Leaseholders in Gallions Reach, east London, are seeing their ground rents more than double owing to 20-year revisions as stated in the lease.
This is, of course, excellent news for the punters in the Long Harbour fund, who own the Abacus Land 4 freeholds anonymously and offshore, and who appear to be some of the richest people on the planet.
(Long Harbour claims its investors are mainly blameless pension funds, but there is absolutely no need for complex anonymity for that, still less offshore smoke and mirrors.)
It is markedly less good news for the leaseholders at Latitude Court, which was built in 2007, with the leases commencing in 2003: another example of tiresome gaming by developers, which stuffs their paying customers and makes the freehold asset, with its 20-year ground rent revisions, more attractive to investors.
So they have just seen ground rents increase from £350 to £711, or an increase of more than double (103%).
It was a point routinely made by LKP trustee Joanne Darbyshire, who is a co-founder of the National Leasehold Campaign, at the outset of the 10-year doubling ground scandal that RPI indexed ground rents could be far more onerous if inflation took off, as it has done.
The Competition and Markets Authority deemed 10-year doubling ground rents were unfair:
But it made no mis-selling ruling to close down the aggressive RPI clauses in leases, which – as in this case – are worse.
A leaseholder Rowena Evans said:
“Abacus Land 4 Limited provide absolutely no service to the leaseholders. For example, during the ongoing fire safety crisis, us leaseholders are paying for huge increases in service charge due to the costs of waking watch and insurance.
“Abacus Land remained silent and did not financially contribute. When we were facing large bills for cladding remediation – fortunately now covered under the Building Safety Fund – Abacus Land did not offer a single word of support or a penny of finance.”
Unfortunately, property values have not increased with inflation but stagnated as a result of the Grenfell disaster and its impact on saleability in the wider leasehold market.
Ms Evans says a one-bedroom flat at Latitude, originally sold for £250,000 in 2007, is listed for sale at £260,000, but she believes will sell for less.
Two sales on the Land Registry that took place after the Grenfell fire in June 2017 are shown registering losses on the orginal purchase price of £94,000 and £25,000.
Ms Evans says: “The ground rent is the same regardless of size of flat. Therefore, two-bedroom flats have a ground rent of £711 but this is a much lower percentage of the value of their property. Assuming a sale price of £260,000, my ground rent is 0.27% of property value: so along with a depreciating asset and the lease term decreasing, we will not be able to sell to anyone who needs a mortgage.
“Buying this flat was the worst decision of my life and a constant source of stress. I would love to sell the flat and walk away from it.”
Related posts:
Tory MP Stephen McPartland shames Long Harbour / Adriatic Land into dropping doubling ground rent leases
Tchenguiz, Astor and offshore freeholders like Abacus Land 4 Limited should PUBLICLY meet over Grenfell cladding, MPs told
McCarthy and Stone says ground rents essential, but why sell freeholds to murky Adriatic Land?
Last year: £64.8bn leasehold properties sold. £13.7bn was new-build. Leasehold house numbers double. Developers make £300-500 million a year from ground rent sales
I had to spend £14,000 to change double ground rent to RPI at Ausden Place. But will I get compo from Taylor Wimpey?
Sell-out run for ‘Fleecehold’, the play telling the story of the founders of the National Leasehold Campaign
The ground terms are set out in a contract/lease, and the leaseholder would have been made aware of them by their solicitor and valuer BEFORE entering into the contract/lease.
When inflation is in our economy, everyone pushes to increase their costs. Employees will strive to obtain salary increases to repair the damage inflicted by inflation. Those in receipt of the state pension will see their pension rise by inflation. Up until recently, incomes have increased by more than inflation therefore the burden that a ground rent linked to the RPI should in time become less burdensome
The ground rent was part of the overall consideration the developer sought when granting the lease. Indexed linked ground rents invariably have an entire schedule in the lease devoted to its calculation .
What costs does the Freeholder incur in relation to ground rents when inflation increases?
The payment of ground rent is an income stream for the Freeholder and nothing more, no goods or services are received in exchange for said payment it is in fact money for nothing.
A great deal has already been achieved by way of reform in this Industry sector in the past several Months, when compared to past Decades. I anticipate more good news to be announced during the Kings Speech on the 7th November 2023.
Any Law can be repealed, amended or replaced at the will of Parliament, and it is reported that a majority of MP’s would support reform of this Industry sector. If that were to happen the Freeholder would be entitled to seek redress in Court.
