Doubling rent

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  • Macromia
    replied
    Originally posted by michelle230 View Post

    Untrue. Who said * all * rising ground rents are a problem. Onerous ground rent terms are. As lenders acknowledge. Hence them not lending. Hence sales falling through. Hence many trapped in unsaleable homes.
    People like YOU are saying that all rising ground rents are a problem - or at least, that is the impression that you are giving the general public (including lenders and buyers) when you say things like you have in this thread:

    Post #7: "Please listen to your solicitor. He is advising you correctly."
    "Finally if you should wish to sell in the future, you will have problems."

    Post #13: "However regarding the escalating ground rent, this IS a problem. Lenders are not lending on onerous ground rent terms."
    "Many sales are falling through and the number is growing. People are trapped, literally in their properties and unable to move."

    Post #14: "...you have made the right decision. You are very lucky to have had such an excellent, diligent solicitor. Sadly many don't!"


    Nothing that you have posted has explained why a ground rent of £300, doubling every 33 years, should be considered "onerous", and nothing you have said has given any reason to question the replies given by others - which explain why this is NOT an onerous term.

    Lenders are less likely to lend when leases contain terms like this one because solicitors and well meaning but ill-informed people like you advise potential buyers against purchasing leases with similar terms. Potential buyers then become less likely to be willing to buy properties with similar terms, which leads to lenders being less willing to lend on these leases, which leads to people being advised not to buy them, and so the cycle continues.

    What SHOULD be happening is that solicitors, and groups that claim to represent leaseholder's best interests, should be trying to educate potential buyers on what are genuinely "onerous lease terms" (and this doesn't include ground rent that won't keep up with inflation and will therefore (comparatively speaking) become lease of a burden on the owner of the lease over time).
    In the example in this thread, if £300 is considered to be affordable and not unreasonable now, how can the future ground rent be considered unreasonable when the amount will fall in value as a result of the effects of inflation - even with doubling every 33 years?

    Leave a comment:


  • michelle230
    replied
    Originally posted by sgclacy View Post

    It was lender knee jerk reaction to the problems of 10 year doublers.

    The lenders may themselves find that they could be "hoist with his own petard" if lessees abandon their properties for being un-mortageable
    Good to know if you have children/grandchildren, you'll be more than happy for them to purchase these traps. At least * someone * will be lucky enough to escape and pass on the burden.

    Leave a comment:


  • michelle230
    replied
    Gordon999 Spot on!

    Leave a comment:


  • Gordon999
    replied
    Many older properties were sold on 99 years lease term and small annual ground rent which doubled after every 33 years.

    The problem with 99 years leasehold property , the mortgage lenders are reluctant to offer mortgage loan below 70 years terms . The cost to seek lease extension when the unexpired term falls below 80 years unexpired , is much higher due to "marriage value" entering the compensation formula.

    So the developers faced with complaints from leaseholders , who were having to seek lease extension before their existing 25 years mortgage had been paid off , changed to offering lease for 125 years , with annual ground rent doubling after every 25 years period.

    But some developers are more aggressive and offer leases which raised ground rents faster by introducing a "modern ground rent" which increases by doubling up after every 10 years. These leases were sold to buyers who were not warned by their conveyancing solicitors against rapid increase in ground rent. Now many leaseholders have found that excessive level of ground rent makes their property unsellable and they are not able to move on . So if you can see the warning signs in advance , then you can better protect yourself and your family .

    Leave a comment:


  • michelle230
    replied
    Originally posted by Macromia View Post

    Except, as has been pointed out by others above, it really isn't the problem that it is made out to be in many cases.
    In the OP's case, a ground rent that doubles ever 33 years will almost certainly not keep up with inflation (in the last 30 years costs have more than doubled, and in previous 30 year periods they have often tripled - or more). This is not "onerous terms".

    The problem is that all rising ground rents have been falsely portrayed as being "onerous" when many terms that include rising ground rents are not.
    Lenders should be looking at this sensibly (although unfortunately they do not - which is why potential first time buyers are denied mortgages, even if they can show that they have always paid rent that is significantly higher than the mortgage repayments would be, and have done so on time every month for several years).

    The issue is NOT rising ground rents (even doubling ground rents), it is the fact that people, including lenders, have a false impression about these because of stories in the media.
    Some rising ground rents may be onerous, but it should not be treated as if this is the case for all.
    People who claim that all rising ground rents are a problem and the properties should be avoided are making the problem for people who have leases of this type far, far worse. You are not helping.
    Untrue. Who said * all * rising ground rents are a problem. Onerous ground rent terms are. As lenders acknowledge. Hence them not lending. Hence sales falling through. Hence many trapped in unsaleable homes.

    Leave a comment:


  • sgclacy
    replied
    Originally posted by leaseholder64 View Post
    One problem with setting arbitrary hard limits is that you end up with something like the interesting number paradox, and any ground rent at all becomes unsafe!
    It was lender knee jerk reaction to the problems of 10 year doublers.

    The lenders may themselves find that they could be "hoist with his own petard" if lessees abandon their properties for being un-mortageable

    Leave a comment:


  • leaseholder64
    replied
    One problem with setting arbitrary hard limits is that you end up with something like the interesting number paradox, and any ground rent at all becomes unsafe!

