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I have a flat in the Midlands that is valued around £100k and the ground rent is £275 annually which is set to double in 2026. The leaseholder is offering landlords in our complex a £5k purchase to revert to an RPI index system along with their legals of £750. I would need legal representation which means further £'s. I am aware of the govt. consultation and review around currently around this and am not sure if I should wait for the outcome. I don't know if this represents a good deal or not and there doesn't seem to be scope for negotiating the price as there is a simple proforma to tick and sign.
Owner occupiers will not have to pay to be relieved of the current ground rent so there should be a lot of take up. If that happens and I don't sign up I get left behind with a property that will be harder to offload. I am not aware if its a one time offering or whether it can be purchased further down the track. I have emailed for clarification.
I don't plan to keep the property more than another 5-7 years, if I were keeping it long term then that would be an easier decision. What considerations do you feel I should take into account? This is my only property and as such I have no other experience.
You cant buy from a leaseholder, as they hold the lease.You are renting from the leaseholder over a long period of time.
What you are suggesting is just a financial calculation. One form of ground rent for another. It will depend on your own personal view of RPI.
If you are planning to sell then this decision could affect the value. And you may be better discussing with a valuer. Also consider the impact on value if the rest of the block is on a different form of ground rent.
Finally as you have all the leaseholders together you may wish to consider buying out the freeholder and going to no ground rent (or at least change it to a mortgage payments from the funds used to buy the F/H). My sense is that the F/Hold will not cost much if the current value is £100k and the buy out ground rent change is £5k. >50% of the leaseholders need to agree to buy the F/Hold
Chartered Accountant, Tax Advisor and Mortgage broker
(and BTL portfolio owner)
I can not speak to the valuation and if £5k would be good value, considering its just 18 times current ground rent (ignoring doubling) id presume it's ok.If you engage a leasehold professional, they will be able to tell you the "Collective Enfranchisement Valuation" and be able to calculate if you are paying too much or too little, its an established calculation.
There is new regulations being proposed and are subject to change but they set a cap on what you pay, they also have a stipulation for leaseholders who purchased before the implementation to get a refund. Though these are always subject to change until they are actually law.
Personally? Id get involved and have purchase a share in the freehold. These freeholders charge for all-sorts and have a conflict of interest in my view. The building should be collectively owned and managed by the leaseholders, who have a interest in the site.
_________________________________________________________________________The above post is not financial advice, its often me rambling - passing time on a coffee break.If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance._________________________________________________________________________
Yeah thanks guys its an interesting one. I'm keen to see the outcome of the current review and hope the current offer put before me can wait til that occurs. Will have to chase them up and find out.