Ground rent school boy error?

Ground rent school boy error?

13:27 PM, 29th March 2018, About 4 years ago 89

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Hi All, Ive made a bit of a school boy error here.

I have a small portfolio, and my last purchase around 4 years ago was a flat in South London had the following clause for the ground rent: Ground Rent £250 Reviewed every 10 years by a factor of 2 or by RPI whichever the greater. Term 99 years

At the time my solicitor did clearly point this out, however I decided due to the price and location I would still make the purchase. I must admit I look back now and do have some regret and am wondering what I should do as its beginning to concern me.

Please don’t answer with “well you should not have purchased” as I’m already down the line with this”; any thoughts/advice from experienced landlords would be greatly appreciated.

Thank you



by Marcus

6:08 AM, 3rd April 2018, About 4 years ago

Reply to the comment left by Freda Blogs at 31/03/2018 - 11:57sorry been offline a few days; Just playing catch up on these comments.
Right - ok.
As advised, Im planning to contact the Freeholder initially to begin the process.
Would sending the freeholder an email be ok?

by silversurfer2017

8:24 AM, 3rd April 2018, About 4 years ago

Marcus, I don't know whether this applies in your case but some freeholders charge an administration fee to process an initial enquiry for a lease extension. You definitely need a solicitor, make sue you get one that is an ALEP member. Visit their website. ALEP = Association of Leasehold Enfranchisement Practitioners. You don't have to use a valuer but definitely need a solicitor who specialises in leases otherwise you could find yourself in an even worse position - see Martin Paine.
Yuo really need a 90 year lease extension on top of the unexpired original lease term. Your current lease has only 19 years to go before it will need extending again. At 80 years left marriage value kicks in making lease extensions even more expensive. IMO you should be aiming for a 90 year extension and also getting the increases down to just RPI increases. A peppercorn rent sounds nice but it will just be too expensive for you. You may need to get your solicitor to serve a S42 notice for a statutory lease extension just to put yourself in a better bargaining position with the freeholder. Expect to pay you own solicitor around £1000 - £1500 inc. vat.

by Marcus

9:29 AM, 3rd April 2018, About 4 years ago

Reply to the comment left by at 03/04/2018 - 08:24
Right ok. Thank you again for the detailed response/advice.

by Freda Blogs

10:04 AM, 3rd April 2018, About 4 years ago

Hi Marcus

Do not confuse the informal process with a non-statutory offer.

The process is to do with whether or not you serve a S42 notice (see my earlier posts). The offer is to do with whether you wish to agree terms for a premium based on the statutory basis (90 years + nil ground rent) or an alternative combination of years/ground rent/premium.

You are entitled to 90 years with nil/peppercorn rent as of right. This is usually the starting point. If the premium that is produced using that criteria is acceptable to you, I suggest you go for that option. It is clear and straightforward. The amount you have to pay will be driven primarily (although there are other factors) on the unimproved value of your property and the length of the unexpired lease term and the attendant relativity (a hot topic at present).

However, you may be able to negotiate the premium down by offering to pay ground rent (with a reasonable rather than punitive rent review structure), if that suits you, especially as many freeholders prefer to have some income. Your valuer should be able to do some alternative calculations for you if you ask.

Judging from his/her posts, Silversurfer has clearly had some bad experience; having dealt with dozens of lease extensions personally and for clients, I don't think the scenario described is typical. I agree that some freeholders can be difficult, but many also just accept the terms of the legislation. Naturally they will try and obtain the best deal they can, just as you should. In order to do this you will need an appropriately qualified and experienced valuer – I urge you not to attempt to do it yourself, it is a false economy. Likewise I repeat my recommendation that you ask your valuer (or your solicitor) to approach the freeholder initially.

With the right team, hopefully you can navigate the process with even the most difficult of freeholders.

I hope this helps.

by Marcus

10:42 AM, 3rd April 2018, About 4 years ago

Reply to the comment left by Freda Blogs at 03/04/2018 - 10:04
Hi Freda,

Yes very helpful.
I will look to contact a solicitor that is a member of ALEP (as per silversurfers recommendation) they can make the approach. As you are experienced with dealing with this, is there a particular solicitor you can recommend? Not sure you can send Direct mail on here, for purposes of confidentiality.

Thank you (for the 5th time!)

by Freda Blogs

11:36 AM, 3rd April 2018, About 4 years ago

Hi Marcus

It depends where in the country you are. The ones I know are SE based.

You should also be able to find valuers who are ALEP members, so you may be able to find both on the website. Alternatively if you like the look of a particular solicitor or valuer, ask if they recommend a valuer/solicitor they have worked with previously. It can be helpful if they already have a working relationship.

by Marcus

13:00 PM, 3rd April 2018, About 4 years ago

Reply to the comment left by Freda Blogs at 03/04/2018 - 11:36
Hi Freda,

I'm based in Hertfordshire; flat in question is in S.E London.

2 MP's i wrote too (housing committee) have now replied asking for my address; i expect they will send me some standard advice; however i'll keep everyone posted.

Thank you

by silversurfer2017

13:27 PM, 3rd April 2018, About 4 years ago

I think Freda might have confused matters slightly. Relativity only comes in to the calculation when properties attract marriage values at or very close to the 80 year mark. With 95 years to go on the existing lease relativity is not going to come in to the equation. Neither is any extra premium going to be added on because you have improved the value of your property by extending your lease. In your case there are only 2 factors that will affect the premium for a lease extension. The first is the landlord's reversionary value. This is compensation to the landlord that he would, as things stand now, get possession of your property in 95 years time. I can calculate the exact figure for you tomorrow but estimate this figure to be around £2,000. The shorter the lease the higher this figure will be and the longer the lease has to run the less the reversion will be. (In the case of my last lease extension the reversionary value was only a few hundred pounds as the lease still had 140 years to run).
The second part of the calculation is compensation to the freeholder for the loss of ground rent income. You will not find any calculators on-line that will work out premium for doubling ground rents. Not even on the government's LEASE website. Neither will you find any calculators for RPI linked increases. If you are familiar with Excel these calculations are quite easy. I have done my own spreadsheet for doubling rents and will work out these figures for you as well. I know that these figures will be very similar to figures produced by a professional valuer because they do their calculations the same way. I will post these figures as well for you tomorrow. It is a pity that I can't upload spreadsheets to this site as they may be useful to others

by Freda Blogs

14:01 PM, 3rd April 2018, About 4 years ago

Silversurfer: I am a practitioner in this field.
You are incorrect: relativity DOES come into 80+ year leases; however, its IMPACT on the calculation is not as great as in shorter term leases.
I have also pointed out that the value is based on the UNimproved value of the subject property.
I appreciate your wish to be helpful, but not at the expense of giving out incorrect information disguised as advice, which some people may erroneously rely on.
Although I hold professional indemnity insurance and I can do the calculations for Marcus (as I do for other clients), I would not presume to do them as I do not have all of the facts nor had sight of the lease, which is why I have urged him to appoint appropriate advisers suited for the matter in hand.

by BP Surrey

14:37 PM, 3rd April 2018, About 4 years ago

Well having made a few comments very early on in the thread, it has all been very interesting. It would be great if Marcus could update us on the progress being made from time to time and hearing of the end result would be good too.

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