What do you think of this ground rent?

[WombatChocolate]

Looking at a Flat priced £185k.

The Lease was 125 years from 2002 so has 107 years remaining.

Ground rent is £150 for first 25 years. Then it rises as follows;
Years 26-50 is £250
years 51-75 is £300
Years 76-100 is £400
Years 101-25 is £500

So it is escalating, but not doubling. It increases every 25 years.

Given all the worries about ground rent etc, what do you think? Would you consider this flat (which is decent and with a decent price) or would the ground rent make you avoid it?

Thank you.

I'd say that is no problem as it's fixed in absolute terms, so can't escalate at the crazy rates a few do. Make sure your lender is happy with it

Yes those ground rent prices seem to be high and i'd be worried as you yourself are. I think i'd avoid to be honest :(

How long do you intend to live there? Longer than 25 years?

In comparison to the leasehold cost, the ground rent is a pittance. How old is the flat? Newer ones have higher ground rents, older ones and ex council places tend to have lower

Thank you.
The ground rent will move into the next phase of £250 in 7 years. I intend to have the flat long term.
However, I don't want a flat where I can't get a mortgage (obviously I won't have it if I can't get a mortgage) or a future buyer can't get a mortgage.

Do you think this ground rent is what they call 'onerous' - I have done a little bit of reading and see some people can't sell because buyers can't get mortgages. Do you think this falls into that category.

I also hear leasehold reform has been on the cards for years - would that make any difference, or not?

I just want to get a realistic sense of if this issue is minor or serious? I know there has been an ongoing issue, but do the terms of this particular lease constitute a problem or not really?

Really appreciate all your thoughts.

The ground rent is fairly high, ours is £80 a year for the next 10 years and our flat is valued at 210k.

If you are looking at a long term investment, it might be worth trying to find out how much it would cost to formally extend the lease, thereby getting rid of the ground rent.

The longer the lease has left before you extend, the cheaper it is.

It might not be financially viable though - especially if there are lots of other options available.

I think it'll make it hard to sell in the future. I wouldn't buy a property where expenses are only going to go up like that. I'd also worry that with a lease like that you'll be dealing with a greedy freeholder and more fees will appear.

I would avoid, it had a poor perception that will affect future resale values.

Is the flat in London? If not, any ground rent at £250 changes the leasehold to an assured tenancy. When this happens, if you fail to pay rent on time then the landlord has the ability to basically re-possess the property and forfeit the lease. If it were a normal tenancy, you could apply for relief from forfeiture. With an assured tenancy, you have no such remedy. A lot of lenders won't touch a flat with a rent at that level for this reason.

The only way of getting round it is varying the lease (in agreement with the landlord) or extending the lease (after you've owned it for 2 years) which lowers the rent to a peppercorn (i.e. nothing). The landlord can charge you a hefty premium for either option.

I wouldn't touch it, tbh OP.

According to Homes Under the Hammer, most mortgage companies look for 60 or 70 years minimum in order to lend. Also, the cost to extend increases as the lease length decreases, so any future purchaser will have the double whammy of a high ground rent and short lease, plus potentially very large bill to extend the lease to make it mortgageable. It doesn't sound like a great combination. Have you enquiries re: current costs to extend / buy the freehold?

Thank you everyone. Sounds best avoided.
However, one last Q - I hear legislation is coming to change leasehold law. Does anyone think this law might make the ground rents I mention less problematic or more easily solved?

If I could arrange a reduction to price to reflect the ground rent issue, would the change in law mean I could extend the lease to get the peppercorn ground rent (mentioned above) for a reasonable rate? How much would you want the price to be reduced by to reflect the ground rent issue and that the lease might need extending in future?

I know I can look at other flats. This one is just perfect though and I would plan to have it for at least 15 years. It is not in Lomdon, just outside. I guess I am hoping that with leasehold reform coming, the problem will be reduced. I am willing to walk away if this could still be a serious problem in 15 /20 years when I might come to sell.

I wouldn't touch a lease that short with a barge pole and it would make it very difficult for you to sell in future.

If you really want it, I'd be asking the vendor to have the lease extended prior to sale, or no deal. If you do buy it as it is, you won't have the right to request a lease extension until you've owned the property for two years, plus you'd have the cost which can be high.

The remaining term of the lease is fine.

Don't bank on leasehold reform legislation coming any time soon.

Some lenders might still be ok with the rent as it is. The CML handbooks lists what each lender accepts.

You could ask for the lease to be varied at the seller's cost with it all done on the day your purchase completes. Your lender might accept indemnity insurance.

Yes I thought the 107 year term was fine.

Okay, I will look into if the seller can get the lease adjusted and try to find out how much it pull cost to get sorted out. ANy ideas anyone of that price?

If seller can't/won't sort out the lease, if I could get money off the sale price equal to sorting the lease out retrospectively, would you go for it if you were me.....assuming I can get a mortgage myself of course.

To be honest, as long as I know there won't be an impediment to me selling in future, I think I'd be okay with going ahead if either;
A. SEller sorts out the lease now or
B. REduces the orice sufficiently so I can sort it out later.

As I say, I wouldn't plan to sell for many years - so plenty of time to sort it out and extend the lease so the rent went to peppercorn.

And incidentally, if I go for that option, would you extend sooner rather than later or wait until the lease gets down to around 95 years?

So much to consider.

Ask the solicitor you're thinking of using how much they charge for dealing with a deed of variation. My firm charges £350 plus VAT. There will also be landlord's legal fees and the premium (price) for the landlord agreeing to do it. It's worth asking the seller to pay the landlord stuff but it's not a given that they would agree.

For the rest, ask a surveyor (NOT estate agent) who knows the area the flat is in.

Oh, and if you go for B, remember there's no guarantee the landlord would do it later.

I owned a residual leasehold on a property which needed extending - there is a formula to calculate how much is market value to extend the lease.

Whilst the cost increases steadily as the lease falls below 80 years, the figure that made most difference to the price payable was the ground rent number - that will significantly hike the cost of extending the lease as time goes on. Find the online calculator and put some numbers into it to try this out.

A lease of 107 years is well within lending territory BTW - the old rule of thumb was 80 year cut off, quite a few leases are only 99 years to begin with.

Google Ground Rent Trap and Housing Act trap. There's an indemnity your solicitor can get for repossession/housing act issue.

Consider this very very carefully.

It's not about affordability. It's about future saleability of your property and of a lender will even lend.