

13:50 PM, 4th October 2013
About 5 years ago

The main purpose of these very high ground rents is not only to provide a good income stream for the landlord from Day 1 but to make the cost of any future lease extension so expensive that people cannot afford to extend.

Given that it is a 125 year lease after the first renewal and in the years before marriage value would kick in (ie when the lease has 80 years or less to run) anyone applying for a lease extension to avoid paying future ground rent would be paying a huge premium as this is calculated at somewhere around 6% of all the future ground rent. Do the maths and you will see what I mean.

I have seen this before and I know of one personally who is currently considering taking action against the solicitor who advised him that this lease was a good one.

Mike S

15:50 PM, 4th October 2013
About 5 years ago

Reply to the comment left by "Mark Alexander" at "03/10/2013 - 10:36":

I hope that you are right Mark, but the purchaser actually bought (exchanged) at auction before instructing solicitors

Mark Alexander

17:04 PM, 4th October 2013
About 5 years ago

That puts you in an even better position!


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Renewal fees - same tenants?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More