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New rules about ground rent

12 replies

KatyMac · 30/04/2022 11:54

What do the new rules about ground rent mean for someone buying an existing flat before the 30th June please?

OP posts:
MinnieMountain · 30/04/2022 17:06

Bugger all I’m afraid. It’s not retrospective.

KatyMac · 30/04/2022 19:30

That's what I thought

DD is into her 2nd attempt at a house purchase and it's fallen apart at exactly the same point

Ground rent being ro high for a mortgage

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KatyMac · 30/04/2022 21:26

Is there anyway to find out about leases earlier in the process?

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WombatChocolate · 30/04/2022 21:34

You can ask the EA to confirm the ground rent and length remaining on lease as soon as your offer is accepted.

At that point the EA will be wanting to see your mortgage in principle and proof of funds and name of solicitor etc before they produce the formal memorandum of sale, which confirm the details agreed. It isn’t unreasonable to say you need to know that basic lease information at that point and can’t appoint your solicitor to start work until you have it.

The law on 30 June will only apply to new properties or to new leases on existing properties, so those with onerous ground rent or short leases won’t see a change. Those people selling such properties will keep finding their potential buyers have problems if they need a mortgage.

You can look at the CMA lenders handbook for ground rent acceptable terms (Google it) to see which lenders have harsher criteria than others. It is annoying but you don’t want to be saddled with a property with onerous ground rent ir a short lease as it will cost lots to resolve and be difficult o sell on until you do.

Some properties are advertised as having a new lease etc

KatyMac · 30/04/2022 21:36

The lease length is fine and so is the current ground rent

But the ground rent doubles every 5 years!

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20questions · 01/05/2022 00:01

KatyMac · 30/04/2022 21:26

Is there anyway to find out about leases earlier in the process?

Any decent agent should retain a copy of the lease when they start to market a leasehold property. You are entitled to ask for a copy before investing any money in a potential purchase. How can you be expected to invest money e.g. solicitor fees when you have little idea of what you are actually buying!

KatyMac · 01/05/2022 00:08

It has taken 14 weeks to get a copy of the lease; our solicitor was going spare!

It was 6 weeks from offer before we got the contract!

With ground rent of 350 in 2027 I think they have to pull out

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MinnieMountain · 01/05/2022 08:24

Will the freeholder agree a deed of variation to make the ground rent acceptable?
An easy way to judge this is for the conveyancer to look at the freehold title. If there’s been a few deeds registered in the last few years, it’s likely to be ground rent variations.
Then you can ask the seller to request one. The whole thing can be done alongside the purchase and you add clauses to the contract so that it completes on the day your daughter completes her purchase.

KatyMac · 01/05/2022 08:42

Wow! @MinnieMountain we will contact the solicitor and ask her

Didn't know that was a 'thing' thanks

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WombatChocolate · 01/05/2022 09:23

You don’t want ground rent which will exceed 0.1% of property value at any point now ….as rightly or wrongly, that’s the condition for many mortgage lenders and it’s not just about getting a mortgage now, but people getting a mortgage in future.

Yes, you might be able to get a deed of variation and they might consider it, especially if they’ve had other buyers drop out for same reason. However, this will cost the seller, so they may resist and hope instead to get a cash buyer who might not be so bothered about it. It depends if it’s the kind of property an investors who do buy to let might be interested in.

An alternative is to find out the cost of extending the lease via the statutory route, which will automatically make ground rent zero. You can then reduce your current offer by that value plus a bit for inconvenience. Currently you need to have been there 2 years to carry out the lease extension, but you could then use the money to extend the lease and deal with the problem, using that money. Of course you’d have to ensure it wasn’t spent on something else, and it would involve some hassle. If it’s a long lease remaining, you might feel you could wait until further leasehold law changes come in…prob won’t be very soon.

To be honest, probably best to walk away.

KatyMac · 01/05/2022 10:43

They are cash buyers but they have to consider selling in the future

This is the second time the lease has been unacceptable at the last minute each time losing 3 months plus

& the market is really fast round here

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KatyMac · 03/05/2022 10:38

So to clarify the lease doubles every 20 years

I think we have a few options

  1. Carry on and worry about the lease when we sell - not ideal
  2. find out the cost of renewing the lease after 2 years and reduce our offer by that
  3. find out about the possibility/cost of varying the lease
  4. pull outis that right?
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