Fears regarding lease of property I plan to buy

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    Fears regarding lease of property I plan to buy

    Hi All,

    I am in the process of buying a property in Greater London (small Victorian house converted in 2 flats), all was going very well, until I recently got my hands on the lease. Basically I am having a hard time knowing how "normal" some of the clauses are and would love to have some opinions before doing a costly mistake!

    1. Increase of ground rent.
    The lease was extended in 2007 by 90 years so no issue there but I am scared that ground rent increase may be excessive. It is currently of £200 until 2017, but will be redefined every 10 years to a yearly sum equal to either one six hundredth of the capital value of the demised premises at date of review or a sum which is 50% above that charged before the review, whichever is the greater.
    The capital value would be determined by a valuer whose cost would be at my charge.

    2. Funds in advance / Expenditure
    To pay the lessor on demand (although the lessor shall not be obligated to make such a demand) such sums as the lessor considers reasonably necessary on account of works to be conducted in accordance with the Lessors obligations hereunder if the Lessor considers it prudent to conduct such works prior to being able to request sums in accordance with the preceeding clauses.
    My understanding of this is that it basically means I have no control over the lessor's planned expenses.

    3. Permitting Entry - This one really scares me
    To sum it up the clauses says that the lessor and his agents have a right of entry at any reasonable times on prior notice to enter and examine the premises to ensure nothing has been done which constitutes or may in the reasonable opinion of the Lessor tend to constitute a breach of any of the covenants (...) and to pay an hourly charge for the Lessor's time spent in conducting such annual (or such that the Lessor may reasonably require) inspection and preparing a report for the Lessee at an hourly rate equivalent to 25% of the ground rent payable in the year of inspection.
    I am not surprised by the right of visit really but more by the fact that I have to pay to be disturbed and have no control over it all.

    4. I have to keep carpet (or equivalent) even though this is a ground floor.

    As I said above I am as many I guess not very familiar to all this but part of the above sounds really aggressive to me. I got some advice from ny solicitor but I guess having some extra suggestions would be very nice.

    Thank you!

    #2
    Is there a contract that could be agreed with the Freeholder to the effect that he is happy for the carpet to be removed (if required) and that he will give notice and not charge more than XYZ on the visit, providing certain conditions have been met. If not you're writing an open cheque surely? and I'd pull out.

    Comment


      #3
      Thanks for the answer.

      For the carpet I guess some kind of arrangement could be found provided I get for his consent as the lease specifies it is an alteration of the property. I was just surprised as I thought usually those clauses were not/less applied to ground floors.

      On the visit thing I do get the impression that I would be writing an open cheque which is the really scary part for me. You're right though, I could try and get the current owners to negotiate a 'cap' with him.
      To be honest I was really wondering if it was usual for the Lessor to have the leaseholder pay for his visits. I did some research but could find very little on the matter.

      Comment


        #4
        If it was me I would walk.

        Comment


          #5
          Or investigate a deed of variation, we had one before we bought the flat but dont remember how you go about it.
          Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

          I do not accept any liability to you in relation to the advice given.

          It is always recommended you seek further advice from a solicitor or legal expert.

          Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

          Comment


            #6
            Originally posted by Alexlandlord View Post
            If it was me I would walk.
            That is what we are thinking of doing, it is just not that easy to accept that we are back at square one although it may be for the best.

            Originally posted by andydd View Post
            Or investigate a deed of variation, we had one before we bought the flat but dont remember how you go about it.
            My limited understanding is that it has to be negotiated and agreed with the landlord, meaning he has no obligation of accepting any changes? Especially if he is loosing money on it all.
            I will ask a question in that sense to the seller's though.

            Comment


              #7
              Originally posted by datester View Post
              1. Increase of ground rent.
              The lease was extended in 2007 by 90 years so no issue there but I am scared that ground rent increase may be excessive. It is currently of £200 until 2017, but will be redefined every 10 years to a yearly sum equal to either one six hundredth of the capital value of the demised premises at date of review or a sum which is 50% above that charged before the review, whichever is the greater.
              The capital value would be determined by a valuer whose cost would be at my charge.
              If I read this correctly then at the next rent review, assuming the flat is worth £300k(possible for a 2 bed in London) then the GR will rise to £500 per year and you have to pay the valuations costs.

