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INC Law
INC Law, Solicitor-Advocate
Category: Law
Satisfied Customers: 15909
Experience:  LL.B, LPC, LL.M, Pg.Dip, Solicitor-Advocate. UK Practising Certificate issued by SRA., DIFC Courts Registered (Dubai)
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I have a question regarding property ground rent in the

Customer Question

Hello, I have a question regarding property ground rent in the lease agreement
JA: Where are you? It matters because laws vary by location.
Customer: London
JA: What steps have you taken so far?
Customer: I searched it online
JA: Is there anything else the Lawyer should know before I connect you? Rest assured that they'll be able to help you.
Customer: I am looking i to buying a property with £325 ground rent which is rpi linked and increases every 10 years. I would like to know of it's a defective lease
Submitted: 15 days ago.
Category: Law
Expert:  INC Law replied 15 days ago.

Hi,

Thank you for your query.  I am a Solicitor-Advocate in the UK and will be assisting you with your question today.

RPI continues to be used in leases where rent reviews are index-linked, the Retail Price Index is generally considered more favourable to landlords. The RPI is normally published on or about 17th day of each month for the previous month. Clicking a year will reveal the index figures monthly for that particular year.

I hope this answers your question.  If you have any further questions, please do not hesitate to ask.

Many thanks

Customer: replied 15 days ago.
Hello, thank you. Can you please advise when the lease becomes an assured tenancy? Is it after £250 per year or is it £1000 in London?
Customer: replied 15 days ago.
Will the £325 per annum ground rent require an additional insurance by the bank in order to obtain a mortgage?
Expert:  INC Law replied 15 days ago.

The main issue is lease termination. Most leases give the landlord a right to "forfeit" if rent goes unpaid for 21 days. But the courts normally have power to grant relief, cancelling the forfeiture so long as the arrears are paid off.

The problem is that the power to grant relief does not apply to ASTs if at least three months' rent is more than three months overdue. The court has no choice in such cases: it must terminate the lease and give possession back to the freeholder.

These draconian rules apply only if the rent is outstanding both when the landlord serves notice demanding possession, and at the date of the court hearing. Prudent lessees will pay promptly, but a bank with a mortgage over the property may not find out until it is too late.  Some banks are questioning whether a lease with a high ground rent or escalator clause is acceptable security for a mortgage.

It may be worth getting insurance to cover this scenario.