The private equity clientele who buy into the Long Harbour freehold fund appear to have bought a pup at a site in West London where the ground rent actually reduces on review.
Ground rents at the nine-flat site start at £250pa, but are reviewed every 25 years, which falls due in 2024.
In what is almost certainly an error – common to all the leases at the site – the ground rent changes to 1/3004 of the capital value of the flats.
The figure is actually hand written into the leases, and the extra “4” added at the end presumably in error, and possibly echoing the review date of “2024”.
But the effect of this is that the ground rent actually falls, given that the flats are selling for around £430,000.
The intention was almost certainly 1/300th, which would bump the ground rent up to £1,433pa: an onerous ground rent that lenders these days won’t touch, but certainly unexceptional in the Long Harbour portfolio.
Leaseholders contacted LKP because they are selling their flat.
Astonishingly, the factory conveyancing legal firm acting for the buyer has misunderstood the lease and asked the vendor to seek a deed of variation from the freeeholder.
The solicitors write:
“The ground rent increases are such that our clients lender may not lend, and even if they do our client should be advised not to proceed. We require a deed of variation to preferably a level rent, or which limits the rent to 0.1% of the property value, limits increases to no more than inflation, and with reviews no more frequently than 5 yearly. Please ask the landlord for a variation.”
The sellers contacted HomeGround, which administers the Long Harbour freeholds, and they are more than happy to vary the lease in their favour … and charge for doing so.
The costs would be HomeGround’s Fee of £300, plus solicitor drafting fees of £300 – £600 + VAT, in order to set the £250pa ground rent to rise with RPI.
LKP’s advice is obviously to do nothing of the kind and for the sellers to inform the buyers that that they may wish to review their solicitors.
Our further advice to all the leaseholders is to enfranchise the block in 2024 on the basis of the new lower ground rent and get the Long Harbour freeloaders out of their lives altogether.