              That would be enough to put me off buying.

              Comment


                #8
                Originally posted by DNM2012 View Post
                If I read this correctly then at the next rent review, assuming the flat is worth £300k(possible for a 2 bed in London) then the GR will rise to £500 per year and you have to pay the valuations costs.

                That would be enough to put me off buying.
                You read that correctly, and if we suppose that it is in 4 years that may even be a low estimate.

                I got the solicitor on the phone who assured me that the other clauses were fairly standard (paying visits) though.

                Comment


                  #9
                  Originally posted by DNM2012 View Post
                  If I read this correctly then at the next rent review, assuming the flat is worth £300k(possible for a 2 bed in London) then the GR will rise to £500 per year and you have to pay the valuations costs.

                  That would be enough to put me off buying.
                  I think it reads as you do BUT every 10 years it is revalued.

                  Comment


                    #10
                    Originally posted by datester View Post
                    You read that correctly, and if we suppose that it is in 4 years that may even be a low estimate.

                    I got the solicitor on the phone who assured me that the other clauses were fairly standard (paying visits) though.
                    He's not getting left with the lease though is he. I think you are right to be concerned and it looks like a very 'clever' person has written the lease to try and get as much out of the leaseholder as possible. Not bad if he can get it.

                    Comment


                      #11
                      Originally posted by datester View Post
                      You read that correctly, and if we suppose that it is in 4 years that may even be a low estimate.

                      I got the solicitor on the phone who assured me that the other clauses were fairly standard (paying visits) though.
                      If you did decide to buy, would the other LH(assuming its not the FH) be interested in buying the Freehold jointly with you?

                      Comment


                        #12
                        Originally posted by landloste View Post
                        He's not getting left with the lease though is he. I think you are right to be concerned and it looks like a very 'clever' person has written the lease to try and get as much out of the leaseholder as possible. Not bad if he can get it.
                        No he is not, which is why I was interested in some 'third party' advice!

                        Originally posted by DNM2012 View Post
                        If you did decide to buy, would the other LH(assuming its not the FH) be interested in buying the Freehold jointly with you?
                        Honestly I do not know, the other leaseholder is getting fairly low on years so it may be pretty expensive for him. Anyway I get the impression that purchasing based on that is risky.

                        Comment


                          #13
                          Originally posted by landloste View Post
                          I think it reads as you do BUT every 10 years it is revalued.
                          Exactly so in 2027, new valuation possible £500k, new GR £833 per year plus valuation costs.

                          Surprising that a 90 year extension was granted but rent was not set as peppercorn.

                          Comment


                            #14
                            Originally posted by datester View Post
                            Honestly I do not know, the other leaseholder is getting fairly low on years so it may be pretty expensive for him. Anyway I get the impression that purchasing based on that is risky.
                            We had a similar thing when we bought our flat, part of the deal was vendor extended lease to 99 years at their cost, when we saw the details the FH had varied the GR to £350 per year, we said no and it was set at existing £100 per year.

                            You are doing the right thing questioning everything now though, better that than find out later after you have bought.

                            It is definitely risky buying based on that but another option worth considering, especially if the other flat needs to extend their lease as you say.

                            Comment


                              #15
                              Originally posted by DNM2012 View Post
                              Exactly so in 2027, new valuation possible £500k, new GR £833 per year plus valuation costs.

                              Surprising that a 90 year extension was granted but rent was not set as peppercorn.
                              Well, my understanding is that the 90 years extension was not made through the legal leasehold reform act process but was negociated directly with the leaseholder, leading to those issues.

                              Originally posted by DNM2012 View Post
                              We had a similar thing when we bought our flat, part of the deal was vendor extended lease to 99 years at their cost, when we saw the details the FH had varied the GR to £350 per year, we said no and it was set at existing £100 per year.

                              You are doing the right thing questioning everything now though, better that than find out later after you have bought.
                              If I relate to your case I guess this is what happens if you agree to some silly ground rent revision mechanisms.

                              Comment

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