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Too little too late for existing leaseholders

On 29 November 2021, the Leasehold Reform (Ground Rent) Bill completed its second reading in the House of Commons. The bill will ban freeholders from charging ground rent to leaseholders in some new leasehold agreements, such as newly built residential properties, if it is enacted into a law. However, the bill was criticised for failing to protect the current 4.5 million leaseholders, some of whom are unable to sell their home due to onerous ground rent increases.

During the Parliamentary debate, many MPs criticised conveyancing solicitors for failing to properly advise existing leaseholders on excessive ground rent, management fees and charges. These solicitors failed in their duties to their clients. They should have advised buyers of any potentially onerous ground rent review clauses in a “Report on Title” or a “Report on Contract”. Therefore, buyers can make a claim against their former solicitor or conveyancer for professional negligence if they have become aware of a potentially onerous ground rent review clause in the lease of which they were not properly advised when they purchased their property.

What is Ground Rent?

Ground rent is a monetary figure charged by the freeholder and paid by the leaseholder for the duration of the lease. Its terms can be escalating or fixed and therefore it is important to make sure you are familiar with the terms of your ground rent before you exchange contacts of sale.

A potentially onerous ground rent clause is when the clause contains a ‘doubling’ review provision. Terms such as these may be onerous if they are reviewed on a regular basis, such as every 5 to 10 years. Although the charge may sound minimal when you first take ownership of the lease, a doubling clause may result in a considerable amount later down the line.

A short example of this is when a Lease has 999 years left unexpired with a starting ground rent of £250 per year. If this amount doubles every 10 years, the leaseholder would be expected to pay £16,000 per year after 60 years, £32,000 per year after 70 years and a whopping £256,000 per year after 100 years.

The long term impact

A Solicitor or conveyancer advising you should warn both you as the buyer and also any lender who is providing a mortgage secured on the property, of any terms in the lease that are unusual, or may adversely affect the value of the leasehold property.

An onerous ground rent clause could also result in banks refusing entirely to lend on such property and therefore making it very difficult or even impossible to sell your property in the future.

How Specters can help you

If you are a leaseholder who has found themselves in the unfortunate position of paying an extortionate ground rent term, or if you have a ground rent term which will cause you to pay an extortionate amount in the future, you may be able to pursue a professional negligence claim against the conveyancer or solicitor who failed to advise you of the clause when purchasing your property.

Specters Solicitors have successfully claimed compensation against conveyancers for their failure to advise upon onerous ground rent clauses.

Contact us on 0300 303 3629 today for a no obligation and complimentary telephone consultation regarding a professional negligence claim if any of the above applies to you.