Ground rent school boy error?

I post from experience not just from theory. My last but one lease extension 4 years ago I did use a valuer, and his total fee was about £1,000 inc. VAT. Be very careful because in my case using a valuer cost me about £2,500 more than it should have done. This valuer was an ALEP member and also a member of the RICS. It was a straightforward lease extension, about 90 years left to run and ground rent only about £150 per annum. My valuer quickly agreed a compromise premium of £5,000 with the other valuer. The solicitors on both sides starting agreeing the wording on the new lease. About 6 weeks later the landlord's solicitor dropped the bombshell. ALL WE HAVE TO AGREE NOW IS THE AMOUNT OF THE LEASE PREMIUM! It then transpired that my valuer had only PROVISIONALLY agreed a figure of £5,000 for the lease premium subject to us agreeing to paying horrific freeholder costs of £5,500, being £3,500 legal costs + £2,000 valuation fees. So in effect I was paying my valuer £1,000 for a deal any fool could have got. My solicitor helpfully offered on a 'pro bono' basis to challenge the freeholder costs at the FTT. The valuer's costs were reduced from £2,000 to £1,000 but unfortunately the legal fees were only reduced from £3,500 to £3,000 because their solicitor had been very awkward during drafting the new lease. (Senior partner's time at £350 per hour + vat soon mounts up). So I ended paying £4,000 in freeholders costs, at least £1500 more than it should have been. Add on the £1000 for the useless valuer and that's the extra £2,500 it cost me. A £100 paper decision from the FTT would have been a far cheaper way to go.
So now on to my last lease extension which was to escape from a Taylor Wimpey 10 year doubling lease which doubled to £8,000 after 50 years. There were nearly 140 years left on the existing lease so there was no marriage value. Because of the length of the lease remaining the value of the reversion was only a few hundred pounds. (the reversion being compensation to the landlord because he has to wait until the expiry of the lease to theoretically re-possess the property. This is discounted each year. In the case of flats usually by 5% after the famous Sportelli case). This lease premium was going to be all about the considerable loss of ground rent income due t the freeholder. You will not be surprised after my first experience using a valuer that I taught myself the basics of valuation and did the valuation part myself although my solicitor was helpful checking over my applications. My solicitor served the S42 notice and about 6 weeks later came back the landlord's S45 counter notice and wanted just over £36,000 for the premium, but was accompanied by by a non-statutory offer, still with 90 extra years, of a 10 year RPI linked lease starting at £350 p.a. for only £21,000. (you will nearly always gets an opening non-statutory offer without even asking). I ignored this and 2 months later filled in the form to the FTT and sent my cheque off for £100. A few weeks later both ourselves and the landlord heard back from the FTT. A few days later I had a revised RPI offer from the freeholder but the price had dropped to £14,500. I then decided to sent off £200 more to the FTT to have a hearing. (Now the freeholder has to pay all his own costs at a hearing so this ramps up the pressure). A few weeks later the hearing date was arranged and it was not long after that that I got my third offer from the freeholder and the price had dropped to £10,000. I had spent a lot of time on my case notes. I found out that the freeholder had bought all our plots at a ridiculously low price. I also found a telling report from Savills saying basically that from an investment point of view the bottom had fallen out of the market for doubling ground rent, especially 10 year ones. So all my case notes for the hearing were sent to the freeholder and his valuer. A few days later came the offer of 90 year lease extension, 350 p.a. ground rent with 10 year reviews for a premium of £5,000! This is the offer I accepted. I did contemplate pushing ahead with the hearing but I doubt I would have done better than say £18,000 for the premium and as the property is rented the ground rent will be tax deductible straight away rather than waiting many years to take it off my CGT.
What you have to realise with lease extensions is that it is a game which is not played on a level playing field.
You must remember that valuers work both for leaseholders and for landlords. They often come into contact with the same valuers but often their roles are reversed. They are very willing to compromise and if you want a compromise result rather than the best result then go down this route.
The leaseholder's S42 offer has to be reasonable, the landlord's S45 counter offer can be any made up figure.
What you must remember is that the very last thing any freeholder want is to give you a Statutory Lease extension.
Start off by showing you are serious and apply, after the 2 month waiting period after getting their s45 counter notice, to the FTT for a tribunal decision. This will trigger further non-statutory offers. How far you want to push depends on how good you case is. A cautionary word with non-statutory lease extensions get your solicitor to check no extra detrimental clauses are inserted.

