• Lenders’s Specific Criteria For Onerous Ground Rent Increases?

    By Guest on 18th Feb 2020

    I am purchasing a leasehold with the following ground rent clause: 125 year lease, 93 years left. Current ground rent = £350p/a (currently 0.1% of property value) Increases every 25 years either by doubling itself or by 0.1% of the property market value - whichever is greater. I’ve checked through and through on the CML handbook and I’m still unsure on whether the above would be considered “onerous” or not. Currently attempting to get a mortgage with Santander who have referred this to their valuer but no response as yet. Any comments on whether this would be acceptable? If not to Santander, which lender might I apply to?

  • 1 Answers

    By NotaryExpress on 19/02/2020

    It really depends on the lender but I would say yes that ground rent is likely to be considered onerous (especially if outside London). This is because due to a legal technicality a lease (even a lease of 999 years) where the ground rent is more than £250pa (£500pa in London) is considered an Assured Shorthold Tenancy (AST) with easier forfeiture provisions. I would make sure the lease either has a cap on the ground rent under £250pa or alternatively there is a mortgagee protection clause ensuring the lease cannot be forfeited as an AST or giving the lender a chance to remedy the default and avoid forfeiture. 

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