Excellent article in the Eye:
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The lessee should be offered two options the first is a premium along with a ground rent of £10 and the other is a lower premium with a higher ground rent
So the flat may be worth £199,800 with a groundvrent of £10 per annum and the other option may be £190,000 but with a ground rent of £300 per annum moving in line with the RPI every 10 years . The discount rate to be in line with a prescribed rate set by the government
Then the lessee has two choices can take advice and opt for what best suits them having taken professional advice
Given the miss-selling, and private equity speculation in this sector, why allow new ground rents at all?
Provided it is made patently clear what the terms are and disclosed correctly then The consumer can have the option of paying as given in the example above £10k less in return for paying £300 per annum rising or falling in line with the RPi – for certain types of purchasers this may be attractive
I would add that in offering such terms the provider in my view should be regulated by the consumer credit act because as you will see it is a form of loan – had such regulation been in place then the 10 year doublers would never have been granted as the NPV of such deals would have set off the alarm bells
No Stephen,
The price is the price is the price. If a property sells at £300,000 so be it. the purchaser pays the £300,000. End of!
The purchaser in a free market economy such as ours should have the right to negotiate and accept differing terms provided those terms are correctly and fairly disclosed
It is the job of government to ensure such terms are so disclosed and to help educate people so they can understand them and ensure no abuse takes place
Therefore there are circumstances where a buyer may wish to take a “loan” in return for a reduction in the premium. The loan of course is the imposition of a ground rent
In future, we are going to need to create shared equity models in housing: unless we think society will be contained by completely depriving the young and talented from a material stake in it.
This, in fact, was and maybe is the view of the British Property Federation: the young should all rent, it said during the boom, when resi prices in Chelsea rose 34% in a year. That leads to events like 1789.
Ground rents don’t play a part in shared equity models, and anyway are simply speculations by financiers these days. Pension exposure in ground rents is not very high.
Why isn’t Jeremy Corbyn running with this?!
The government should deliver on introducing legislation to reduce ground rent to peppercorn. Ground rent at peppercorn would help to accelerate the end of leasehold. Leasehold is an outdated system stacked against the leaseholder which needs to be abolished.