Can someone explain ground rent ££ and mortgage companies to me pls?

[KievLoverTwo]

I've seen a flat I like, in a converted victorian house (probably 2 flats, it's vast), share of freehold, but the ground rent is £1500 a year.

Correct me if i am wrong, but i was under the impression that most ground rents are around £100 and mortgage lenders get really sniffy at much larger ones, no? Idk why I think I have read that a few times but it is lurking in my head. I am not confusing it with services charges.

Not London, btw.

It's not an affrdability issue - I have seen this a few times lately. I am just confused. And want to know if considering them is a waste of my time.

If it helps, it's about 200-250k under what some (very silly and irresponsible imo) banks would be prepared to lend us, but we'd only be going in with a 10% deposit.

It's been a while since we sold the flats that we used to rent out (all with shares of freeholds as we wouldn't have bought them) & I can't remember how much the ground rent was, but it does seem a bit high - especially if not in the London area.

We had flats in the centre of a University city in the SW (not Bristol) all in older houses converted into flats. As I remember, (bearing in mind we sold the last of these in 2019) that the ground rent was in the region of £90pa and the management & maintenance was in the region of £120pcm.

I'm wondering if the Ground rent includes maintenance? I'm also thinking that the high ground rent is one of the reasons why the asking price is so low compared to comparable properties.

Edited for typos

Mortgage lenders don’t like ground rents that are too onerous.

There has been a trend in the past 20 years or so for greedy developers
to put ground rents in place that double
every 10/20 years. However most mortgage lenders now refuse to lend on these properties, as they can fairly quickly become
eye watering amounts and seriously impact the resalabillity.

Something more sensible like £400 a year that can only increase in line with inflation, mortgage lenders would be ok with.

I might call them. SC is listed as 0. Which is also not good - a 150 yo house needs maintenance.

The details of the ground rent should be specified in the leasehold documents. This should include terms about how much and how often they can be increased. I also have a feeling that leasehold owners now have more rights about buying the freehold, but don't quote me.

You need to speak to a conveyancing solicitor really.

Basically the mortgage lender wants to make sure they can sell the property and get their money back easily, if you default on the mortgage.

Excessively onerous ground rents make properties harder to sell, so mortgage lenders see that as a big risk.

Right, thanks. Because it is for nothing, yes? It is paying someone for the ground underneath your feet but no actual services.

So, I guess the question to ask is: how much was the GR in 2015, and 2005. And if it doubled each time at the 10 year mark we know most banks will just say "no."

Ah, I had forgotten that - the resale liability, thanks.

No, because these flats are two hours away and I don't want to do a four hour round trip (which could result in me not being able to walk the next day) for a complete waste of time.

I also know from a lot of experience of not successfully buying a house on several occasions that most of them won't even return your call until you open an account to actually buy something. Been down that road several times.

If folks here say "if it has doubled in ten years don't even bother viewing" it will save a lot of effort and probable pain!

Are you sure they didn't get it mixed up and its service charges and ground rent £0?

If it includes the share of the freehold then the freeholders set the ground rent so it is likely to be for maintenance- there may be a big job they are saving for or have done. Worth checking with the estate agent.

I am not sure - it is sounding likely to be a mistake. Or maybe I am just too hopeful :)
I will give the EA a call to check.

That was my first thought- the two things seem to be the wrong way round as you would expect ground rent to be close to zero and service charge to be the higher figure.

Worth checking @KievLoverTwo may be a typo.

But if you are going to own a share in the freehold you will technically be a joint Landlord and you will be paying ground rent to yourself? I think the figure you have stated is for service charge.

Sounds odd. Ask the EA if they have a copy of the lease.

I think you have it the wrong way. - or someone has

it’s more likely that’s the service charge and the ground rent is 0

however services charges can go up massively and you will have very little say in this unless you jointly own the freehold

and I wouldn’t trust what the estate agent tell you - most are crap and have no real knowledge

if the ground rent is more than 250 - or 1k a year in London most mortgage companies won’t lend on it

plus pretty much all newbuilds built since June 2023 have a peppercorn ground rent so basically 0 ground rent so older flats are competing against nice shiny new builds with 0 Ground rent

My first thought was the service charge and ground rent were mixed up too.

Def check.
If it is 1.5k ground rent i'd walk away as it would be a major sticking point for resale. (Although weord if it is SOF)

If it’s share of freehold it’s a very different issue as pps I’ve said, you’d be paying yourself. Check re EA details as they are often wrong. Moved recently and two of the three EAs I got round to value produced marketing brochures (to convince us how well they would market our house) with the wrong number of bedrooms.