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  • Leasehold Property

    Ground Rent Increase every 10 years

    Hi,

    I am about to buy a new build development flat. My solicitor has raised conceren on the following and would advise not to purchase the property. I am wondering if anyone else buying new builds have encounter this and their experiance and is there anything to worry about?

    The developer in the contract wants the ability to increase ground rent every 10 years according to consumer index point.

    My soliciltor advise this is quite uncommon and that a standard clause would be more inline with ground rent increase every 25 years and no larger than double the amount. He is also advising that it will be difficuilt to sell the property down the line as lenders will not like the clasus.

    So any advise on this topic will be very helpful as I am struggling to make the decision on what to do at the moment. My inital plan is buy this as buy to let as an additional income and was not intending to sell it at least in the next 20 years....

    Cheers

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    Dont buy it.
    Have you not read the news recently.
    This type of ground rent escalation will be illegal very soon
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    Also if you are getting a mortgage on it now the lender will not like this clause at all
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    Why pay a solicitor and then ignore their advice?
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    I was looking at buying a 2 bed repossession flat on the market for £130,000. The new build price in 2003 was £185,000!!!

    It too has a RPI clause on the ground rent.

    In the end I pulled out as what with the ground rent and extortionate service charges I considered the flat a liability

    rather then an asset!

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    I haven't checked, but CPI is around 3%???

    So assuming ground rent is currently £250, after 10 years the ground rent would be £257.50. Are you really not buying this for the sake of a £7.50 increase in the ground rent?

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    It would be ten years compounded, so thats about £335 at 3%. After 25 years it would be more than double. Far easier to buy with ground rent and not pay it at all I would suggest.

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    Commericalprops, is correct.

    The problem is it gets compunoded in the first 10 years is fine and the next 10 years and 10 years after it quickly esclates.

    The solicitors maths shows, it could go from £100 to £200. than £200 to £600 and £2,400.

    And the other problem is the lenders might not lend to this, so the flat price might drop further when it comes to resell.

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    Hi Poon,

    Go for it! What could go wrong, its fine to ignore the independent professional advice of a solicitor and just go on what some strangers have posted on a online forum. No worries, its only money after all.

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    We made a serious buying error on one of our new flats a few years ago, the ground rent had clauses to double the ground rent every ten years. Our solicitor had not advised us of the disadvantage at the time. If we could turn back the clock, we would never of touch leasehold flats again. You need to praise your solicitor for pointing this clause out to you. We are currently offloading all our flats at a lost.
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    BE AWARE that if your ground rent is more than £250 pa (£1000 in London) then your lease will fall under the housing act 1988 whereby your lease will be an AST.

    Forget to pay your ground rent and the freeholder (landlord) will be able to take legal action to have you evicted

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