Ground Rent Worries and Possible Solutions
“My ground rent keeps going up!” “I was never told about the ground rent!” “Do I have to pay my ground rent?”
There is been a growing trend in housing developers selling you a new house but actually only selling you a long leasehold interest. By this I mean a large number of years (eg 999 years) so much so that your solicitor or conveyancer may have said “it’s as good as freehold!”
The freehold interest remains with the house builder which makes them the landlord and they can charge what is called “ground rent” to you as leaseholder. This was usually a tiny amount and often described as a “peppercorn rent” but times have changed. It is now often a monetary amount and can often double every 5, 10, 25 years. Doubling every few years quickly means it grows to ridiculously high levels. If your home is an asset you intend to pass onto your children you may be passing on a liability to pay substantial sums too.
More recently, the ground rents have been “traded” as investments (the landlord/house builder sells the freehold interest to someone else who then becomes the landlord and can charge ground rent. Added to this, the leasehold interests are sold with clauses that allow the ground rents to be increased, this was probably to make the freehold interest more saleable.
You should have been advised of this when you purchased your long lease by your solicitor or conveyancer.
Your landlord may be increasing your ground rent or selling the freehold to someone else who then increases it. They often then offer to sell the freehold to you (which would mean you would own both freehold and leasehold and not have to worry about the ground rent anymore) but at a vastly inflated price. When you can’t pay they put the rent up or sell the freehold on again for a profit to someone else.
This problem is seriously unfair but is coming under scrutiny by the government (whether they ever get round to doing anything and what is another matter). There is some action being taken by customers who bought houses from Taylor Wimpey.
If you were not advised of the consequences of buying a long lease, the ground rent provisions (including rental increases) or re-assured they were “as good as freeholds”, but then found your ground rent going up and up and if you would not have bought that home had you been warned of the ground rent you may have a claim against your solicitors/conveyancers.
Call Nick, a senior solicitor at Sentinels Solicitors Ltd on 01925 759 510 or fill in the contact sheet at the side bar for advice and help.