Ground rent purchase – lots of questions?

by Readers Question

12:50 PM, 27th February 2015
About 4 years ago

Ground rent purchase – lots of questions?

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Ground rent purchase – lots of questions?

Hello,
1, Can anybody advise me how to calculate the fair price to pay for purchasing the freehold of a ground rent on one of my rental properties. The yearly ground rent cost is £10.00
I have asked the current leaseholder and he has said that he wants £650, he said that this would cover the legal costs for the conveyance and administration fee as well.

2, Does anybody know how the purchase cost is made up? ie conveyance cost, application administration fee, and then the value of the freehold itself. I have read that the value of the ground rent can be valued anywhere from 9 x ground rent charge to 25 x ground rent charge.

3, If I purchase the freehold do the title deeds at the land registry get updated?

4, Do I need the permission of my mortgage provider to purchase the freehold?

5, Does my mortgage provider get notified if I purchase the freehold by the land registry or some other person?

6, Can I force the current freeholder to sell the freehold to me?

7, I seem to remember reading on this web site that if you purchase the freehold of a mortgaged property that the lender can then take action to force you to redeem your mortgage and any other mortgages that you have with them even if you are up to date with all of your mortgage payments. Not sure how true this is.

All help is greatly appreciated.
Private landlord

Jimquestions



Comments

David Atkins

14:52 PM, 27th February 2015
About 4 years ago

Jim

£650 sounds very cheap are you sure that the person quoting £650 is the freeholder? - check it out on the land registry portal. Have a look for marriage values when purchasing the freehold which is what I think you mean here by, "purchasing the freehold of a ground rent".

I can answer number 3 which is a yes but it is the freehold title that will be updated.(leasehold title and freehold title will have two separate entries for those using government e-portal).

Number 6 is answered here but it will depend on your lease (does the Freehold contain a share of commercial property) - you need to look at enfranchisement:

http://www.lease-advice.org/publications/documents/document.asp?item=11

As for 4 and 5 I don't think it has any bearing unless you have a BTL, Commercial mortgage or your mortgage is with ME. Check the small print to your mortgage agreement.

I'm a layman but have a lot of dealing with leasehold law.

Tony Lilleystone

17:30 PM, 27th February 2015
About 4 years ago

Hello Jim
Can you please say whether the leasehold property which you own is a house or a flat? I rather assume that it is a house, as you haven't mentioned whether other leaseholders in the building are involved, and £650 looks cheap for the freehold of flats. Also can you say how long your lease is? Also is the property in England or Wales?
Incidentally in your Q1 you say you have approached the current 'leaseholder' I presume you meant 'freeholder.'

Sam Addison

15:53 PM, 28th February 2015
About 4 years ago

I purchased the freehold on a BTL 2 bed victorian terrace, ground rent £1.50 p.a. It cost me £550 which included all the legal costs. The freeholder used their in-house solicitors which is where their profit comes in.
As a financial investment it doesn't stack up but we did it for the peace of mind.
We didn't tell the mortgage lender but I cannot imagine they care who owns the freehold. When we bought the place the mortgage company didn't require my solicitor to prepare a report on the freeholder.

Mrs Kennedy

16:45 PM, 28th February 2015
About 4 years ago

We were asked £4000 for a £7.34 per month ground rent, 934 years still to run! At a later date a standard letter from the company offering £1000 for redeeming the ground rent! £650 sounds pretty good!

Freda Blogs

0:10 AM, 1st March 2015
About 4 years ago

To value the freehold interest properly you need to provide more facts: the length and other specifics of your remaining lease, the value (unimproved), flat or house etc. Freeholds are valued by valuing the term income (ground rent), reversion ie value at today's date of the property when it will revert to the freeholder after the lease term ends, and marriage value for leases <80yrs. £650 does sound inexpensive however, but without knowing more facts, no-one on the forum can confirm. I suggest you clarify facts and get it formally valued by a chartered surveyor experienced in these matters. I assume you are aware that you will be taking on additional responsibilities/ liabilities as freeholder? There may be some reflection in the price you have been quoted of some pending or future liabilities?


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