Ground rent

If you have purchased a leasehold property, there is a risk that your lease may contain unusual and onerous ground rent terms.

Some onerous ground rent clauses can result in the amounts you must pay annually rising exponentially over the decades to the point that they reach many thousands of pounds a year. Ground rent clauses of particular concern are typically those where the ground rent doubles every ten years. These clauses started to become more widespread in leases from about 2006. A number of major developers, including Taylor Wimpey, adopted them as a means of enhancing their profits at the expense of the leaseholders. In many cases the ground rent will double just five times by which time it will have risen from say £300 per year to £9,600 per year. In more extreme cases the ground rent will double every ten years for the entire length of the lease by which time it may have risen from say £300 per year to say £614,400 per year (or more depending on the length of the lease).

In response to the upsurge in ten ear doubling ground rents and in recognition of the toxic effect that they can have on leasehold homes, in 2017 the Council for Mortgage Lenders Handbook was revised making it clear that some lenders will no longer lend on property if the ground rent exceeds 0.1% of the value of the property, or if it doubles more frequently than every 21 years. Previously ground rent that doubled say every 15 years would have been marginal but acceptable (albeit regarded as very steep) whereas now a leaseholder who owns a property with ground rent that doubles every fifteen years may well experience problems through no fault of their own.

Escalating ground rents can make it very difficult to sell your home, slashing its value and potentially putting you into negative equity. Such ground rents may also make it difficult, if not impossible, to obtain a mortgage, or re-mortgage because many lenders now refuse to lend on leases with this type of doubling ground rent clause.

While the Government is proposing to make legislative changes to outlaw this type of exploitation of leaseholders occurring in the future, many thousands of leaseholders are still struggling with the consequences of existing leases that contain onerous ground rent clauses.

However, there are options open to you if you find yourself in the unfortunate position of owning a leasehold flat, or house, which has been blighted by onerous ground rent.

If your solicitor failed to advise you properly when you purchased the property, you may be able to seek compensation on grounds of professional negligence.

Meanwhile, Taylor Wimpey has provided a £130 million fund to cover the cost of varying the ground rent clauses for homeowners who purchased leasehold properties direct from the company.

What can I do about rising ground rent on my leasehold property?

If your ground rent is unusual and onerous (for example it doubles every ten years) and you were not warned of this by your conveyancer, or solicitor, at the time of purchase, you may be able to seek compensation on the grounds of professional negligence.

You may also be able to negotiate a deed of variation to alter the terms of the lease. Some housebuilders, such as Taylor Wimpey, have schemes in place to cover the cost of varying the terms of the lease, so that instead of doubling every ten years the ground rent is instead linked to the Retail Price Index. Whilst this conversion should reduce the amount of ground rent payable over the next forty years or so (assuming the change in RPI stays at present levels), in the longer term it may mean that overall more ground rent will be payable. Our view is that lessees should convert to RPI because it should make extending the lease, or buying the freehold and getting rid of the ground rent altogether much cheaper, however, professional advice should sought from a surveyor.

What is ground rent?

If you own your property on a leasehold basis, it means that you do not actually own the land it sits on. In most cases you will be required to pay the landowner (freeholder) ground rent in accordance with the lease agreement you will have signed when you purchased the property. Ground rent can vary from ‘a peppercorn’ to many hundreds, or even thousands, of pounds. Traditionally ground rents would be for a nominal amount that would increase by a small amount every 25 to 33 years. More recently developers and freehold owners and investors have seen ground rents as a means of generating substantial amounts of income and capital through significantly higher ground rents that also escalate rapidly.

What is an onerous ground rent clause?

An onerous ground rent clause is one in which the ground rent levied on a property rapidly increases over the years at above the rate of inflation. Typically it will double every ten or fifteen years, although some of the most extreme examples are linked to ‘rentable value’ or a percentage of the sale price of the property.

Can I sell my home if I have an onerous ground rent clause?

It may be very difficult to sell your home if you have an onerous ground rent clause in your lease because potential buyers are likely to be deterred by the rapidly increasing costs. It is likely that only a cash buyer would be able to purchase your property as a mortgage company would be unlikely to lend on such a leasehold property. As a result some flats with this type of lease end up being sold at auction for far less than the price paid. We have seen flats which were bought new for £112,000 being sold at auction for less than £50,000 because they have onerous ground rents.

You should seek immediate professional advice if you discover that you have a leasehold property with an onerous ground rent. It is important not to delay because there are time limits for bringing solicitors negligence claims and also the longer you delay the more it will cost to get a variation of your lease to remove the ground rent.

What is a deed of variation?

Put simply, a deed of variation is a legal document to alter the original terms of your lease agreement with the freehold owner of the land. It can be used to change the ground rent so that it ceases to rapidly increase. It can also be used by some freeholders to increase the ground rent so you should always ensure that you obtain legal advice before agreeing to any variation of your lease.

Did you buy a Taylor Wimpey leasehold property ?

Does your ground rent double every 10 years? 

Legal Advice for Taylor Wimpey Homeowners

If you have purchased a leasehold property from Taylor Wimpey and are now trapped by onerous ground rents, we may be able to help.

The housebuilder recently hit the headlines for its onerous ground rent clauses which see ground rent doubling every 10 years in what has been dubbed the “ground rent scandal”.

I bought my home from Taylor Wimpey and still own it

Taylor Wimpey has now provided a £130 million fund “to alter the terms of the doubling lease to materially less expensive ground rent review terms, with the group bearing the financial cost of doing so.” This is known as the Taylor Wimpey Ground Rent Review Assistance Scheme.

Doing this will require a legal document known as a Deed of Variation. You will require your own solicitors to act for you and if you qualify under the terms, the Taylor Wimpey Scheme will make a fixed contribution towards your legal costs.

Our specialist solicitors are experienced in lease and ground rent variations and are looking after a large number of the adversely affected owners.

I bought my Taylor Wimpey home from the original purchaser

In these circumstances, you may not be eligible for the Taylor Wimpey Ground Rent Review Assistance Scheme. However, we are happy to work with clients to negotiate Deeds of Variation with the freeholder. Additionally if your freeholder is unwilling to negotiate, we can also assist you with a formal statutory lease extension, or purchase of the freehold, under the Leasehold Reform, Housing and Urban Development Act 1993.

We have been successful in recovering the cost of getting rid of onerous ground rent clauses from the insurers of the conveyancers who failed to advise you properly when you bought your leasehold property. You may have grounds for a professional negligence claim against the solicitors that acted for you in your purchase, if they did not make you aware of an onerous ground rent clause.

Complete the form below today, and a member of our team will be in touch to discuss how we may be able to help you with a Taylor Wimpey Ground Rent Variation:

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