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Beware new build leases and the ground rent clause

Posted on 19th January 2018

If you have recently purchased a new-build leasehold residential property, you may have a professional negligence claim against your conveyancing solicitor if they failed to properly advise you on potentially high increases in your ground rent.

The Department for Communities and Local Government estimates that in England there are around 1.4 million leasehold houses and 2.9 million leasehold flats.

Typically, a residential lease will include a clause whereby the ground rent will normally increase in line with the Retail Price Index (RPI) every 25 years. However, some new-build leases have introduced a new clause whereby the ground rent would double every decade. This means that the ground rent can substantially escalate over time and can decrease the leasehold value of your home.

Keeping mortgage lenders updated

It is a requirement under Section 5.14.9 of the Council of Mortgage Lenders handbook, that the mortgage lender is informed of any increase in the ground rent that may materially affect the value of the property. Therefore, if at the time of purchase the conveyancing solicitor failed to give clear enough advice on the adverse lease terms (in particular the impact of the increasing ground rents) to the buyer, they may be professionally negligent.

Owners of these types of properties are now facing difficulties in selling their home as some banks and building societies are refusing to lend on these types of lease, making them virtually unsaleable.

Whilst the government has vowed to try and resolve the issue, this will take time and most likely will only deal with future ground rent charges. As such it does not help the thousands of people who are currently affected and unable to sell their home.

Our Dispute Resolution Solicitors are backed by four decades of experience. Our legal practice and team of London Solicitors have a strong track record of achieving favourable client outcomes. For expert legal advice use our contact form or call us on 0800 437 0322 today.

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