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Are skyrocketing ground rents bringing your house down?

11th May 2017

The history of ground rents can be traced back to Roman times when a ground rent, or solarium, was a yearly rent paid by the lessee of a parcel of land. Over the centuries, the laws regarding ground rents have been amended but the system we have today passed into common law from its Roman roots and has since been adopted by many nations whose legal systems were based on a British model.

Historically, ground rent levels ignored the value of the building standing on the land. They were structured instead to reflect a rent at which the land could be let for the purpose of improvement. This regime meant that ground rents, often set at around £100.00 per annum, were considerably lower than commercial building occupation rents.

Unfortunately the position regarding ground rent has altered somewhat over time – many developers and builders now charge high ground rents commensurate with corresponding council tax charges. In addition, many leases now include rent escalation clauses that allow ground rents to double every five or ten years until, very quickly, ground rent charges could escalate to a level that could hinder the sale of the lease itself. Indeed some national developers seem already to be heading in this direction, according to concerns recently raised about leases granted by such giants as Taylor Wimpey and Bellway.

So, do you have grounds for a claim if you think your ground rent has skyrocketed beyond reason?

Legally, no objection can be made to a lease that includes a periodic increase in ground rent if the increase is reasonable and is fixed or easily established. But if you believe an increase in your ground rent may materially affect the value of your property, this should be reported to your mortgage provider. Your lender will then decide whether the proposed increase could is having an adverse effect on the value of your dwelling and at this stage you may wish to call the George Ide property team on 01243 786668 to discuss a potential claim based on the details of your case.

Interestingly, one mortgage provider has already taken matters into its own hands: Nationwide has said it will no longer lend funds if the lease term is less than 125 years and the ground rent is higher than 0.1 per cent of the land value. Nationwide may be the first lender to react in this way but it is unlikely to be the last – more are bound to follow.

Nicholas Smith. Partner & Head of residential conveyancing

General, George Ide, News, Residential Property Conveyancing
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