beware the ground rent

22 Oct

london 10.45am 11.2C cloudy saturday 2016

this article in the guardian , entitled beware the ground rent made me realise i had a narrow escape when i bought this flat years ago. mine is a ex council flat and so the ground rent is £10 a year. and it has been that all the time i have been here, about 25yrs now.

but it seems if someone who wants to sell their flat quick and wants to extend the lease and do not want to go through the slow process of doing it in the normal way  can have an informal understanding with the freeholder to increase the lease and so get it sorted out quickly enough to put it up for sale with the new lease; and there the freeholder is allowed to charge whatever he wants for the ground rent. in this eg, a one bed flat has a ground rent changed to £250 a year, but instead of starting from 2011 when it was changed, it was backdated to 1961 when the block of flats was first built. and so the new owner got a backdated bill for £8000. and what is more, the agreement allows for automatic raising of the ground rent every odd years, rising as the years go by… which will rise to £8 million a year near the end of the lease. what a cheat! the solicitor was at fault for not alerting the buyer of that clause in the ground rent. and in fact it should be illegal. these flats are usually sold by auction, where people are careless about reading the small print. or even are misled when this potential cost of the ground rent is not mentioned in the sales information. 

i used to wonder how the freeholder can make money when they only charge £10 a year for the length of the lease which is 99yrs or £125yrs. so now i know this is how it can be done.

currantly there is a circular going round this housing estate which got  popped into my letter box saying i could join a group action to have my leasehold extended… i have not bothered to do it, because there will be costs to pay and i dont really want to do that. after all who benefits? not me, just whoever inherits it when i die, and even then i doubt it will affect that person, but the one next down the line. the lease is 70yrs and should see both of us out. haha. after that i dont care who gets it. 

The site adds that in a typical 99-year lease, it might be set at £50 a year for the first 33 years, then £100 a year for the next 33 years, then £150 a year for the final 33 years.

that seems to be the standard rate if ever my lease gets extended. so there is not only the cost of buying the new lease, but the annual ground rent will rise as well. to my way of thinking, thanks but no thanks!!

the ploy is that faced with this high ground rent, the owner will either get fed up of it, and cut his losses and sell it back to the freeholder at a much reduced price…and allow that flat to be put on the market again at the currant market price to trap another poor sap;  the chain would stop if all the potential buyers are warned of it by their solicitors, that the ground rent will rise by huge amounts making the property unsellable. but even solicitors i think do not know of this ploy , unless they read the small print very carefully. or as is common, these flats are sold at auction. 

sigh, these pitfalls in buying property are there, due to greedy people.

i think this one is extreme eg of how greed can struck people like that man and his wife who owns the freehold.

another eg of greed is people renovating their flats with the intention to sell it. they put in central heating that is very inefficient, just to keep the cost low and put in the cheapest central heating, and it is all done in a very slapdash way, and then the new owners have to deal with all kinds of things going wrong with the system . or they make cosmetic repairs just to make the place look nice, until it is sold and then the shoddy workmanship comes home to roost with all kinds of problems that cost so much more money to fix.

that is why i dont bother to move. this flat will see me out. it is exactly the size i like and the location i like. so why change?

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2 Responses to “beware the ground rent”

  1. Garfield Hug Saturday October 22, 2016 at 2:33 pm #

    Interesting share on ground rent. Many Singaporean investors buy property in UK. I am sure they are not aware of this. The rates as you described can rise terribly.

    • alifesgayventure Saturday October 22, 2016 at 2:48 pm #

      all flats here on on leasehold. that is why some people prefer condominiums. many of the flats in malaysia, singapore are condos, where they share the freehold. though this particular eg is due to a greedy freeholder. he has been named and shamed by an mp.

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