Posted on 23rd December, 2019
Is my ground rent too high and how does an onerous ground rent affect my flat?
Ground rents are an inevitable part of owning a flat. In fact, every residential lease has a ground rent but some are quite small at just a just a few pounds every year or even zero which is usually referred to as “peppercorn”. High ground rents or ground rents which increase very quickly can make your flat difficult to sell or remortgage.
Examples of problematic ground rents include those which are higher than 0.1% of the value of your flat (i.e. where a ground rent is higher than £200 per annum ground rent on a flat valued at £200,000), a ground rent which is already over £250 per annum and ground rents which double on a regular basis, particularly every 10 or 15 years.
Some mortgage lenders will not consider a property to be suitable mortgage security and will not advance funds if any of the above circumstances relate to your flat’s ground rent. Legal advisors acting for buyers are now advising their clients against purchasing flats with potentially onerous ground rents leading to sales falling through.
If you have a potentially onerous ground rent you are best advised to deal with the situation in advance of any sale or remortgage. There are basically two options to remove or alter a ground rent in a residential lease:
Firstly, your freeholder may agree to voluntarily vary the terms of your lease with an amended ground rent, subject to a payment. This alteration of the lease is known as a “deed of variation”.
Alternatively, if you have owned your flat for more than two years you will have a legal right to a statutory lease extension under the terms of the 1993 Leasehold Reform Housing and Urban Development Act. A statutory lease extension as well as extending the term of your lease by an additional 90 years also resets the ground rent to a peppercorn (zero) for the duration of the lease.
We specialise in advising and assisting leaseholders with onerous ground rents problems. We can look at the details of your existing lease and calculate costs for either a deed of variation or a statutory lease extension and undertake negotiations with your freeholder to agree appropriate terms.
If you are concerned at all about the ground rent provisions in your lease then please call or email us for an initial no obligation discussion regarding your situation and the options open to you.