Don’t take the gamble with your Ground Rent...
Have you been approached by your Landlord to vary the Ground Rent in your Lease? Was Taylor Wimpey your Developer? Do you deal with Estates and Management or Landmark? These are just three of the companies that we are aware of that have been contacting their Lessees (flat owners) to offer a Deed of Variation varying the Ground Rent provisions in their Lease.
An increasing number of mortgage lenders will now not lend on flats where the Ground Rent doubles every 5, 10 or 15 years. Our advice generally is to not accept any Ground Rent that doubles throughout the term.
In addition, an increasing number of mortgage lenders will also not lend on flats where the Ground Rent is between 0.1% and 0.5% of the market value of the property.
Another lesser known issue is that when the Ground Rent of a flat is £250 or more a year (£1000 or more a year in central London), it may fall within the definition of an Assured Shorthold Tenancy and the Landlord has a mandatory ground for possession should the flat owner fall into arrears. The Courts do not have the power to stop or prevent possession on this ground (known as the Ground 8 Possession problem). We now know that a number of high street mortgage lenders will also not lend on a property where this risk is present.
In our experience, Taylor Wimpey, Estates and Management and Landmark are (in certain circumstances at least) offering to vary the Ground Rent so that rather than doubling, the Ground Rent increases in line with the Retail Prices Index. This is done by way of a Deed of Variation and then registered at the Land Registry against your title. If you have a mortgage, we will need your lender’s consent to the Deed of Variation.
In addition, a number of Landlords have signed up to a Government pledge to remove doubling Ground Rents from their leases. If you follow the below link, you can find out if your Landlord has signed up to the pledge:
The only way to be rid of the Ground Rent entirely is to serve a Notice on your Landlord claiming your right to a statutory lease extension under the Leasehold Reform Housing and Urban Development Act 1993. If you have owned your flat and been the registered owner at the Land Registry for 2 years then you qualify for this right. In addition to extending the term by 90 years, your Ground Rent is reduced to a peppercorn, which is zero. You will have to pay your Landlord a premium in return for the additional years and reduction of rent and their legal and valuation fees (as well as your own).
At Mayo Wynne Baxter we have a specialist Leasehold Enfranchisement Team that practices in this area; we have dealt with a vast number of Lease extensions and Deeds of Variation. Please do not hesitate to get in touch with the team if you wish to discuss your Ground Rent, or, indeed, any query about your Lease.