A man who purchased a flat has discovered that his ground rent would cost £1.3bn over the course of the whole lease.
Buying the flat for £150,000, Luke Mosson thought he’d be paying just £250 worth of ground rent per year to the owner of the leasehold.
However, his contract contained a clause which meant that every 10 years, the cost of the ground rent would double.
Over the whole duration of the lease, 190 years, the rent would total £1.3 billion.
Terms like this have recently been highlighted as a problem for those with leaseholds, often inserted when the freehold is sold on to a third party company. It can make properties almost impossible to sell as well as having an impact on value.
Expressing his frustration in regards to the additional contract term, Mr Mosson stated: “I’m very aware that this clause was inserted into the contract when they extended the lease for no other reason that his [the freeholders’] financial gain. There’d be no reason he needs to do this. It’s purely as a mechanism for him to make more money.”
Also commenting was Beth Rudolf of the Conveyancing Association. She stated that conveyancers should be aware of the impact that these clauses can have in order to effectively advise clients.
“What we say to all the members of the Conveyancing Association is make sure that if you’re advising a client on these clauses, because they can be so tricky, that you run the calculation and that you are entirely sure as to what that calculation is. Because when you sit down with that, and spend some time actually looking at it, it becomes very clear that this is just an attempt to dupe people into a very uncomfortable position.”
Potentially having serious implications for owners, the recently published Housing White Paper has proposed plans to tackle issues such as unscrupulous landlords and problematic leasehold clauses such as the one is this case.
How this will be dealt with in practice is yet to be seen.
