Ground rent increases on leasehold apartment?

Ground rent increases on leasehold apartment?

9:47 AM, 28th September 2022, About 2 years ago 6

Text Size

Dear All, I purchased an apartment in 2011 and it has ground rent charges of £500 p.a. for the apartment and £250 p.a. for the car parking space (which is in a separate building to the apartment).

In my lease it indicates that the ground rent is reviewed every 10 years and a variable factor (it is complicated how they calculate it) is applied to determine the ground rent for the next 10 years. A few years back the review was carried out and the ground rent has increased to £679.68 for the apartment and £339.84 for the car park space.

My question is, what can I do about this as there has been a lot of news about not being able to sell or mortgage an apartment in the future with ground rents that escalate to high levels?

I have also seen that a new act came into force where new leasehold homes can only have peppercorn rents.

An article on the website also shows that the Competition and Markets Authority had succeeded to bring action or persuade a number of freeholders to remove these kind of clauses from leases.

I see in one case the freeholder sold the freehold to the leaseholders at a discount.

I am generally concerned that the value of my apartment will go down from here on in, if after all a buyer is able to buy an apartment with zero ground rent or one that has a £3,000 per year, they would prefer the zero.

Can I as a leaseholder, either on my own, or as a group with the others in the block or even the development, approach the freeholder to remove these clauses?

Will they even entertain the idea?

Or should we wait for further acts in the leasehold reform to come?

Is my original solicitor liable in anyway if they didn’t flag this up? They may have done but I didn’t understand the implications.

Are any of you in the same situation and what, if anything, are you doing?



Share This Article



11:48 AM, 28th September 2022, About 2 years ago

There are two main ways to deal with this situation - one collectively and one individually.

Collectively - you could group together with fellow leaseholders to buy the freehold, using Right to Enfranchise. That needs "more than 50%" to participate and therefore involves 'herding cats'. Difficult, but ultimately the best answer ... as you can grant yourselves lease extensions as part of the process and/or change the ground rent to zero (a peppercorn).

Individually, you can serve notice on the landlord requiring a statutory lease extension. That provides +90 years to the existing lease term; e.g. 125 > 215 years ... and also changes the ground rent to a peppercorn.

Either route removes the onerous ground rent clauses in your lease and solves the problem you're worried about.

Raj Kirpalani

18:34 PM, 28th September 2022, About 2 years ago

Reply to the comment left by BernieW at 28/09/2022 - 11:48
Can you use option two if your lease has already 988 years left. I thought there was an upper limit as to when you can exercise a stauatory lease extension?


21:47 PM, 28th September 2022, About 2 years ago

With those terms it will not be cheap


9:22 AM, 29th September 2022, About 2 years ago

Reply to the comment left by Raj Kirpalani at 28/09/2022 - 18:34
There's no upper limit as far as I'm aware.


20:00 PM, 1st October 2022, About 2 years ago

We had the same issue Ground Rent increasing every 10 years based on inflation. We brough a flat in 2012 and our Solicitors warned us against buying the flat. We still went ahead anyway as it was a nice flat and provided good rental profit. However, ground rent has recently increased from £250 per annum to £500 per annum. Tried to get the other three owners to buy the freehold but they refused.
It is a problem if you are selling as many will be put off and getting a mortgage could prove difficult.
The leasehold reforms doesn't take into account the old leases and doubt in future is will do
This is the way the freeholder makes money and will definitely refuse and will probably offer you and other leaseholder to buy the lease at some exorbitant cost
While ground rent is high it hasn't increased much after 10 years. In 10 years time we will have another review and if say inflation remains high then we are facing significant increase.

Raj Kirpalani

20:40 PM, 1st October 2022, About 2 years ago

Reply to the comment left by Jim at 01/10/2022 - 20:00
Yes the leasehold reform act doesn't take into account old leases at the moment but from what i read some freeholders were reversing the clauses in the leases before the reform act came into place. It seems the competion and markets authority brought cases against these developers that sold the freehold to other parties. There must be many flats sold previous to the reform act that have unfair terms.

On another note i dont think my solicitor warned against me buying the flat. I ll have to check the summary report they produced at the time but it may be too late to claim against them anyway as the purchase was in 2011.

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership


Don't have an account? Sign Up

Landlord Tax Planning Book Now