March 2022

40
Wanstead Village Directory
Ground r£nt grounded
Derek Inkpin from local solicitors Wiseman Lee explains why a new law
is a step in the right direction to ending the ground rent scandal in the
world of leasehold property
Leases of flats sold say 40 or 50 years
ago were normally for 99 or 125 years,
at a fixed ground rent of £50 to £100
each year. In the past few years, however,
land developers of both leasehold houses
and flats have started to include ground
rents of between £250 and £500 per
annum. What is worse is that some leases
now have rent review clauses, which
allow the ground rent to double say every
10 years.
If a ground rent of say £250 a year doubles
every 10 years, a leaseholder would be obliged
to pay £16,000 each year after 60 years. Not
only would a flat owner find that amount
unmanageable, but the flat, if let, would have
a rent expense that could not be passed on to
the tenant.
If you had bought the house or flat and did
not appreciate the problem of rising ground
rents, and your solicitor also failed to notice
this, your mortgage lender most certainly
would not lend in such cases, and this at least
would stop a purchaser buying a property
that would be pretty much worthless on the
open market.
All this may be familiar to you because in
recent years it has hit the headlines as a misselling
scandal. Leaseholders saddled with this
problem may try to purchase the freehold to
overcome their defective lease or alternatively
try to agree amendments to their leases, but
these potential solutions are likely to come
at a significant cost. If solicitors fail to notice
these problems then they are likely to face a
successful claim against them for negligence.
Being stuck with an unsellable flat or house
(much like the cladding scandal) is, of course,
the stuff of nightmares. As a leaseholder, you
will feel trapped due to unfair ground rent
charges, and claiming against your negligent
conveyancing solicitors may take years to
resolve.
The Leasehold Reform (Ground Rent) Bill –
which received Royal Assent on 8 February
– seeks to tackle the unfairness of these
ground rent situations. The government has
committed to legislate to restrict ground
rents in new leasehold houses and flats to a
peppercorn rent (of no value). In addition,
loopholes in leasehold law will be addressed
to improve transparency and fairness. The
new law will allow leaseholders of houses
and flats the right to extend their leases as
often as they wish at a zero ground rent for a
term of 990 years. Just in case landlords try to
impose administration charges instead of a
peppercorn rent, this is prevented in the bill.
Although the new law will only apply to the
grant of new leases, it is a step in the right
direction after a scandal which has gone on
for far too long.
Wiseman Lee is located at 9–13 Cambridge
Park, Wanstead, E11 2PU. For more
information, call 020 8215 1000
To advertise, call 020 8819 6645 or visit wnstd.com