What can you do about doubling ground rent
If you have not been one of the fortunate homeowners to have benefitted from the CMA action or new legislation you still have solutions to the doubling ground rent problem.
Deed of Variation
In essence a deed of variation is a contract outlining changes to the terms of a lease. If you have a doubling ground rent clause as part of your lease you can approach the freeholder and request a deed of variation to get it removed.
To get a deed of variation requires agreement from both the leaseholder and the freeholder, in this instance both parties would have to agree to the removal or amendment of the doubling ground rent clause.
There will be costs involved in this, at the very least the legal fees for the change will fall on the leaseholder. Additionally a freeholder might demand further financial compensation for the loss that they will incur from the reduction in ground rent that they will receive. This amount will often be determined by a surveyor which will also be a cost that the leaseholder is liable for.
Statutory Lease Extension
Perhaps the simplest solution to the problem is to apply for a statutory lease extension. If you have lived in the property for more than 2 years you have the right to increase the lease by an additional 90 years.
Now you might be thinking that you have plenty of time left on the lease so what has this got to do with doubling ground rent. The granting of a lease extension also has the added benefit of reducing the ground rent to a “peppercorn” rent for the duration of the new lease so essential you are getting 2 things for the price of one, a longer lease term and a reduction in ground rent. Of course there are costs involved in this. As with the deed of variation landlords will require compensation for the amount that they would have made on additional ground rent and again the leaseholder is liable for the costs such as legal fees and surveyor fees if once is required to determine the value of the lease extension.
“A very low or nominal rent” – definition of peppercorn rent
In cases where the time remaining on the lease is below 80 years, the lease becomes classified as what is known as a “short lease’ if this is the case then the costs of extending the lease can increase significantly. Read our article on short leases to find out more on this matter.
Further Reading: Selling a flat with a short lease
Conveyancing solicitor failed to mention doubling ground rent clause
You may be able to pursue a professional negligence claim if at the time of purchase your conveyancer failed to mention the doubling ground rent clause. Solicitors are required to identify and disclose such clauses in the lease. They are also under a duty to inform the mortgage lender of any arduous ground rent increases that may be deemed unreasonable as per the mortgage lenders handbook.
Can you sell a leasehold that has increasing ground rent
You can sell a leasehold property that has a doubling ground rent clause. Although it may be significantly more difficult than selling a freehold property or leasehold without a doubling ground rent clause.
This is due to the fact that many buyers will be put off by the exponentially rising cost of the ground rent coupled with the fact that mortgage lenders are unlikely to lend against the property with the clause in place.
This can lead to a significantly longer sale time making an open market sale unviable for many.