    Leave a comment:


  • sgclacy
    replied
    Originally posted by Macromia View Post

    Except, as has been pointed out by others above, it really isn't the problem that it is made out to be in many cases.
    In the OP's case, a ground rent that doubles ever 33 years will almost certainly not keep up with inflation (in the last 30 years costs have more than doubled, and in previous 30 year periods they have often tripled - or more). This is not "onerous terms".

    The problem is that all rising ground rents have been falsely portrayed as being "onerous" when many terms that include rising ground rents are not.
    Lenders should be looking at this sensibly (although unfortunately they do not - which is why potential first time buyers are denied mortgages, even if they can show that they have always paid rent that is significantly higher than the mortgage repayments would be, and have done so on time every month for several years).

    The issue is NOT rising ground rents (even doubling ground rents), it is the fact that people, including lenders, have a false impression about these because of stories in the media.
    Some rising ground rents may be onerous, but it should not be treated as if this is the case for all.
    People who claim that all rising ground rents are a problem and the properties should be avoided are making the problem for people who have leases of this type far, far worse. You are not helping.
    Totally agree and the following article shows the problems those that talk hysterically about rising ground rents can cause

    https://www.mortgagesolutions.co.uk/...rules-procter/

    If a ground rent was say £1000 per annum rising by the RPI every 5 years this should take off around £25k off the value of a flat. It does not make it unsaleable or un-mortgageable . Even less so if a lessee could easily reduce the rent on payment of a premium

    I recently entered into a deed of variation whereby the ground rent was lowered from £250 to £233 so as to keep the rent at 0.1%. I sought a premium of £350 but the purchaser had to pay the legal costs of the exercise and cost them in total well over £1000 including the premium - what a waste of time and money

    Leave a comment:


  • Macromia
    replied
    Originally posted by michelle230 View Post
    However regarding the escalating ground rent, this IS a problem. Lenders are not lending on onerous ground rent terms.
    Many sales are falling through and the number is growing. People are trapped, literally in their properties and unable to move.
    Except, as has been pointed out by others above, it really isn't the problem that it is made out to be in many cases.
    In the OP's case, a ground rent that doubles ever 33 years will almost certainly not keep up with inflation (in the last 30 years costs have more than doubled, and in previous 30 year periods they have often tripled - or more). This is not "onerous terms".

    The problem is that all rising ground rents have been falsely portrayed as being "onerous" when many terms that include rising ground rents are not.
    Lenders should be looking at this sensibly (although unfortunately they do not - which is why potential first time buyers are denied mortgages, even if they can show that they have always paid rent that is significantly higher than the mortgage repayments would be, and have done so on time every month for several years).

    The issue is NOT rising ground rents (even doubling ground rents), it is the fact that people, including lenders, have a false impression about these because of stories in the media.
    Some rising ground rents may be onerous, but it should not be treated as if this is the case for all.
    People who claim that all rising ground rents are a problem and the properties should be avoided are making the problem for people who have leases of this type far, far worse. You are not helping.

    Leave a comment:


  • sgclacy
    replied
    Originally posted by michelle230 View Post
    Andrew - agree with what you say
    However regarding the escalating ground rent, this IS a problem. Lenders are not lending on onerous ground rent terms.
    Many sales are falling through and the number is growing. People are trapped, literally in their properties and unable to move.
    I agree that a number of lessees cant sell their flats because the ground rent is greater than 0.1%and lenders will not lend. But that is not the failing of the landlord it is the irrational behaviour of lenders. The landlord has done nothing wrong, he puts the deal on the table and the lessee with the benefit of legal advice and a surveyor agree the terms and enter into the contract.

    Maybe a solution is for a lessee to have the right to have just the rent lowered, not have the term increased. This could be made very simple and would not require a valuation of the property, simply a calculation of the rent. The legal and valuation fees could be capped or reduced is prescribed rates were introduced

    Leave a comment:


  • michelle230
    replied
    Originally posted by SandraHope View Post
    Thank you so much. What you have said makes sense but the solicitor has put the fear of god into us and the mortgage broker also seemed concerned when we informed him. We are so close to exchanging that it is a bitter pill to swallow not to mention all the money we have lost. I think if we went ahead we would be continuously fretting about selling on.
    Sandra - you have made the right decision. You are very lucky to have had such an excellent, diligent solicitor. Sadly many don't!

    Leave a comment:


  • michelle230
    replied
    Andrew - agree with what you say
    However regarding the escalating ground rent, this IS a problem. Lenders are not lending on onerous ground rent terms.
    Many sales are falling through and the number is growing. People are trapped, literally in their properties and unable to move.

    Leave a comment:


  • michelle230
    replied
    Originally posted by leaseholder64 View Post
    This a flat. The alternatives to leasehold flats are likely to make them even less saleable.
    Works perfectly well in Scotland.

    Leave a comment:


  • leaseholder64
    replied
    This a flat. The alternatives to leasehold flats are likely to make them even less saleable.

    Leave a comment:


  • AndrewDod
    replied
    This thread is absurd. There are many many problems with leasehold properties. Contractual obligations which are clearly stated and which increase ground rent according to to some estimate of inflation is hardly one of them. The many other mechanisms via which freeholders are enabled and facilitated to make money outside of of ground rents and reversion rights are far more important (various backhanders, commissions and outright theft of reserve funds).

    Solicitors should be advising clients to consider carefully whether they wish to leasehold properties at all until the non-ground-rent problems have been resolved. They should not be mis-advising them as they have been here. Politicians and hysteria generators seem less concerned by theft than by contractually agreed (and usually reasonable) obligations.

    Leave a comment:

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