Is £250 ground rent increase an issue?

Reply to the comment left by Amethyst at 11/12/2023 - 14:17
The consultation is [deliberately?] convoluted. But there is useful guidance pointing to 'Peppercorn' ground rent being the best solution for the millions of existing leaseholders, because the payment of ground rent doesn't result in the provision of any service or value from the freeholder.

I read today [legal comment] that if your ground rent is so high that you effectively have an AST, you cannot be a qualifying leaseholder [unless you are a landlord] when it comes to RTM or RTE, providing the freeholder with yet another opportunity to deny ownership and maintain the status quo with managing agents and rip-off service charges.

Reply to the comment left by NewYorkie at 11/12/2023 - 16:42
Ground rent was never intended to be in return for a service, It was part of the bargain under which the flat would be sold. I don't think ground rents can just be scrapped without any capitalisation of their value, even if the calculation is on a fairly favourable basis to the leaseholder. I expect that they will be pegged and limited at say £200 pa for a flat. I would be most surprised if they were simply extinguished in the nature of a gift to the leaseholder. Some freeholders although not obliged to do so pay for revaluations out of ground rent income, they often end up policing the eficacy of the management company if there is one, When there is a spectacularly large insurance claim it is the landlord who gets tied up dealing with the loss adjusters and managing a claim, In a large and complex estate there can be elements such as batteries of garages that are outside of the scope of a triple decker residents management company lease but nonetheless there is management involved and often no service charge arrangement as the lessee has the covenant to repair and rebuild a garage.

As stated, there are five possible options and the one that suits Leaseholders will definitely not suit Freeholders. They won't take it lying down and will be looking to be recompensed somehow. See the figures quoted in the LKP article re the so called and disputed value of these Freeholds across the property market. If GR goes completely and only peppercorn is charged, what's the betting they will introduce a 'charge' into the SC called an 'estate charge' or something? It will be a disguised GR. Freeholders are not going to lose out.

Ground rent is payment to the freeholder for permission to live and meet conditions in the lease on freeholders land. It is likely in the future to be a peppercorn retaining the link to the registered title to the freehold land.
Maintenance Costs for Garages /car parks on the retained access land fall under Estate service charge payable to the freeholder and this imposed charge enforces variable service charge on block common parts payable to the Lessor (protected under the Landlord & Tenant act).

I just recall last year when GR was abolished for new leases. You would imagine that was fairly definitive wouldn't you but what did the Freeholders do but back date their Leases so they pre dated the legislation! Again, see LKP who drew attention to this practice. Ways and means..

Reply to the comment left by Amethyst at 11/12/2023 - 17:44
I don't think you are right about a "disguised" charge, But certainly if the Government simply legislate to ban the charging of ground rents where they are a contractual term of the lease the Government will be liable to damages. I think it is more likely that they will cap the amount of the rent and overwrite any lease that specifies ground rents are to increase beyond the rate payable when the lease was granted. I expect that would be held to be workable

Reply to Amathyst re alleged backdating leases to evade legislation raises the issue of conveyancers duty to their clients.
One would expect market forces to operate. Conveyancers have a duty of care. The service they provide should include drawing attention to GR and the increases and explain what it means in real terms and advise clients not to proceed if it will be detrimental to them.
Too often conveyancers see £ signs and are negligent when their firm is ‘recommended’ by the seller/freeholder.

Reply to the comment left by Contango at 11/12/2023 - 17:20
The freeholder doesn't buy the flat, the leasehold buys a lease. The freehold bears no relationship to the value of the flat, but for a small investment the freeholder becomes entitled to take the leaseholder's flat, even if the mortgage has been fully paid off.

The points you make about what a freeholder does are exceptions, which a RTM Co will also do. As for 'managing' the managing agent, in many cases they are closely 'associated'.

You can continue trying to justify the reasons why freeholders should keep their cash cows, but you will never convince a leaseholder who is ripped-off to the tune of £000s, time, after time, after time, every year.

Maybe, the ground rent will be pegged to something more than a peppercorn, but all the conditions surrounding it must be removed, as must be the power the freeholder has over the leaseholder. But how would you address the issue where some leaseholders have zero ground rents, which puts them in a far better position when it comes to selling?

As for the grossly exaggerated compensation demand from the freeholders, I see no reason why the same calculation method as was used when Scotland ended its feudal system, shouldn't be used in England & Wales.

Reply to the comment left by Contango at 11/12/2023 - 19:10
They did it in Scotland. Or are freeholders in England & Wales somehow deserving of better treatment?

Reply to the comment left by NewYorkie at 11/12/2023 - 20:22
I would say that at the majority of leasehold sites there is no RTM. The majority of leasehold sites are as modest as a house converted into a couple of flats, going up from that. A ground rent per se is not a rip off, it was part of the bargain for the flat to be sold when the lease was granted. I agree that escalating ground rents look oppressive and Ive never been involved with those. I do not see that a zero ground rent is inherently more saleable than one fixed at say £100 per annum and if they are to disappear it is not just for the waiving of ground rent to be gifted to the lessee. I can remember many instances of negotiations where the premium payable was reduced by a few thousand pounds in exchange for the leaseholder agreeing a ground rent and hence do not think it proper for Gove to presume to interfere with those contractual arrangements.