One of the UK’s best-recognised mortgage lenders is taking steps to prevent borrowers from encountering ‘unfair’ leasehold terms and rising ground rents.
In recent days, Nationwide has announced changes to its valuation policy for new-build leasehold properties – which means that the lender will now only consider offering loans to buyers purchasing flats with leases of 125 years or more, or houses with leases lasting 250 years or more.
The news follows scathing media reports in recent weeks criticising the common practice of rising ‘rip off’ ground rents.
In April, BBC News reported that a worrying number of leasehold property owners are getting “caught out” by clauses which allow property companies and freehold owners to “dramatically increase” ground rent fees over a period of time.
In some instances, ground rents were found to have doubled every decade, meaning that an annual fee of £300 would rise to £600 in ten years’ time, then again to £1,200 in 20 years’ time and so on.
Nationwide has said that, under its new terms, the ground rent must be ‘reasonable at all times’ and that such ‘unreasonable multipliers’ will not be allowed.
Instead, the lender has proposed that price escalation – if any – should be linked to a verified index such as the Retail Price Index.
It adds that the maximum acceptable starting ground rent on all new-build properties should be ‘capped’ at 0.1 per cent of the property’s value.
Robert Stevens, head of property risk, data and strategy at Nationwide, said: “As a mutual building society that looks to protect its members, we have decided to make changes to the way we value new build properties on a leasehold basis.
“We are doing this to address the practice of using leasehold tenure where this is unnecessary, particularly for new build houses, and to ensure that onerous leasehold terms, including ground rents, are properly considered and controlled in order to safeguard our mortgage members”.
Carter Lemon Camerons LLP (CLC) solicitors is a City law firm which provides legal services with a personal touch to both landlords and tenants. Unlike many City practices we are happy to act in smaller private legal matters, bringing the same care and consideration as we do to large commercial matters. For more information about our conveyancing and other residential property services, please contact Prodromos Shakallis or telephone: 020 7406 1000.