Doubling Ground Rent - Cost Calculation

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  • MrSoffit
    replied
    See image (in two parts) for examples @ 5% yield on GR. You have to let the 'experts' decide the yield and discount rates. Have a big bearing.

    Capture1.PNG

    Capture2 .PNG

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  • ak90
    replied
    So, how much would it cost to change the ground rent terms?

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  • Ian N
    replied
    No £2.7M is the total ground rent payable over 236 years.

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  • ak90
    replied
    Pretty sure it wont cost £2.7m Ian? Or you mean net present value?

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  • Jon66
    replied
    Not sure what you're asking but legal fees for a deed of variation to the lease are àround 1600 incl vat in total, including the freeholder's fees which you would have to pay.

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  • Ian N
    replied
    I have devised my own Excel calculator that does this. The numbers look pretty frightening but so does compound inflation over a long period. To work out the net present value of a stream of income you need to apply a discount rate. The lower the rate the higher the value and vice versa. My calculator assumes the first doubling is in 25 years time so the figures will be slightly different for your example.
    You will note that doubling every 25 years is equivalent to compound annual increases of 2.8114%.

    You MUST check with the mortgage lender if they will accept this. Some will, some won't and some won't. See e.g. https://www.cml.org.uk/lenders-handb...ion-list/1852/
    Example 1 Example 2
    Annual rent £150.00 £150.00
    Lease length 236 years 236 years
    Doubles every 25 years 25 years
    Discount rate 5.00% 3.50%
    Highest annual rent £76,800.00 £76,800.00
    Total payable £2,761,050.00 £2,761,050.00
    Net Present Value £5,129.69 £12,803.11
    Years' Purchase 34.1979 85.3541
    Compound increase 2.8114% 2.8114%

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  • ak90
    started a topic Doubling Ground Rent - Cost Calculation

    Doubling Ground Rent - Cost Calculation

    Hi All,

    Looking to buy a flat in London which has a doubling ground rent. My solicitor said it can be "fixed" but it'll cost me - however he was unable to give a ballpark cost. Hoping someone could help please!?

    Details:
    Price - £425,000
    Lease - 236 Years
    Current Ground Rent: £150
    Increase: Doubling every 25 years
    Next Doubling: June 2030

    Can anyone help with an approx. calculation please? I am on the brink of making an offer, but need to figure this out and incorporate it into the price.

    I crunched into the Lease Extension calculator, using a Ground Rent of £225 (average of £150 & £300) and it came out with £9,500 (upper end estimate).

    Thanks

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