Here is landlord and tenant solicitor Mark Chick, of Bishops & Sewell, explaining that ground rents are a really dull investment and who would have thought they would make the front page of The Times.
“Ground rents will never ‘set the world on fire’ in investment terms …”
Tell that to Vincent Tchenguiz, Goldman Sachs, Rothesay Life, Frank Sixt, William Waldorf Astor, James Tuttiett, Steve Morgan, Jeff Fairburn, Peter and Nicholas Gould etc
More from Mr Chick in News on the Block here (well, it isn’t Investors’ Chronicle):
Next up comes Cassandra Zanelli, now with PM Legal Services, on Nationwide declining to lend on onerous lease terms.
She rightly points out that the public statement refers only to new build property.
In fact, mortgage lenders are markedly nervy over leasehold properties at present, and declining loans at the merest suggestion of games being played with lease terms and ground rents.
LKP is informed – by aggrieved buyers and sellers – of deals falling owing to mortgage lenders concerns virtually every day.
LKP is always interested in hearing more from Cassandra Zanelli.
Last year, when employed by Taylor & Emmet LLP she attempted to suppress LKP’s article on leasehold gameplayer Martin Paine, writing:
“I emphasise that our clients position is entirely reserved in respect of further action they may take relating to defamation, together with damages and costs, should you proceed to publish the article.
“I trust that no steps will be taken to publish the article until such time as my client has had opportunity to take advice … ”
A case of no Paine, no gain, eh Cassandra?
Q&A – RPI Lease | News on the Block
QUESTION I have an RPI Lease which has an annual ground rent more than 0.1% of the capital value which is now not approved of by Nationwide. Is this likely to cause me a problem in the future? ANSWER
And here is Phil Parkinson, legal director of JB Leitch debt collectors, offering some quite sensible advice on why leaseholders have to do what they are told by their landlord.
It is noteworthy in being one of the few emissions from JB Leitch that does not use the F-word. That is, F for forfeiture.
Related posts:
Police may need to investigate ground rent scandal, says Bottomley
Guardian’s Patrick Collinson welcomes Nationwide exploding the ground rent scandal
Have lenders refused mortgages on doubling ground rent properties?
Sector foxes warn that changing leasehold will be ‘dangerous’. But for whom?
Ground rent scandal risks becoming full-blown crisis as loans are refused on blighted homes
The Sun attacks ‘fatcat’ housebuilders with inflated fortunes thanks to Help To Buy
I was looking through an auction catelogue of the 1920′ and ground rents typically in south London were around £2.-£5 per annum on suburban villas . Whilst they may seem nominal by today’s standards there were resperetive of around a weeks wage and insime cases around 15% of the yearly rent
So by today’s standards the £350 per annum rent which is often created to ensure that if the rent is in arrear a landlord can start action quickly seem if anything less than it was
Doubling was not applied to ground rents until about the early 1970’s in response to wild inflation to help repair the damage done by inflation
But doubling is but a wild guess as to future inflation and far better is the Nationwides proposal that rents be linked to the RPI .
But the important point that the Nationwide fails to suggest is that the rent should fall in times of deflation. Many think it unlikely but with increasing automation and cheap labour in developing countries and the destruction of middle class jobs deflation could well be on the cards so a fixed rent could become onerous in time
All very interesting, Stephen. But remind me … what are ground rents actually for?
It’s part of the consideration for granting of the lease. If two identical properties are offered with a peppercorn rent and the other with a rent of £250. A logical purchaser would opt for the property with a peppercorn. Therefore the ground rent compensates the landlord for taking a lesser sum
I have suggested the way to deal with ground rents is for the NPV to be calculated using a prescribed discount rate and this to be clearly shown on the prescribed clauses in the lease say Box 6.1
The root of the issues raised by Louis Burns all stem from the failure to know what the NPV of the new ground rent terms are. Had the NPV of a 10 year doubler been calculated using 6% discount rate then the sum thrown up would have made buyers aware of the pitfall of the deal .
