Complex land laws exacerbate stressful experience of leasehold property sales
However future government changes to sector may tip scales towards leaseholders
QI am trying to sell my leasehold flat. It has around 90 years remaining on the lease and the ground rent is currently around £175 a year. This increases by £175 every 15 years, the next increase is in 2029. I accepted an offer but the buyers insisted that we get a deed of variation to fix the ground rent with no increases. The landlord refused, so the buyers pulled out. I’m really worried now that I won’t be able to sell my property. What can I do?
ABuying and selling properties is one of the most stressful experiences, and having a property entangled in the complexities of the England (and Wales’) complex land laws only exacerbates things.
Let’s start with something positive. I don’t believe you live in an unsellable flat. Yes, your lease length is shorter than what most property solicitors and estate agents would like – their preference tends to be 100 years or above. But there is still a decade until you reach the dreaded 80-year mark, which creates far greater problems for leasehold owners and future owners.
Anyone looking to increase the length of the lease when it is at less than 80 years will face paying thousands of pounds more to do so. This is because, at this point, the freeholder of the property is entitled to half of the ‘marriage value’, which is essentially the increase in value of the property generated by extending the lease length.
You have ruled out extending the lease, but there are obvious benefits for your sale. As you have owned the property for more than two years, you have the right to add another 90 years to your lease and move to a ‘peppercorn’ ground rent, typically £1 a year. The obvious advantage here is that no potential buyer can grumble about the length of lease or level of ground rent, and it might even boost your sale price.
Will Thomas, Senior Associate at BDB Pitmans and expert on leasehold issues, told me that this is certainly not the most onerous ground rent clause he has seen. You may have read about the plight of some leaseholders who have such punitive ground rent clauses – which sees ground rent doubling every 10 or 15 years. Apply that to your scenario, and your clause seems benign in comparison.in 2089, your ground rent will exceed £1,000 per annum. Will Thomas said that at this point, a long leasehold is converted into an assured shorthold tenancy (for properties in London, the tipping point outside of London is £250). This poses some risk to the leaseholder (and future owners), in that possession of the property can be returned to the freeholder if rent is not paid for three months.
The reality is it is extremely rare for landlords to start possession proceedings, and mortgage lenders tend not to be so worried about the Assured Shorthold Tenancy risk.he suggests negotiating with your landlord and asking it to carry out a deed of variation that essentially says that it won’t initiate possession proceedings. You should seek professional advice
from a leasehold lawyer. You can also purchase indemnity insurance, which will give the buyer’s lender the confidence that they won’t lose out.
Many of these seemingly perilous outcomes for your lease should become moot for the next owner of your property. Over the next year, the government is ‘to extend their lease to a new standard 990 years with a ground rent at zero. Ground rent caps will be introduced, marriage value will be abolished, and it will be easier and cheaper to extend leases or buy the freehold. The scales are going to be tipped towards leaseholders, and future owners will be the beneficiaries.