Report comment

Please fill in the form to report an unsuitable comment. Please state which comment is of concern and why. It will be sent to our moderator for review.


Ground rent 'traps' are not new. They have been around since (at least) the 1960s. What is new is that that apart from the well known minority of freehold investors who specialise in taking advantage of naive lessees and their solicitors by slipping in extremely onerous ground rent terms when leases are extended, or otherwise varied, is the proliferation of 10 year doubling clauses used by mainstream developers over the last 11 or 12 years.

These rapidly doubling ground rents are now also appearing in leases for student accommodation. These are properties which are marketed to cash buyers only because no mainstream lender will lend against this type of property, but we are now seeing leases for student accommodation with ground rent starting at £390 per year, doubling every ten years for the first 40 years. They are sold off plan to foreign investors who are required to put down 25% deposits on the basis that they will be fully managed. As is so often the case the selling agent will refer the purchaser to recommended solicitors. Unfortunately, although it is pretty obvious that the ground rent and other management charges will decimate the rental income and the value of the investment, there will still be buyers who fail to understand what it really means if you have to be a cash buyer. I mean who, properly advised, would want to pay £89,000 for a student studio flat in Liverpool with ground rent rising to over £3,000 per year?

Your details