Ground rents and laws around leasehold property in the United Kingdom
RAYMOND HAYES Solicitor & Chairman , Barton ’ s Solicitors
I
' ve heard that there are some issues surrounding what are called ground rents in England which makes some properties unsellable-what is happening ?
Unlike South Africa , much property is leasehold and because of affordability many buy to let investors have bought leasehold flats . The best leases are for 999 years at a peppercorn rent .
Unfortunately , some leases are shorter but also have problems because of ground rents . Legislation was passed last year to prevent any new ground rents being created but this doesn ' t help with pre-existing leases where the ground rent is or could be £ 250 a year outside London or £ 1000 a year in London .
The reason for the problem is an obscure provision in the English housing acts meaning that a long lease at a ground rent is capable of being an “ assured tenancy ”. If the rents are above the thresholds and a tenant is more than 3 months late in paying the ground rent the landlord can request the termination of the lease and this is a mandatory ground for repossession .
There are three possible solutions pending any possible change in the law : a . a deed of variation with the landlord either reducing the ground rents or obtaining confirmation the landlord will not enforce the mandatory ground - there is nothing to compel the landlord to agree this ; b . where a property is mortgaged ( bond ) it is possible to obtain a relatively cheap insurance policy but it is for the benefit of the lender c . only ; or use legislation which is available after 2 years ’ ownership to obtain a 90 year lease extension at a peppercorn rent-this is more expensive but the process is guaranteed and the premium is in accordance with a statutory formula . d . Professional advice is always required when this type of situation is encountered .
ENQUIRE NOW info @ rei . co . za
16 MARCH / APRIL 2023 SA Real Estate Investor Magazine