Increasing Ground Rents

Buying a long leasehold property, BEWARE, your 999 year Lease could end up having an Assured Shorthold Tenancy.

Issues have arisen as more Leases have started to contain unfair ground rent increases such as doubling every 10 or 15 years over the term of the 999 year Lease. This results in an extremely high ground rent which could render the property unmarketable and affect the value of the property.

If the annual ground rent exceeds £1,000 in London or £250 in other parts of the UK could result in them being classed as an assured tenancy under the Housing Act 1988.

Whilst legislation is due to be passed on or around March 2020 Meaby will assist clients to ensure that the ground rent provisions are changed so as to make them acceptable to both Lessees and their mortgage lenders. We will deal with varying the Lease to achieve the following: –

  • Cap ground rent increases to the acceptable level or reduce the peppercorn,
  • Ensure starting ground rent is below the AST thresholds.
  • Ensure that increases are in line with the Retail Price Index (RPI).

Mortgage Lenders require solicitors to inform them where the Lease is or could become an AST and the lender will expect the Lease to be varied as they will consider the terms of the Lease unsatisfactory.

Do not be under the misapprehension that if you lease term is for 99 years or 125 years it won’t be affected. These leases can still qualify as AST’s.