Grounds for concern? Exploring the added costs surrounding leasehold apartments

OUR >Residential Property Manager and Yorkshire Post property correspondent, John Robson, has expert advice for homebuyers who are confronted by high ground rent fees, in his latest Question and Answer column on all things property.

Here, he outlines the law around ground rents, your rights, the dangers of falling into arrears, and what options you have to challenge the annual fees demanded.

Question

I am looking to purchase a newly-built apartment in Harrogate. I am buying off-plan and my conveyancer has sent to me a report upon the draft lease proposed for the apartment.  I understand all the apartments will have the same form of lease. I have one main concern and that is in respect of the proposed initial ground rent payable, which is set at £350 per annum. This seems high to me.

John’s answer

Traditionally, long leases contained a ground rent of a “peppercorn” which means nil or a nominal amount of say £10 per annum. 

More recently, freeholders are setting ground rents at higher amounts, as the freehold is then more of a saleable asset once the development is completed and all apartments sold.

However if a ground rent is over £250 outside London, and £1,000 per annum in London city, then the lease falls within the criteria of the Housing Act 1988 and can be construed as an Assured Shorthold Tenancy.

This can create major problems should the ground rent fall into arrears for 21 days or over then the landlord freeholder can take possession of the property.  Courts generally have the power to grant relief in these circumstances provided the ground is then paid. 

However, if the ground rent remains unpaid for three months then the Courts do not have the power to grant relief.

Most mainstream mortgage lenders will not accept this position and thus the apartment may diminish in value and be difficult to sell if mortgage finance is not available.

I suggest you ask your conveyancer to argue the case for the initial Ground Rent to be reduced to £200 per annum before proceeding.

For more information on ground rents and leases, or if you have any general question about residential property and conveyancing, please contact John at our Harrogate office on 01423 530103 or email him at john.robson@milnerslaw.com

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