J
JessyC
New Member
Hi guys,
We are first time buyers going through buying a leasehold flat in London (the building is around 5 years old) so not very sure whether this is a reasonable clause or not. So far we found more information on doubling ground rent. We are a bit cautious of how ground rent will increase for this leasehold and am wondering if anyone has some insights here:
*The current ground rent is set at £500 per annum
* Ground rent will be reviewed and increased every 10 years
* Increase in ground rent will be calculated as the compound of RPI for the 10-year period
* For example, if RPI is always 2.5% during the 10-year period, the increase is calculated as: (1 + 0.025)^10 - 1 ≒ 28%
* In the above example, the new ground rent after the review will be: £500 + £500 * 28% = £640
* There's an additional clause in the lease saying that *if RPI is lower than 2.5% for some year, RPI for that year is assumed as 2.5%* for the purpose of the above calculation.
The current ground rent of £500 feels a bit expensive, but it's still ok. I feel review in every 10 years is standard as well. However, is it common to have ground rent increase tied to RPI and also *floored at 2.5% per annum*?? I've found it difficult to figure out how these conditions on ground rent affect fair value of the property. I've heard that the government is trying to do a reform on leasehold, but it's not clear how it will affect the existing lease.
Any comments/advice appreciated, thanks in advance!
We are first time buyers going through buying a leasehold flat in London (the building is around 5 years old) so not very sure whether this is a reasonable clause or not. So far we found more information on doubling ground rent. We are a bit cautious of how ground rent will increase for this leasehold and am wondering if anyone has some insights here:
*The current ground rent is set at £500 per annum
* Ground rent will be reviewed and increased every 10 years
* Increase in ground rent will be calculated as the compound of RPI for the 10-year period
* For example, if RPI is always 2.5% during the 10-year period, the increase is calculated as: (1 + 0.025)^10 - 1 ≒ 28%
* In the above example, the new ground rent after the review will be: £500 + £500 * 28% = £640
* There's an additional clause in the lease saying that *if RPI is lower than 2.5% for some year, RPI for that year is assumed as 2.5%* for the purpose of the above calculation.
The current ground rent of £500 feels a bit expensive, but it's still ok. I feel review in every 10 years is standard as well. However, is it common to have ground rent increase tied to RPI and also *floored at 2.5% per annum*?? I've found it difficult to figure out how these conditions on ground rent affect fair value of the property. I've heard that the government is trying to do a reform on leasehold, but it's not clear how it will affect the existing lease.
Any comments/advice appreciated, thanks in advance!
Last edited:
