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  • Leasehold Property

    Step up lease means I could lose my property?

    Just got letter back from solicitors re my first btl purchase of a 5 year old flat and cant assess the impact of the advice so any suggestions or comments are welcome.

    The ground rent of the 125 year lease steps up every 25 years from £350 to £700, 1050, 1400 and £1750.

    The solicitor advises that this element of the lease means that, in the event of non payment, the lease becomes an AST and the landlord can repossess the property.  They have requested that the lease be varied.

    Clearly, I need to and will take advice but don’t imagine the owner of the freehold has any obligation to vary the terms.  I would appreciate any comments / thoughts from anyone if they have seen this before.

    Comments much appreciated as I am not sure how to proceed.

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    This is a problem for any property with a ground rent of £250 or more.My buyer's mortgage company required a variation of the lease that compels the freeholder to give notice to them should the leaseholder fail to pay the ground rent.Thie variation has been completed at a cost of £540 not including my own solicitor's costs.The mortgage company also required as a condition an indemnity policy that cost me a further £76.

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    I have a few properties where the ground rent is £350 and doubles every 25 years and I had to do no such variation on the lease. So I guess it depends on the lender?

    Also a Ground Rent that goes up (or doubles) every 25 years is nothing to worry about, imo, as inflation will pretty much eat away the increase. £700 might seem a lot now, but in 20 years you probably wont even notice it

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    You are missing the point forget to pay the ground rent  and the freeholder can apply for possession and you could forfeit you lease without compensation.lenders are all now well aware of this and some will refuse to lend.By the way properties in London must have a ground rent of more than £1000 pa to be classed as an AST rather than £250 elsewhere.
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    Walk away if not run, the implications further down the road are serious, doubling ground rent will skyrocket any lease extention following the first full mortgage term completed. Future solicitors will flag this for future vendors especially when the mortgage term exceeds 80 years remaining on the lease these leases will become an issue in time
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    You are also missing the point i have already made. Under the housing act,. 1988 ground rents over £259 pa are subject to AST rules ( £1000 in London).So what is the remedy?

    As a leaseholder, i have been advised to negotiate a lease extension now even though i have 115 years remaining on my lease. This would result in a peppercorn rent so in effect i could never be in default so my lease would be safe and sound and the value of my property maintained.Mortgage lenders. would then have no concerns about their security

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    It is not doubling rent (except in the first time) it is an arithmetic progression. That is no where near as bad. Though the over £250 bit is the same either way.

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