The ground rent is effectively the repayments on a loan. The loan equating to the reduction in the price of the property for having a ground rent
The comsiner credit act requires an APR to be calculated and I am suggesting something similar except the rate is prescribed and it is the NPV that is calculated
What I am proposing is very simple and easy and would make non statutory lease extentsoons possible as the exact terms of the new rent will be clearly shown and it’s value calculated so the two alternatives can. E quickly and easily compared
the government has hinted that this may be a way forward on leasehold where the landlord can clearly demonstrate that by taking a lesser sum and imposing a ground rent discounted at a precribed rent may be acceptable
Stephen, you seem to be “smoothing over” things and trying to convince everybody that these modern day onerous leases are acceptable and workable.
Also do not forget it is not only GR charges that are wrong, what about all the other charges a leaseholder can be forced to pay..
There is a simple bottom line here that, except in extenuating circumstances, there is NO need whatsoever for HOUSES to be leasehold, other than the greed of these builders. End of story.
Yes, yes, I know there is no law against it, but for gods sake, what sort of morals have these people.
It is such a disgrace what can happen these days just because we have no law (yet).
I do not need to repeat what simple way out needs to take place, it is being shouted out by nearly every poster on this site Stephen, excluding you
In a free market economy if a vendor wishes to dispose of an asset then he should have freedom to dispose of it in terms he decides PROVIDED that this terms are crystal clear and transparent and that those buying should not be coerced into accepting those terms.
So a landlord should, if he so wishes, offer a ground rent that doubles every 10 years HOWEVER the full financial cost would need to be clearly set out and if it was then the only takers would be those paying tens of thousands less for the property. There will be some buyers who may prefer to receive a very big discount now in return for paying back later.
All the abuses about consent fees etc can easily be remedied by having prescribed charges set in a statutory instrument
The idea that to solve the abuses shown to have arisen in leasehold is to abolish it is wrong. It needs correction and the ideas I have suggested would address those concerns
The danger would be that existing leaseholds would be seen as an inferior structure and prices in those properties would then be adversely effected.
Nice try Stephen, bit no cigar…. Leasehold must and will be abolished. It is clear to me and possibly others on this site that you are in the ‘Business’ called property.
Might I add that the “Ideas” you have suggested do not address any of my concerns.
They do address your concerns
Your first concern is onerous ground rent and the requirement to show the NPV of the rent as part of the overall consideration would ensure that onerous ground nets can’t be slipped in
Your second concern is to do with admin charges and again these would be controlled by having them set by statutory instrument
The abolition of leasehold would require huge amounts of compensation to be paid and vast amounts of legislation. Based on the governments background notes on their consultation process is not what they are seeking. It is far better to put forward solutions that could be implemented easily and quickly. You also avoid creating an inferior asset class of leasehold where the owners can’t or are not interested in converting away from leasehold
Oh dear Kim, I think Stephen is the new”plant”, sorry, I mean PR smoother for all the fatcats that have been exposed
Trevor, I am inclined to agree with you. He is rather transparent . I don’t believe MI5 will be giving ‘S’ a call anytime soon….In future, if I require ‘Stephens’ opinion on leasehold I will give it to him. ( Geddit)
I do not agree with you that “Huge amounts of comp” would need to be paid. Where is your evidence that that will be the case? Just because slave owners were paid compensation when they had to cease treating fellow humans as chattel does not mean that the Spivs and wanna be ‘Barons’ who treat Leaseholders as cash cows should rake it in when they are forced to cease their nefarious practices. As far as ” vast amount of legislation ” being required , well, so be it. You say it is far better to implement change “quickly and easily”,better for who- you? Leaseholders will fight for the abolition of leasehold and we will get it.
In addition Stephen, when I tell you that your ‘Points’ do not address my concerns I mean just that. You must realise that your comments prove to me that you are a ‘One trick pony’.
To clarify my post above:
If changes are implemented ” Quickly and easily’ as recommended by Stephen, I believe any sensible leaseholder will realise that the changes will be no more than ‘ Bread and Circuses ‘Leasehold was abolished in Scotland and must be abolished in England. All the wannabe Dukes of a Westminster are heading for a dramatic fall. ABOLISH LEASEHOLD. Fini.
Stephen, I think you need to find another forum to post your “recomendations and thoughts”.
This site is all about abolishing leasehold.
