This month several leaseholders with Freehold Managers received letters saying their ground rent is to be doubled. Can a managing agent double your ground rent whenever they feel like it? Generally, no, but as with all things leasehold, it depends on the wording of the lease. While most of the original Warner leases have a fixed ground rent, leases that have been extended informally may have had a clause added that permits periodic increases.
If you’ve received notice of a ground rent increase, firstly send a copy of your lease to www.lease-advice.org and ask them whether your lease allows this. This is a free service. If you don’t have a copy you can order one through the Land Registry. Your conveyancing solicitor or mortgage lender should also be able to give you a copy. Secondly, ask FM to provide you with the clause that they believe gives them the right to do this. If it’s not explicitly given, they have no legal basis for doing it.
If you find your lease does allow periodic increases, and you weren’t warned about it when you purchased your property, ask your conveyancing solicitor why they didn’t flag it at the time. You may still be covered by the Unfair Contract Terms Act (1977) and could be entitled to legal relief if you can prove the lease terms are unfair. Even if the sum involved is relatively small, as it increases over time it could affect the resale value of your property.
Often residents are tempted, especially when planning to sell, to get a quick, informal lease extension without the overhead of solicitor and surveyor fees. But it’s a false economy, as this resident’s story shows:
“I purchased a Warner flat in 2015 and the lease had just been extended by the previous owner. They had paid £6,600 for a 15 year extension and agreed for the ground rent to go from a flat £125/year to £200/year with a ‘doubling cause’ every 23 years thereafter. This is an astronomical amount to pay for a lease extension given that you are gifting the freeholder with all this extra ground rent.
I think people need to be wary of these clauses when negotiating lease extension. I can understand why people would try and get £1,000 off the upfront cost but they are doing so with no idea about what the future value of their cash is worth. It might be worth warning people about this when they are negotiating their lease extension.”
If it was banks behaving this way, it would have the makings of another PPI scandal. Why is that freeholders can get away with this kind of underhand practice?
If you’re planning to sell, you can give notice of your intention to extend and this notice can be inherited by the new owner, who can then proceed with the extension through the Act. Going through the Act means the buyer can exercise their right to have the ground rent removed completely. Yes. zero ground rent. It’s worth it!