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Original poster

Doubling ground rent every 25 years on a leasehold flat - should this be a dealbreaker?

33 replies

FTBHelp2022 · 19/01/2023 22:37

I am going through the process of purchasing a leasehold flat in London. I've found some concerning details about the ground rent, even though there are 990 years left on the lease

Under the terms of my lease agreement, the ground rent is currently £350.00 per annum and rises as follows:

£350 for the first 25 years of the Term;

£700 for the next 25 years of the Term;

£1,400 for the next 25 years of the Term;

£2,800 for the next 25 years of the Term;

£5,600 for the next 25 years of the Term; and

£11,200 for the remainder of the Term.

Considering the recent legislation reducing ground rents of new build flats to peppercorn values, should I avoid the purchase of this flat completely? I'm worried about the resale value...

OP posts:
titchy · 19/01/2023 22:49

Are they actual amounts or will they be index linked? If no updating due to inflation you need to work out what the equivalent of say £1400 or £2800 (ie the period that your future buyer would consider) will be. In 75 years time £2800 will probably only be the equivalent of £100 which won't affect anyone!

titchy · 19/01/2023 22:50

Service charges would be more of a concern to me tbh.

Original poster
FTBHelp2022 · 19/01/2023 23:07

Luckily these are the actual amounts, they are not index linked. I plan to keep hold of this flat for at least 15+ years, it's worrying to think the ground rent may put buyers off when I come to sell considering the new legislation that says new build flats are only allowed to have a peppercorn ground rent!

OP posts:
Original poster
FTBHelp2022 · 19/01/2023 23:08

Service charges are very reasonable approx £1700 per annum which includes lift maintenance. The only problem is there is no reserve/sinking fund...

OP posts:
ttcnumber2x · 19/01/2023 23:18

If you think about it logically in 150 years, £11,000 a year probably w

ttcnumber2x · 19/01/2023 23:18

hit post too soon

*wont be as bad as it sounds now

Ivesaidenough · 19/01/2023 23:23

I would not even consider this - it's a massive no as far as I'm concerned. There has been a lot of news about this recently and how crazy it is. As an example, my own ground rent is £10 a year.

OneRingToRuleThemAll · 19/01/2023 23:26

My ground rent is £200 and doubles every 33 years, so £200, 400, 800.

I'm not concerned by it.

Original poster
FTBHelp2022 · 19/01/2023 23:37

It's hard to decipher how ordinary or out of the ordinary my terms are..
as I presume most ground rents have escalating terms, but mine seem high indeed 😞

OP posts:
Original poster
FTBHelp2022 · 19/01/2023 23:39

Is your property in or out of London? If in London that sounds like a much better deal than mine!

OP posts:
CurrentHun · 19/01/2023 23:40

Presumably everyone else in the block will be worried about that too- you could look into right to manage, and buying the freehold together?

20questions · 20/01/2023 00:40

These are seriously onerous ground rent terms and you are right to be concerned. And yes - this will affect any sales going forward.

20questions · 20/01/2023 00:44

Also if you and the other leaseholders were able to buy the F/H (many reasons why the block may not be eligible!), it would be very expensive. GR terms and cost of lease extension or enfranchisement are linked..

TheTeenageYears · 20/01/2023 00:50

I wouldn't buy a property with service charges that doesn't have a reserve fund. It means that whoever owns at the point a maintenance issue occurs is liable. At some point the roof will need renewing and the cost will be distributed across the owners at that point and not others who have come and gone over the years benefitting from the roof.

Anoooshka · 20/01/2023 01:28

There's no way I would buy a property that does not have a reserve fund. What happens if major renovations are required? Or even minor repairs? What has been done with the service charge? Can you see a copy of the accounts?

Delectable · 20/01/2023 01:51

I was had progressed with similar some years ago but was so uncomfortable with the 25yr doubling. Thankfully a better one 3 doors away came up on the market so I went for that and extended the lease myself. No services charges in either case.

MinnieMountain · 20/01/2023 05:42

I’d ask to have it changed or walk away.
What does your lender say?

BeachesDiary · 20/01/2023 05:55

I'd be more concerned about the low service charge. What happens when the windows need painting/replacing? I live in an apartment and last year we all had to double our service charges for the year to pay for the windows to be painted, and that was on top of having £20k in the sinking fund already. The windows cost 42k. We've also had issues with the lightening conductor, the drains, the lift, the gates etc etc. Our service charge is double yours and we live nowhere near London!

putthehamsterbackinitscage · 20/01/2023 08:25

If you really want to go ahead check cost of lease extension. You can ask the vendor to start a formal lease extension- that removes the ground rent - and transfer as part of the sale so long as they've owned it for 2 years.

MinnieMountain · 20/01/2023 12:36

@putthehamsterbackinitscage OP needs a deed of variation not a lease extension. The law only requires the ground rent to be a peppercorn for the additional years of the term. Which is pointless when there’s 990 years left.

mondaytosunday · 20/01/2023 12:52

Ground rent is different to a service charge. Ground rent is the few paid to the freeholder (which could be a person or a company), the other is for the running of the building. This could just mean building insurance and cleaning/maintaining of the common areas, or paying for heat and water, or even a concierge and gym facilities.
As you are unlikely to be living there beyond 50 years and as others have said the value of the pound will be less than now.
Is there a service charge? How is the whole building insurance paid? How are repairs paid for?
Ask your solicitor to look at the management pack carefully - you are paying them to look at these sorts of issues.

putthehamsterbackinitscage · 20/01/2023 19:24

Deed of variation is potentially expensive and is discretionary- often freeholders won't agree to exactly what you want it will maintain other onerous conditions... eg switch to rpi... by doing a statutory lease extension there are agreed processes, valuation models and the property becomes a much better proposition for getting a mortgage.

Periodlate · 22/01/2023 10:28

Really don’t do it. It’ll be harder to sell!

Tell them you’ll buy if they remove this clause. They probably will.

BarbaraofSeville · 22/01/2023 11:28

OP, how old are you?

Even if you are quite young, you probably don't plan to stay in the flat more than 25/50 years so with that in mind, a ground rent of £700 in 25 years time, or £1400 in 50 years time isn't a significant worry. At worst it might surpress the value by a really minor amount, £2/3k at most.

Do you expect to be living in the flat in 75 years time to be concerned about the ground rent potentially going up to a few £k pa affecting the value?

Original poster
FTBHelp2022 · 22/01/2023 17:23

I'm 30 but plan to keep and hold this flat for many many years, I will look to rent it out if it no longer suits my needs in the future, so the resale value is of importance since if I ever look to sell it will be when the ground rents are high...
Currently there are 980 years left on the lease, only 6 years before I have to start paying ground rents of £750, very worrying for when I come to sell....

OP posts:
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