Pulled out again due to onerous Ground Rent increases

Pulled out again due to onerous Ground Rent increases

8:58 AM, 21st January 2020, About 2 years ago 18

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I have just pulled out, again, from the purchase of a new-build flat due to the onerous Ground Rent increases in the lease. In the first lease, which was for 2 flats in Birmingham, the ground rent of £250 increases every 10 years linked to RPI. In the second lease, which was for a flat in Manchester, the ground rent of £254 increases every 5 years linked to RPI! Plus, no ceiling to the rise in Ground Rent is given, so on a 300 year lease, the increase could be massive.

Another problem this causes was explained by my solicitor. If ground rent is greater than £1000 in London or £250 outside of London, the lease is viewed as an AST and not a lease! This means that if you are a homeowner, your home can be taken away from you without legal redress, should you fall behind on Ground Rent payments!

I know that developers want to make money after the build is completed, but when big banks like Nationwide and Santander stipulate that ground rent should be no more than 0.1% of the value of the home, how can purchasers be sure that they will find a mortgage when it comes to completing, and selling or remortgaging in the future.

I will not be buying a new build now or in the future until this is changed.

Your thought or comments would be appreciated.

Philippe



Comments

by Gracie

13:45 PM, 25th January 2020, About 2 years ago

I agree it's a shocking tenure, and anybody who thinks that something devised in the 11th century could possibly be fair or even fit for purpose in the 21st century....beggars belief.
http://leaseextension-uk.info/leasehold-history.html
I am not as badly affected as many, I have an doubler every 33 years. By the time my GR gets to over £1k (assuming that value remains the same) my lease is only a few years to go until expiry anyway, at which time the property is handed over to the LL anyway (despite being an "owned" property by way of mortgage and responsible for all upkeep, repairs etc.) It's a joke! And don't get me started on managing agents, who use leaseholders as revenue streams, to which we barely have any recourse, as they have a complete lack of regulation, it's ridiculous. Serfdom is alive & well in England. Scaremongering my **se, it's a real and shocking system, just because it doesn't affect you, doesn't mean it's all ok.

by David Mensah

13:59 PM, 25th January 2020, About 2 years ago

Ground rent of a few hundred quid that goes up with RPI doesn't seem onerous to me. If it follows RPI, wether that is assessed annually or every 5 or 10 years, it will still feel like the equivalent of a couple hundred quid in 300 years. Linking to RPI seems sensible.

It's true that some leases go up by more, and the one's that doubled every 10 years are scandalous.

Where these leases can trip you up is in other clauses that can block you from doing certain things, or charge high fees for basic services.

Of course if you have the bad luck of owning a flat with Grenfell style cladding then the lease can force you to pay for your share of the repairs, which can be enormous. But that would have happened on other forms of co-ownership as well. It's just back luck,.

by David Mensah

14:06 PM, 25th January 2020, About 2 years ago

Reply to the comment left by David Mensah at 25/01/2020 - 13:59
p.s. if you look at UK RPI http://www.swanlowpark.co.uk/retail-price-index then in the period 1960-2019 it has doubled roughly every 13 years, although that includes the high inflation period of the 1970s. Given the BOE current inflation targets, a doubling of roughly every 25 years may be a better estimate (modulo all the usual caveats about predicting economic trends).

by linda green

14:54 PM, 25th January 2020, About 2 years ago

This is about far more than just the ground rent scandal. It's about an unregulated and uncapped market. It's about antiquated laws. It's about the total imbalance of power. It's about uncontrolled greed.
An imbalance of power and unchecked power = abuse.
Leaseholders have been abused for years and it is getting worse.

by Denise

21:06 PM, 25th January 2020, About 2 years ago

Reply to the comment left by beefy at 23/01/2020 - 20:15
It’s not only ground rent that’s an issue for any purchaser. What’s the lease extension going to cost? What’s the maintenance charges? Are there permission fees to pay?

by Denise

21:13 PM, 25th January 2020, About 2 years ago

Reply to the comment left by David Mensah at 25/01/2020 - 13:59
If the cladding needed replacing in a commonhold situation then the insurance would just pay. Dealing with the other entities in a leasehold tenure like management company, freeholder, head leaseholder, developer, yes you get the picture! How on earth can the leaseholders that need the cladding replaced on a lease they purchased get the job done?

by Dave Smith

16:15 PM, 26th January 2020, About 2 years ago

I took the decision to sell my small portfolio of 4 rental flats due to the compounding issues of the Leasehold rip off including Ground Rent doubling, major works including a failed roof that was never been fit for purpose costing us £1.2M, no control over Management Companies and their endless lack of transparency, conflict of interests and mis-management, escalating out of control service fee's, escalating insurance premiums (50% plus of which is commission to the Freeholder), rip off 'permission fee's for every new tenant. Luckily for me (but what a terrible nightmare for my buyer) I missed being caught by the cladding scandal by 6 months! This £300k flat is currently unsellable and leaseholders facing massive bills to put right.

I had to sell my flats to cash buyers at a reduced prices to move on. After 15 years I'd had enough. The portfolio was still making a reasonable return but I just didn't want all the stress and heartache that went with leasehold, and feel I was just being financially abused by the Freeholder's and Managing Agents.

Dont get me wrong, I was comfortable with the usual risks of being a landlord, tenants who trash the place, full refurbs after smokers have ignored your rules, etc, etc, non payers and had my fair share over the years. This goes with the territory to an extent.

So I sold up (over the last 3 years) and reinvested in older freehold properties, renting them on short term lets as serviced accommodation. It's proving far, far more profitable and less hassle. Glad to be away from leasehold and wild horses would never get me back in that corrupt and immoral world again.


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