I believe it would make for a fascinating case, in one corner the Freeholder representing a dozen players with a vested interest in maintaining there income stream under any circumstances, and in the other corner circa 4,000,000 + Leaseholders and their siblings, family and friends. I wonder how difficult it would be for a High Court Judge to decide on the merits of a case that might hinge on some ones Human Rights?
The charge of ground rent is absurd it is money paid in return for precisely nothing.
The majority of Leaseholders that I know had absolutely no idea what they were letting themselves in for when they purchased the long Lease to their Apartment, in one specific instance the purchaser of a long Lease had not been told about the annual Service Charge Demand, he was devastated when I explained to him the financial cost and the ever increasing Year on Year increases. I remember being told that “The Service Charge can never go down because XYZ had to make a profit” No where in my Lease is the word profit used in relation to anything.
During the process of purchasing the long Lease to our Home we never actually met our Solicitor in person, it was all carried out properly over the phone, the whole Legal process took around ten to fifteen minutes.
I believe that to fully understand the contents of a Lease or the Freehold / Leasehold system racket, you would in fact have to be a top drawer Solicitor or other Professional with a lifetime of Industry sector experience, which I have not.
It really is about time that this Industry sector is abolished and replaced with Commonhold for those that wish to adopt it.
The developer when selling the flat sought a premium and a regular stream of income for the property. This deal was set out in the lease and it is for the buyer to either accept, negotiate or reject the deal. The buyer being represented by a solicitor and a valuer, with the transaction be negotiated over two to three months. The concept of seeking a premium and an income stream having been the standard practice for a couple of hundred years
Having agreed to those terms by signing the lease/contract to then later on advance the following arguments that the rent should be cancelled or reduced seem somewhat weak
Any attempt to cancel or reduce ground rents will inevitably be challenged in the courts all the way up to the European Court of Human Rights. Arguments advanced to date so far are somewhat weak and rather naive
1) It was all written in !legal speak!
2) The developer is getting two bites of the cherry
3) It is part of an old feudal system
4) Neither the solicitor or the leaseholder had any idea what they were signing up to
5) The solicitor acting for the leaseholder did not do their job properly
6) Had no choice but to accept the terms
I refer you to the above comments which were gained from first hand, relevant, factual up to date experience (s), in other words the “as is” and not what others try to portray as the idyllic fantasy world of Freehold – Leasehold where everything is perfect and has stood the test of time so why change it?
From time to time I talk with industry insiders who are equally annoyed and irritated with the current situation and want change for the better. Consensus suggests that the practices of specific industry players is detrimental to the whole Industry and is bad for business in terms of growth and profits.
Those better qualified than I can envisage the opportunity for substantial market growth given the right environment, and repair to the current highly toxic reputation of this Industry, and that will not happen any time soon without the introduction of Commonhold or radical short term reform.
My lease was sold to aviva without the knowledge of other flat owners or indeed not given the right of refuse in the first instance, my solicitor did not advice me of the implications of this when exchanging contracts.
Can I Sue my solicitor for this. No new lease was ever sent to me
It may be the case that the developer had agreed with Aviva before selling the flats that when the flats were all sold that the freehold would be sold to Aviva
If that was the case then no notice under Section 5 of the Landlord and Tenant Act 1987 would need to have been served
Your solicitor you instructed was to advise you on the terms of your lease and the implication of owning a leasehold property
Unless your instructions when appointing your solicitor were very widely drawn I doubt it included giving advice on rights of first refusal
All grist to the mill to get this doubling ground rent issue sorted – its disgusting that Gove bottled the challenge and I have told him there are probably 300,000 votes they wont get at the next election… can LKP not start a list of good guys/ bad guys on this issue to name and shame those that are preventing many many leaseholders moving on because mortgages are not available to any purchasers?
Everyone was banging on about getting doublers converted to RPI a few years back until inflation has now reared it ugly head and 12% inflation! 7% was the figure for a doubler over 21 years.
Be carefull for what you wish.
Rule of 72 – fairly accurate
At 7% money doubles in 72 / 7 = 10 years
At 10% money doubles in 72 / 10 = 7 years
At 8% money doubles in 72 / 8 = 9 years
For more info https://www.investopedia.com/terms/r/ruleof72.asp
Churchill Retirement RPI ground rents very much the same.
Over £700 as at four years ago.
Not due to go up for another three years yet, but with RPI increase added already calculates to over £900. So almost certainly will be well over £1,000!
For residential Mobile ( Park ) Homes, the inflationary index applied annually to pitch fee
( ground rents) has this year been changed from RPI to CPI . See the link >
https://www.legislation.gov.uk/ukpga/2023/11/pdfs/ukpga_20230011_en.pdf