onerous ground rents

08:57 23 September in News & Case Studies

Onerous ground rents are those that double every 5-10-15 years or are linked in some way to the value of the flat. The latter is less so and more publicity has surrounded the 10 year doubling ground rents. These can lead to very high ground rents at the end of the term and make extending the lease or buying the freehold prohibitive.

It is essential for leases to be reviewed very carefully. Any onerous ground rent provisions can be identified and pointed out at an early stage to a potential buyer for negotiations to take place with the seller and the freeholder.

Varying the lease if at all possible to make it more marketable. In any event, this provision would automatically have to be reported to the lender for their authority to proceed. Unfortunately, many lenders are not prepared to lend on leases with onerous ground rents. This leaves an increasing problem in the rise of some leases becoming unmarketable with potential buyers being unable to obtain a mortgage. Or worst still existing owners of leasehold properties who will not be able to remortgage or raise finances on current leases with the potential of escalating ground rents.

If a leaseholder suspects that their lease may have an onerous ground rent provision, in the first instance they should seek legal advice and the possible solutions available to resolve the issue on the lease.

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