Ground rent refusal by mortgage company

[birdladyfromhomealone]

Our mortgage provider has rejected our application due to ground rent.
The freeholder charges x per year with a double increase each decade.
so for instance 1k for 10years then 2k , 4K, 8k etc
This works out at about 3% per year.
Our mortgage provider says the freeholder should only charge double every 20 years not 10.
Are there any mortgage companies that won't stipulate this?
Who pays the freeholder to change the lease Vendor or buyer?

I wouldn't buy the property at all with a clause like that in the lease. It gets more and more expensive as time goes on until the property is unsaleable. If the freeholder can be persuaded to change the clause, it doesn't matter who pays - whoever wants it most. I'd stay well clear.

I agree with the mortgage company, your property will quickly become unsaleable with that clause, they are doing you a favour

Is this a new(ish) build ?

There was a R4 programme a few months ago about how a lot of new builds are leasehold with very severe restrictions (no internal changes without £1000 written permission) , plus swinging increases in ground rent. There were some people that had setup support groups.

It's a widespread problem - quite a few people were simply unable to sell (as I suspect the vendor of the house you are looking at might find themselves).

I wouldn't buy the house

I don't know how you're working out that doubling every 10 years works out at 3% per year. Doubling every 10 years works out at about 7.2% per year, which is a totally unreasonable increase.

www.lawcomm.co.uk/blog/new-build-leasehold-problems

might be a starting point.

from that article ...

www.theguardian.com/money/2016/oct/29/new-builds-house-buyers-leasehold-property-trap

The mortgage company have estimated there will be a huge liability blighting the chance of a sale if they needed to sell. If this is a red flag to them, it should be a massive red flag to you, not something to fix by changing mortgage company.

Run...

For info, did my B.Sc. dissertation on leasehold/commonhold/freehold issues.

I saw something recently about this. People who had bought a new build only a few years ago now had properties that they already couldn't sell due to that clause.

I'd be looking for another house not another mortgage provider

Don't buy it!! Nightmare

They probably won't let you change the lease as it's a major income stream for them. It's possibly offset by a lower upfront cost but really you want to buy a house freehold.

As a solicitor I will offer you some free legal advice - do not buy the property.

It is not mortgageable. You are not likely to find any mortgage company who will lend on a doubling ground rent lease. You will also find it very difficult to sell and the value will be negatively affected.

In around 100 years the ground rent will probably be over £1 million a year.

The only way you can buy it with a mortgage is for the lease to be varied. Did the seller buy it straight from the developer and which one? If yes and it was Taylor Wimpey then they have a scheme to change the ground rent in the leases at the moment. The seller will need to contact their freeholder and vary the lease before you purchase.

You do not want to be stuck with this. The seller needs to pay and sort it now and do not buy until the doubling ground rent clause has been varied.