Ground rent concerns

We’ve finally moved into our flat! It’s been quiet on the blog as we have been busy building furniture and unpacking. We’re almost settled in so have time to write again!

I wanted to talk about ground rent today. I included it as one of the questions to ask before making an offer in this post.

First of all, what is ground rent?

Ground rent relates to leasehold properties and is a payment that the leaseholder makes to the freeholder. For definitions, the Leasehold Advisory Service has a useful glossary!

For example, as a leaseholder, we own the right to live in the property for a term specified in the lease (e.g. 125 years). Our freeholder owns the land and the property. There is a section in our lease which has clauses relating to ground rent which covers how much is due, how often it increases and how the increase is calculated.

What are the concerns?

We asked about ground rent before making an offer because we read news articles about doubling ground rent which resulted in homeowners struggling to remortgage or sell their property. The articles mentioned that lenders won’t grant mortgages where there are onerous terms such as these in the lease.

The Competition and Markets Authority (CMA) performed an investigation into the leasehold property market and found that some homeowners were misled by developers and later struggled to sell their homes. As part of this investigation, they found that some buyers were faced with unfair contract terms. In some cases, the ground rent doubled every 10 years.   For more information, please see this BBC article.

Here are some useful articles on ground rent issues:

·      MoneySavingExpert.com - Competition watchdog to take action on leasehold selling

·      The Guardian - Homeowners caught in a crippling ground rent trap 

·      The Guardian – Leasehold houses and the ground rent scandal: all you need to know

Hope you found this useful!

Jess