Deed of Variation – A move to fairer Ground Rents?
Thursday, 22nd February 2018
Leasehold Valuations
Back in the middle of 2017, Taylor Wimpey amongst a few others, received blanket bad press for their involvement in the selling of leasehold houses, which included very aggressive ground rents. Headlines such as “£9,000 per year Ground Rent” and “Newlyweds unable to sell home due to legal catch that sees ground rent DOUBLE every decade” may have been the perfect fit for a modern emotive news reel, but leaseholders of these properties were and still are in a situation that compromised both the value of their property and their ability to sell.
The Government did eventually step in and prohibited such ground rents being applied to new flats, but that still left existing leaseholders no better off.
Taylor Wimpey have stated that their £130m assistance scheme is not compensation and some but not all of its customers can implement a Deed of Variation to amend their ground rent to an RPI linked multiplier.
It must be said, that not all of the blame rests on Taylor Wimpey’s shoulders. There is a valid case for negligence to be brought against the conveyancing solicitors involved in the transactions and it would have been one of their principle jobs to have read through the lease and made their client aware of any covenants or clauses that could have a negative effect.
It appears that with 2018 up and running, leaseholders are being written to directly with the proposal to switch their ground rent and we are currently working with clients to resolve their issues. If you are in receipt of such a letter you are welcome to contact our expert leasehold valuation team here at Peter Barry. The calculation of the difference in value between a ‘doubling every 10 years’ ground rent and an ‘RPI’ ground rent can be established and the offer reviewed.
There is some debate as to whether an RPI ground rent constitutes a fair or aggressive ground rent. The Nationwide Building Society could be a reference point. They state on their website:
“The ground rent must be reasonable at all times during the lease term, with unreasonable multipliers such as doubling every five, ten or fifteen years not allowed. Escalation should instead be linked to a verified index, such as the Retail Price Index.”
Our surveyors can also offer additional advice as to the current climate surrounding ground rents to enable you to make an informed decision. The methodology is the same across the country, so we can provide valuation advice UK wide, and not just in London. If you wish to obtain some free and impartial either email or call us on 020 7183 2578.