I
I have read these responses and I can see Stephen has offered sensible ideas moving leasehold forward, particularly as it appears it will not be abolished any time soon (if at all). I realise that some buyers don’t even see the lease (unacceptable) and many of them are written in far from plain English. Some combine legalese with over 50 pages making it hard for anyone but the most experienced conveyancer/solictor to find the significant parts, even with the prescribed lease clauses being at the front. However, by buying a lease, leaseholders entered into a contract and therefore what thought has been given to those leaseholders who are demanding they get their freeholds? They surely can’t expect them just to be handed over. What law would be used? Contract law? What about the RMC’s who use ground rent income to manage their companies, having used legislation to create them? I could go on but as one post pointed out, this site is all about abolishing leasehold for which I wish it luck not least because I personally favour Commonhold. And no, I’m not a big player in the leasehold market just a leaseholder working with the system and getting as much free information out there as possible.
Re; Returning freeholds.
It will be interesting to see If the contracts entered into by the leaseholders are actually valid. I am sure a clever silk should be able to prove the contrary. I believe that the developers and the murky individuals who are building ground rent portfolios would do well to return the freeholds licikty split and think themselves fortunate their collars are not being felt. In my view they are no more than a Bunch of Rogues in Brogues! Enough Already!
Hello Miss SC.
Obviously being an associate member of IRPM you will of some knowledge of what’s wrong with the totally flawed leasehold system.
In all my years of experience I would never imagined leases of the type that have been produced ever happening to houses.
You say many leases are written in far from plain English. Some combine legalese with over 50 pages making it hard for anyone but the most experienced conveyancer/solictor to find the significant parts – well with no disrespect, that’s NOT the purchasers fault, it’s the solicitors if onerous clauses are not spotted, but why did the builders introduce them anyway, greed?.
You say by buying a lease, leaseholders entered into a contract – that’s true but it is clear the true facts and consequences were not explained to thousands in PLAIN ENGLISH.
You say leaseholders are demanding they get their freeholds and they surely can’t expect them just to be handed over – why not, the majority are demanding what they were promised in the first place, which was to buy the FH within 2 years at costs of less than say £5,000.
There are over 6,500 members on the Facebook site alone that are in serious trouble through no fault of their own. They can’t all be liars when they say full terms etc etc was not explained in plain English..
Why did the builders “recommend” particular solicitors. I/we don’t need an answer to that
Why in the first instance did these greedy developers write up such difficult to understand leases, probably knowing they would sneak through the system I guess.
Do you think it is right for the taxpayers funded scheme “Help To BUY” be used to pay for a LEASE (a glorified rent book) In actual fact the scheme has helped builders to sell, and at inflated prices.
The bottom line is that, except in extenuating circumstance, there is no need for houses to be anything but Freehold – simples.
Moving forward, all multi occupancy buildings (flats/apartments should be Commonhold.
Hi Trevor,
I certainly do. I’ve had a double whammy in that I work within the PRS as well and 1 flawed sectors is bad enough but two?? Certainly agree with the points you raised in your post!
Hi Sharon,
Thank you for you response. You certainly do have a double whammy.
Brings back memories.
I remember writing to IRPM and PRS in Jan 2016 complaining about a certain gentleman who was a member of both giving full details etc of his horrendous deeds.
Never heard a thing from either club. It was a real “Paine” with the effort I put in.
However, the person in question has since resigned from IRPM.
Hope all goes well
Trevor let’s face the fact tat these useless self regulatory bodies – AIRPM/ ARMA et al, are about as much use as a eunuch in a harem…..
Meant IRPM. Still utterly ineffectual.I believe that All individuals in the property management racket need to be vetted
to ensure they have no criminal record ( Fraud/.Theft),and must be strictly regulated by legislation. Alas, the property biz tends to attract a certain ‘type’.-just saying……..
Trevor , I am comforted that SC agrees with the very valid points made in your excellent post and presumably she’s agrees that the shafted Freeholders should ” Just have their freeholds handed over”. The Freehold’s are rightfully theirs. Slowly slowly catchy monkey………????????????????
I agree with all your above mentioned information related to leasehold sector.