Escalating Ground Rent and Purchase of Freehold

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    Escalating Ground Rent and Purchase of Freehold


    I am looking to purchase a property valued at £675,000 but am quite hesitant to proceed after learning of the ground rent provisions in the lease. The relevant provisions are set out below:

    Lease Term:
    20 years from 1 June 2000
    Remaining Lease Term: 233 years
    Current Ground Rent: £350 rising to £5,600
    Ground rent Review Mechanism:
    1 June 2000 (during the first 50 years) – Ground rent (GR) payable is £350.00
    From 2050 (during the second 50 years) – GR payable is £750.00
    From 2100 (during the third 50 years) – GR payable is £1,400.00
    From 2150 (during the fourth 50 years)- GR payable is £2,800.00
    From 2200 (during the final 50 years) – GR payable is £5,600.00

    My questions are:

    (1) Do you think that the ground rent is excessive?
    (2) What would be the cost of buying the freehold?


    Is this property a house or flat ?

    if flat , how many units in block and what is the total annual ground rent collected by freeholder ?



      If this lease is worth £675K on the open market then on face value a GR of £350 is well below the recently emerging 'onerous' benchmark of 0.1% of value for lending on new leases.

      You will have doubling ground rent every fifty years. The new lending benchmark is suggesting RPI indexing. I may be wrong but to go from £350 pa to £5600 pa after 200 years would need an equivalent average annual RPI of less than 1.5%? Hardly onerous?

      And you will have a nice long lease.

      However, there is far more to consider buying leasehold than ground rents or even the term left on the lease.

      Read today's Guardian (and the comments below the article) here...

      Read reports on a recent parliamentary group meeting here...

      Leasehold is broken. Well broken.

      Is this a house or a flat? How many other leases are there on the freehold? Is there a leaseholder-run freehold company? (Can be a disaster in itself).

      What size building is it? Age and state of repair? What about huge major works costs down the line? Excessive consent fees just to have the right to change a light bulb (almost)?

      What are the service charges? How well is the place managed? Have you talked to actual leaseholders there - more than one?

      Personally, I would not buy leasehold again. Maybe yes if it was a BTL and you knew you could make a nice little return with none of the live-on-site stresses, earning a good buffer against any future major works costs.

      Even then, you might face forfeiture action for some inherited problem - its the legal costs that can arise from nowhere that takes leasehold beyond normal tenure experience.

      You could face a share of legal costs even if you have done nothing wrong if the freeholder pursues someone else using the lease.

      The cost of buying the freehold depends on whether it is a block of flats and you have to work with others, or a stand-alone house.

      If it is a new house you may be quoted one figure by the developer now and find they have sold the freehold over your head before you get around to buying it. Price will have hiked rather a tad too.

      Somebody will likely be along soon with an estimate. It will not be anywhere near a guarantee, mind. This is the world of leasehold.

      Edit: was no reply above when I went orf to type mine!
      Do not read my offerings, based purely on my research or experience as a lessee, as legal advice. If you need legal advice please see a solicitor.


        It is a flat in a building of 9.

        We received advice from our conveyancer that this lease was 'onerous' and that we should not proceed with the transaction. I feel that the advice is over cautious but not 100% as we have never purchased in the UK...


          Its quite acceptable for new flats to be sold with 125 year leases with annual grouind rent starting from £300 p.a (1 bed ) and £400 p.a (2 bed) and doubling after every 25 years.
          This means after 50 years, the ground rent will rise to £1200 p.a and £1600p.a and the lease has fallen to 75 years unexpired or you may have already paid for a 90 years statutory lease extension to end the ground rent payments.

          If you buy the flat, you would have ground rent to pay fixed for another 33 years paying £350 p.a before the next rise to £750 p.a.

          If all 9 flats pay the same ground rent at £350 p.a , the freeholder receives about £3150 p.a rental income. So if a majority of leaseholders make a compulsory purchase of the freehold by enfranchisement , the cost to buy the freehold title may be 20-25 times annual income = 3150 x 22 say = £70,000 which shared between 9 flats = £7700 approx contribution by each leaseholder.

          You must check the ground rent figures and ground rent rises stated in the lease are as you have posted.

          Leases with ground rent doubling up every 10 years are a big problem now and you should avoid


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