Ground rent – Buyer beware!

A producer on BBC Radio 4’s flagship consumer programme ‘You and Yours’, contacted Leasehold Solutions yesterday to seek expert opinion on a breaking news story about residents of an estate in Wales who have seen their ground rent soar by an incredible 4,000%.

The Elba Estate in Gowerton contains a number of leasehold properties and for the last 25 years residents have paid the freeholder, Swansea Council, a ground rent of either £50 or £75.

The problem? The lease contained a ground rent review clause, and as a result of this rent review, the ground rent has now risen to nearly £2,500 a year.

Leasehold Solutions’ Chairman and co-founder, Alex Greenslade, was invited by the BBC to discuss the issue – and the wider issues surrounding the implications of ground rent schedules – live on ‘You and Yours’ today.

We passed a copy of one of these leases to our colleagues at Leasehold Valuers, who confirmed that the council did have the right to review the ground rent and that the figures proposed could be justified.

Alex confirmed to the programme that Swansea Council was broadly acting in accordance with the terms of the lease; the ground rent schedule and details of how it would be calculated are written in the lease, albeit largely incomprehensible to the layperson.

He also made the point that it may be possible for the owners of these properties to go back to their conveyance solicitor and ask why this clause was not made clear to them (if indeed it wasn’t). There may be some legal redress for the homeowners there.

Unfortunately, as well as suddenly finding themselves over £2,000 a year worse off, the homeowners have a bigger issue to deal with in the future as the ground rent element of a lease forms part of the calculation should the homeowner wish to extend their lease or purchase the freehold of their property. This onerous ground rent will mean that the homeowner will have to pay a disproportionate high cost to extend their lease or purchase the freehold of their house.This will certainly affect the market value of these houses and, sadly, may push some of these homeowners into negative equity.

Alex finished by encouraging those affected by the ground rent hikes to speak directly with the council, contact their mortgage providers for support and involve their local MP too.

So, the main thing to take from this news item is to pay attention to your ground rent and its future increments. If in any doubt ask for your solicitor’s advice – in writing – or have a chartered surveyor look at the figures for you. We can’t stress enough how important this is.

These homeowners in Gowerton were paying an innocuous £50 a year ground rent – just £1 a week! The fine print of the review schedule means they are not only faced with paying thousands of pounds per year, but face huge costs to rectify future lease length issues. Furthermore there is a real impact on the value of their homes. 

All of this because the small print of the lease was largely ignored or simply misunderstood.

We wish the very best luck to these Gowerton residents  – let’s hope that Swansea Council understand their plight… 

If you need advice on any of the leasehold issues discussed on today’s ‘You and Yours’ contact Leasehold Solutions on 020 3327 1177.