Questions on the lease extension and ground rent increase

Questions on the lease extension and ground rent increase

9:44 AM, 23rd November 2014, About 9 years ago 25

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First post here but I’ve been reading for a while and this is a great resource. Questions on the lease extension and ground rent increase

I’m nearing the end of my first BTL purchase of a flat but there are a few things to be finalised with the solicitor…. We put an offer in on the flat knowing that the lease was being extended to 125 years and knowing that the ground rent was £25 per year.

The purchase has been dragging on a little time now, so I made contact with the solicitor and she informed me that she’d had the lease extension info through. The new lease is indeed 125 years, but the ground rent has increased from £25 to £250 a year and rising after every 10 years according to the following formula – £250 x latest RPI / initial purchase date RPI.

I’ve emailed the solicitor stating that this isn’t the deal I signed up for and I’m awaiting a response.

Is this a matter to take up with the seller/estate agents or the solicitor??

Any advice and what are my options?

Thanks

Darren


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Comments

James Leavesden

23:02 PM, 25th November 2014, About 9 years ago

Reply to the comment left by "WAD " at "25/11/2014 - 21:21":

The Freeholder is unlikely to extend a lease cheaply for £25 ground rent per annum. I would normally recommend going for a statutory lease extension of 90 years and zero ground rent. You need to have owned the property for two years to do this but the vendor can start the processes off and rights can be transferred to the buyer.

Puzzler

9:55 AM, 29th November 2014, About 9 years ago

The vendor has been stitched up here - probably in order to obtain a quick sale if the lease was already too short to get a mortgaged purchaser. A lot of freeholders are trying this on, I suggest you speak to the vendor if you can and tell him that he should get a proper valuation and/or go to the tribunal, or insist that he has the statutory lease extension. This does take longer. If not, maybe the estate agent can pass on the message.

philip allen

12:17 PM, 29th November 2014, About 9 years ago

What a lucky bunny you are! I've just been offered a new term of 99 years. 250 doubling every 20 years. Of course (God willing) in 20 years from now I'll be looking for an extended lease, i.e. new terms, so this projection is, seemingly, irrelevant.

James Leavesden

12:45 PM, 29th November 2014, About 9 years ago

Philip, bear in mind when you negotiate to extend the lease, it will be valued based on the new ground rent of £250 doubling every 25 years, and no doubt the Freeholder will want an increased ground rent again in order to renew the lease. That's why a statutory lease extension with zero ground rent is a good idea if you intend to hang on to the property for the long long term.

philip allen

13:33 PM, 29th November 2014, About 9 years ago

Hi James,
A 'statutory lease extension'? Zero ground rent? Please elaborate.

Darran Lebas

17:21 PM, 29th November 2014, About 9 years ago

Thanks for the pointers; I can't see anything changing now as I'm sure the current owners are screwed really and I can't see them getting a better deal to suit me.... I'll just have to see how it pans out. To be fair £250 a year isn't that much but it's more than £25....

I guess I could see how things go in 10-15 years and as you said, the lease will add value to the property so maybe move it on... I think I got the flat for an OK price.

Can anybody advise on what an average ground rent is on a 1 bed flat nowadays? If £250 is the norm, I've got nothing to gain by looking elsewhere and only money to lose in solicitor fees..

James Leavesden

21:16 PM, 29th November 2014, About 9 years ago

The Leasehold Advisory Service is a good place to start http://www.lease-advice.org/information/faqs/faq.asp?item=96

If you don't want to do it yourself, there are companies that will manage the process for a fee
http://www.leaseholdsolutions.com/extend-your-lease/

Munmun

0:16 AM, 28th March 2018, About 6 years ago

Reply to the comment left by Mark Alexander at 23/11/2014 - 09:52
Is it possible in this case to claim back the legal costs if he decide not to Purchase?

Mark Alexander - Founder of Property118

6:59 AM, 28th March 2018, About 6 years ago

Reply to the comment left by Munmun at 28/03/2018 - 00:16

I think you have a case worth progressing to the Small Claims Court if necessary, absolutely.

If you went ahead and completed though, after finding out, then your case will be extremely weaker.

What did your solicitor advise?

Did you report the matter to the Ombudsman?

Munmun

11:20 AM, 28th March 2018, About 6 years ago

Reply to the comment left by Mark Alexander at 28/03/2018 - 06:59
Thanks Mark

I have given my notice last Friday that I withdraw as the lease does not match what I was offered by the sales agent. They started negotiating this week and I wrote a summery in https://www.property118.com/ground-rent-compensation-offer-new-btl-purchase/

They confirmed this morning that Ground rent will be RPI from £700 in 10 years’ time
This is not acceptable as I may find difficulty selling. The area in my opinion is not worth such high ground rent (not sure how to check it formally) ??
My Solicitor is not doing a great job as they informed me last week that the developer solicitor accepted to change the lease as originally offered by their agent- that wasn't the case and the developer solicitor vanished in a holiday so I am just losing time and getting too much stress.
where should I complain - Ombudsman?
this type of off plan is not backed up by FCA - clients who proceed to invest will not have access to the Financial Ombudsman service or the financial services compensation scheme - however they are part of Ombudsman scheme - I think I need to go to the one they are registered with.

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