I have one more suggestion for Marcus to consider which might help. Get your solicitor to write to the London Major Sadiq Khan and the Secretary of State for Housing Sajid Javid. In that letter explain you are attempting to overcome the problem of your ground rent doubling every ten years and as you know they have grave concerns facing many leaseholders with such leases, it is your intention to circulate all documents in the transaction to them to enable them to get a better understanding of the problem in a real live situation.

It might be a good idea for those two people to appear on the circulation list in all communications to the freeholders and/or their legal team.

Your solicitor will be wasting his time writing to Sajid Javid. I wrote to him myself nearly 12 months ago, before I applied for my lease extension, telling him of my own 10 year doubling ground rent and that an estimated 100,000 people are being affected by these leases. I did not get a reply or even an acknowledgement and I sent my communication both my email and by post. I fear that warm words are all we will get from this government to help those with 10 year doubling ground rents.

Reply to the comment left by at 31/03/2018 - 18:17
That's a rather defeatist attitude!

In any case, I suggest that Marcus, not his solicitor, should write to explain his plight. The letter maybe better received, if from Joe 'voting' Public rather than a paid-for legal advisor.

Perhaps Marcus should write to his MP and copy Sadiq Khan and Sajid Javid?

I wrote to Sajid Javid personally as Joe Public and had no response whatsoever. I did mention to Mr Javid that my case was not unique and up to 100,000 people were in the same position. In my opinion if you want to get out of a 10 year doubling lease you need to do your best to help yourself out of this situation. The problem with the softly, softly approach to this landlord is that he is obviously very clued up. He has already had £14,500 for one lease extension and by cleverly slipping in 'RPI or a factor of 2' he has done his best to make sure he gets at least another £14,500 from any subsequent purchaser to get out of this lease. I have already given my reasons for the best approach with this landlord - I will not repeat myself.

Are you sure it is doubling of Ground Rent and just linked to RPI.

I have following clause in my lease and thought such clauses are common nowadays

Revised Rent = £250 * Latest Index Figure/Initial Index Figure

OR

the sum of the yearly rent payable immediately before the relevant review date and £250 whatever is greater.

I had been banging head to try to understand the clause and looks like a RPI increase with a minimum of £250 every 10 years. Originally I thought it was a doubling of Rent.

Some freeholders will try and disguise the true terms of the ground rent increases to make them slightly ambiguous but still legally correct or hide the true terms in other clauses. This clause does mean in plain english - 'Every 10 years your ground rent will increase by the rate of RPI over the last 10 year period or by 100% whichever is the greatest.
If you want to study an unscrupulous master of of obfuscation then just Google freeholder Martin Paine and Blythe Court. He sold flats recently with 50 year leases, extended by 99 years so effectively with 149 year leases. The ground rent started at £250 per annum doubling every 10 years. However he had inserted a clause in the lease that was missed by nearly every buyer's solicitor that the £250 p.a. ground rent and the doubling was backdated to 1961 when the flats were first built! So the unfortunate buyers as soon as they moved in were faced with an immediate £8,000 per annum ground rent bill, rising to £4,000,000 at the end of the lease. The properties were of course unsaleable. Martin Paine offered to buy them back at a substantially lower price to try the trick again on someone else? Most freeholders are honest but bad news isn't always made as obvious as it should be.

RPI increases are perfectly reasonable anything else should be held to be null and void. Law clearly needs to be changed

Reply to the comment left by at 31/03/2018 - 15:36
Apologies for the radio silence, i had not realised there was further comments that had been added, Really appreciate the post and your experience - thank you
This sounds like quite an ordeal.
I was putting together a plan for this, but did not realise how much maybe involved.
To kick things off i was going to contact the freeholder directly and ask if we could agree something (as it sounds like your 1st valuer was fairly useless).
Can you please advise how i should start the process (if you were in my shoes?) From what you say should i do some calculations myself and contact the freeholder directly for an "opening non-statutory offer" then potentially go down your route if its very high or find a good solicitor first?....i wont take this as advice just like to know what would be your initial plan of attack.
Many Thanks.

Reply to the comment left by Ian Cognito at 31/03/2018 - 19:03I have emailed Sajid Javid.
From reading various articles online it would seem the government may well do something to amend this law, potentially by end of 2018...... so, patience could be a virtue on this occasion; but i would prefer to be pro-active and get this sorted.