Damp structural issues in leasehold flat?
2 years ago | 23 comments
Is £250 ground rent increase an issue?
12:02 AM, 29th November 2023, 2 years ago
76
Hello, one of my leasehold flats just had a Ground Rent increase which takes it over £250.
I’ve heard that ‘lenders’ do not like it when GR passes £250 and, when/if selling this may cause problems for future purchasers to get mortgages.
I have 130 years left on the lease, does anybody have experience on whether the £250 limit is a serious issue?
Any help would be greatly appreciated,
David
Tags:
ground rent increase, ground rent limit, leasehold, leasehold issues, leasehold property, mortgage approval
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Member Since October 2013 - Comments: 1630 - Articles: 3
5:23 PM, 30th November 2023, About 2 years ago
Reply to the comment left by Kizzie at 30/11/2023 – 16:07
I haven’t got a clue as to why you’ve felt the need to explain this.
Member Since February 2018 - Comments: 627
10:51 AM, 2nd December 2023, About 2 years ago
Our GRs will double in about two years time but the lease provides for increases at TWENTY year intervals, effectively 3% p.a., it’s not an isssue.
Member Since January 2023 - Comments: 6
11:11 PM, 6th December 2023, About 2 years ago
I have two properties with ground rent issue. The first one in Bradford BD1 built in 2020, has a ground rent that has already increased to £600. The second flat in Liverpool L8, with a lease of 137 years remaining, currently has a ground rent of £600. However, the next ground rent increase is expected to be £1200 in three years. Initially, it’s puzzling why the pension company chose to invest in ground rent, causing a surge in property prices. This, in turn, led banks to withhold mortgages for these properties. Landlords are raising rents, putting financial strain on renters who face the choice of tightening their budget or facing homelessness. Consequently, the property’s future value seems precarious.
Member Since January 2023 - Comments: 142
11:20 PM, 6th December 2023, About 2 years ago
Reply to the comment left by NewYorkie at 29/11/2023 – 23:13
I dont think they are a zero risk proposition. Service charge outlays can sometime prove irrecoverable.
Member Since January 2023 - Comments: 6
9:56 AM, 7th December 2023, About 2 years ago
Reply to the comment left by Amethyst at 29/11/2023 – 13:25
All auction properties face this issue. I’ve experienced it myself; once you purchase it, finding someone willing to pay becomes challenging. In essence, I ended up with a debt rather than a valuable property.
Member Since October 2013 - Comments: 1630 - Articles: 3
10:28 AM, 7th December 2023, About 2 years ago
Reply to the comment left by moneymanager at 02/12/2023 – 10:51
You may think the sums involved aren’t an issue, but they would become an issue if they exceeded £250/£1000 and you couldn’t remortgage.
Member Since October 2013 - Comments: 1630 - Articles: 3
10:32 AM, 7th December 2023, About 2 years ago
Reply to the comment left by Contango at 06/12/2023 – 23:20
I’d love to hear about these irrecoverable expenses!
Member Since July 2017 - Comments: 463
2:05 PM, 7th December 2023, About 2 years ago
Reply to the comment left by moneymanager at 02/12/2023 – 10:51
It’s actually much closer to 3.5% each year.
Member Since January 2023 - Comments: 142
2:57 PM, 7th December 2023, About 2 years ago
Reply to the comment left by Dennis Forrest at 07/12/2023 – 14:05
that is correct
25 year doubling ground rents is equal to 2.87% annual growth rate and 33 yearly is 2.12%
Member Since August 2019 - Comments: 25
2:30 PM, 8th December 2023, About 2 years ago
Hopefully David, the OP will have enough material to inform any decision regarding his property. My own experience tells me these £250 ( England) /£1000 ( London ) GRs are a significant problem as future purchasers must be cash investors. If the thresholds were to change, that might be different. Whatever he does he must not default on the GR, as the Lease could now be an assured tenancy and Section 8 repossession will apply for non payment. This will be a far quicker process for a superior Landlord than using forfeiture, another means by which the Lessee could be evicted. Under forfeiture he could be evicted for breaking the terms of the Lease in this case not paying GR. These scenarios of eviction have happened many times in my development. The properties ended up being auctioned. Also in my experience and in answer to another poster who had property in BD1, these types of flats are unmortgageable no matter how slowly the GR increases or how long is left on the Lease. BD1 is becoming notorious for this and that is why they are very inexpensive properties and attractive to the uninitiated cash investor. Our property would need to be discounted by over £80,000 ( original purchase price in 2005 £135,000 ) to stand a chance of selling. Since capital growth has been out of the question we had have to rely on rental value and income.