Ground rent linked to RPI?

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    Ground rent linked to RPI?

    We own a flat with 110 years remaining on the lease and a ground rent of £100 pa, doubling every 25 years. The landlord is negotiating a lease extension with the other tenants who both have short leases and has offered to extend ours to 175 years at nil premium so that they all have the same lease term.

    However we would have to agree to ground rent of £300 pa with 15-yearly increases linked to the RPI.

    We are planning to sell probably within 5 years. Which would be more attractive to a prospective buyer – a flat with 105 years on the lease and ground rent of £100 (which will go up to £200 pa 10 years from now) or a flat with 170 years on the lease and ground rent of £300 pa (going up by an amount linked to the RPI 15 years from now)?

    #2
    I cant add alot more than this
    http://forums.moneysavingexpert.com/....php?t=4732074

    The increases in ground rent under RPI are vastly in excess of doubling, even if your new lease started at the current £100, let alone £300 as proposed.

    When you sell the rent would be in real terms £350 and in 15 years £470assuming RPI at 3%. At 5% its £630!!!!!!!

    With 110years on the lease and 105 when you sell, there is no problem with selling or mortgaging a lease of 105 years.

    Forget extending. It's just not worth it at that price. Sooner or later high ground rents like that will be hard to sell.
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


      #3
      LHA is right - forget about extending for atleast another 15 years.

      Comment


        #4
        Originally posted by Gordon999 View Post
        LHA is right - forget about extending for atleast another 15 years.
        thank you !
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


          #5
          Is it still the case that it is illegal for ground rent to exceed a certain level? (Used to be two thirds of the RV and then some formula I forget.)

          Comment


            #6
            No sadly not, but its something I keep putting off to look up as GR over a certain level also used to change the repairing liabilities too.
            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

            Comment


              #7
              Unless I'm misunderstanding, ground rent linked to the RPI doesn't sound like a good idea. Here, our ground rent will be increased soon, based on the last seven years of RPI, that is, the diffrence between the RPI in 2006 to 2013. I've heard there's a new RPI ( RPIJ ) if this is so, our increase would reduce by approx' 5%, are Landlords obliged to use this new index?

              Thankyou for any help and advice.

              Comment


                #8
                Which index they use depends on the leasewording. RPIX or RPIY are unlikely to be used while the RPI exists as the principle measure.
                Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                Comment


                  #9
                  Originally posted by leaseholdanswers View Post
                  No sadly not, but its something I keep putting off to look up as GR over a certain level also used to change the repairing liabilities too.
                  It would be helpful if you could let me know by what statute the change was made.

                  Comment


                    #10
                    The quick and dirty answer is that since the HA 1988 the ground rent over £1000 in greater London, £250 elsewhere, for tenancies after 1-4-1990 could be regarded as a rent subject to the rent officers control.

                    As we have returned all our summer graduates to their HMO's I'll see if I can find the time to look up any RO decisions at the VO
                    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                    Comment

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