Is £250 ground rent increase an issue?

Reply to the comment left by Contango at 29/11/2023 - 18:26
If I pay rent for a garage, I get the use of a garage. If I pay ground rent, what service or value do I get?

Reply to the comment left by NewYorkie at 30/11/2023 - 12:26
I am sorry to read what you say. Take for example the s20 consultation scheme. It takes so long for a builder to be actually given the green light to start following giving his quote that the small contractor is put off tendering for the work as he cannot say whether he will be free and have a workforce available months and months ahead and at the price tendered. As a result the sort of firms who do in for s20 tendering will sometimes be a bit dearer than other contractors. This does not mean the landlord is ripping anyone off, its just how it is because of the legislative structure. Many freeholders own a unit or two in blocks where they have the freehold. Their interests coincide with the leaseholders because they too pay service charge exactly the same as the other leaseholders

To New Yorkie
The right to live on land owned by the freeholder providing the conditions set out in a long residential lease are met and also legal protection under Landlord & Tenant Act 1985 sections 18-30 and more recent legislation and also giving security of tenure which renting does not provide.

Reply to the comment left by Kizzie at 30/11/2023 - 13:13
The purchase of a lease conveys the right to live in the property for a set term. There is no security of tenure when the ground rent exceeds £250/£1000, which is why lenders wont lend. Hence, the payment of a ground rent is nothing more than additional revenue for the freeholder, who is not obliged to provide service or value in return for payment thereof.

Reply to the comment left by NewYorkie at 30/11/2023 - 13:20
I wouldn't describe the ground rent as "extra revenue" for the freeholder, quite typically it is the only revenue, particularly where the residents have conduct of the management

Reply to the comment left by Contango at 30/11/2023 - 13:27
If the freeholder is receiving only ground rent, and it does not prevent leaseholders selling, I don't have a problem, but they are far from being 'typical'. Why do you think leaseholders might have assumed the Right to Manage?

I've done 2 RTM's, and been Co.Sec. of a freehold management company. I think I have some experience!

Reply to the comment left by NewYorkie at 30/11/2023 - 14:03
It was perfectly common to set things up with triple decker leases Landlord owning the ground, Residents Management company holding a management lease, and leaseholder. Sensible freeholders avoided criticism of the running of the service charge by letting leaseholders deal with it waiting in the wings to pick up the pieces if the company should fail or to resolve disputes between lessees or worst case to intervene if a leaseholder refuses to pay service charges which typically will be owed in the first instance tl the Residents Management company but the covenants of the lease are enforceable by the freeholder. And all of this type of set up predated by forty years or so RTM was dreamed up to simulate such an arrangement. So yes there are ground landlords whose only recurring income stream is the ground rent

Reply to the comment left by Contango at 30/11/2023 - 14:32
I don't have a problem with them. My problem is with the freeholders who have 'invested' in ground rents as a zero risk and high return asset class, with the sole intent of sweating the asset through service charge manipulation, permission fees, lease extensions, and ground rents which were specifically designed to increase disproportionately e.g. doubling or RPI every 5 years.

Reply to the comment left by NewYorkie at 30/11/2023 - 14:45
A tripartite lease comprises the Lessor the RMC limited (by shares or by guarantee held by each leaseholder ) and the leaseholder as Lessee. The leaseholder acts in two roles 1. as shareholder/ guarantor and must comply with CA 2006 enshrined in Articles in running the company and enforcing lease
covenants and 2. as Lessee comply with lease covenants. It means leaseholders have sole liability and responsibility for success or otherwise of the RMC.

I should add that the RMC holds the Freehold reversionary interest and each leaseholder holds a share in the freehold interest in their ownership.