Ground rent increase

by Readers Question

3 years ago

Ground rent increase

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Ground rent increase

I bought a flat in November 2012 and the ground rent was £100 till now. Yesterday I got a letter from the management company E & M saying that the ground rent was due for review in December 2012 and it’s now £325 pa from 2012. Ground rent increase

I am going to check the lease out but in the meantime I am wondering:

1. Can they increase ground rent by that much ?
2. Can they charge backdated ( now is 2014 ) ?
3. The lease has around 100 years left, is it worth to get lease extend to avoid ground rent ?
4. How much would the lease extension cost?

I would really appreciate if anyone could help.

Many thanks

Cissie

Comments

Mike McDonagh

3 years ago

Hi Cissie,
Your best course of action is mentioned in your question...check the lease. This will give all the details regarding rent reviews. If you bought in Nov 2012 and rent renewal was due the following month I'm surprised your solicitor did not highlight the fact and what increase was permitted.
Re a lease extension, in essence this does what it says, you are only extending the lease not varying it. To avoid paying ground rent you would need to purchase the freehold or appropriate share and then effect the change.
Hope this clarifies even if it doesn't help.
Cheers Mike

Ray Davison

3 years ago

Hi Cissie,
As you say, you need to read your lease as that will document what they can do.

1. If the lease says they can then yes. It is likely to have either a fixed ground rent for the duration of the lease (Common in older leases) or a range of charges a different periods into the tenancy. If it does not mention any increases then they cannot do it. If it simply documents a review then it depends upon what the documented terms of the review are.

2. Again it depends upon the lease you signed. Charges are likely to be due per the dates specified in the lease. If the increase is documented to commence from a certain date then it is due based on that date.

3. A lease extension won't stop you paying ground rent but will protect the value of your property.

4. That would be by negotiation with the freeholder although the lease valuation tribunal will make the decision if you cannot agree an appropriately reasonable (To both sides) sum. There is a formula on the Leasehold Advisory Service website.

cissie Zheng

3 years ago

Reply to the comment left by "Ray Davison" at "24/12/2014 - 11:00":

Hi Mike,Ray,

Thanks for your reply. The lease said : 1) shall increase to such sum as is the same % of the review value of the building ... 2) the amount shall be specified in a notice in writing given by at any time within 12 months prior to 21 years..

So do you think I can argue about the amount and I shoulndnt pay the backdated amount as I only got notice few days ago?

Thanks

Cissie

James Leavesden

3 years ago

If you go down the statutory route (LeaseholdHousing Reform Act) you compel the freeholder to provide you with a 90 year extension at Zero ground rent.
As a bonus the freeholder can't add any new clauses to the lease other than what is required to extend the lease and introduce a peppercorn ground rent. One of the favourite 'tricks' of the large /Professional freeholders is to insert an annual consent to let fee in new leases when you negotiate a normal extension ( usually at increased ground rent too).

Malcolm Norquoy

3 years ago

Cissie,

I recently won a court case against an agent and freeholder who did something similar. The circumstances were that there was a Ground Rent revision clause in the lease to increase the Ground Rent to 1% of the property valuation at that time. The increase happened before I bought the properties.

I challenged the increase on two grounds. The first being the valuation which was clearly vastly (almost 100%) in excess of true valuation and secondly because the increase had not been mutually agreed, failing which the case needed to go to arbitration, as required in the lease.

I was successful. The actual valuation was not part of the court case and so the ground rent reverted to the original level and I was refunded the difference based on the number of years I had owned the properties.

Take a good look at the lease. If these are two requirements, do extensive homework to understand each aspect. I employed a local surveyor to get professional valuations. In my case the gap between the freeholders and the surveyors valuation, along with proof points of similar properties sold in the locale, was so big that it was not really up for debate, although the freeholder did insist on continuing to court. I also had documentation from the previous owners (I own four flats in the block) that showed they had clearly disagreed with both the valuations and the process. They, along with the other 40 odd leaseholders, had not taken the bold move of challenging the decision.

Bold, but worthwhile! Good luck!

cissie Zheng

3 years ago

Reply to the comment left by "Malcolm Norquoy" at "26/12/2014 - 09:28":

Thank you Malcolm. Since the lease was written the increase will follow the building increase percentage, so I calculated slightly less than their figure. I am writing back to argue this and the another point is that they should not charge me backdated as I have never received notice nor agreed. I am waiting to see how they reply.

James: if I extend 90 years lease, will they still add the ''tricks ' to it? They have already charge letting Reg fee £105 per registering when I let out.

Thanks and merry Christmas!

Cissie

James Leavesden

3 years ago

If you go down the statutory route, the only changes to the lease will be the extended term and zero ground rent. Any terms already there will stay.

cissie Zheng

3 years ago

Reply to the comment left by "James Leavesden" at "26/12/2014 - 15:40":

Thanks James.

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