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There has been much negative publicity focused on ground rent clauses for leasehold properties. Ground rent is payable by some homeowners of leasehold properties to the landlord (or their appointed managing agent), for the land their house is built on. For some years, homeowners have been exposed to their ground rent doubling, or cumulatively increasing year on year. Alternatively, the ground rent may be increased by way of a calculation that is linked to the retail prices index (RPI). In the case of RPI linked ground rent this can be vulnerable to inflation rate increases. Under most leases, the leaseholder is obliged to pay an annual ground rent to the landlord or their managing agent which can increase at several points over the duration of the lease term, making costs unmanageable and affecting the owner’s ability to sell the property. Many mortgage lenders are refusing to lend to purchasers seeking to buy a property which has an increasing ground rent clause within the lease.
This has resulted in the Leasehold Reform (Ground Rent) Bill , for all new build properties. The new law stops ground rents for new properties and ensures it is charged as a nominal fee of ‘a peppercorn’. However, if you are an existing property owner with a leasehold property which has unreasonable increasing ground rent clauses then you should seek to remove this by way of a deed of variation.
In some cases, house builders and landlords have approached the leaseholders directly to offer them a deed of variation to alter the increasing ground rent provisions. Some well-known builders originally offered to vary the ground rent clause to be linked to the RPI index. You may also be a homeowner who has not been approached but who would like this clause amending to a nominal charge.
A deed of variation varies or amends the terms and clauses within a lease. If you have been approached by your landlord/housebuilder or their managing agent regarding an amendment then you should contact a specialist property solicitor to review the lease and deed of variation, making sure it is drafted correctly and in your best interests. If you have a mortgage secured against your property then your lender may also have to be notified of the proposed variation and their consent obtained.
Stephensons can assist if you want to approach your landlord to remove an onerous ground rent clause or change it from an RPI linked index to a nominal amount. We have experience of doing this. Whilst the landlord is under no obligation to accept the variation, they are becoming more amenable to this due to the negative publicity around this which was stimulated by the passing of the reform bill. The cost to vary is principally the responsibility of the leaseholder. However, we will try and recover some of these costs and some landlords and builders are agreeing to pay such costs. Where this is not possible, the cost of the deed of variation is often quickly neutralised due to increasing rent no longer being incurred.
If you are an existing leaseholder with escalating ground rents there are three main advantages that necessitate the varying of a ground rent clause:
If you are an existing leasehold homeowner with escalating ground rent charges, either a doubling charge, or ground rent charges that are linked to RPI inflation, then please do get in touch with as we would be more than happy to assist. Our fees for this type of work start from £750 plus VAT. Call us today on 0161 696 6174.
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