Ground Rent · Report on Title scenario

My ground rent doubles every 25 years — does that matter?

It matters to lenders, and through them to what the flat is worth when you come to sell. A doubling clause is not unlawful and plenty of leases contain one, but it is a known category of concern: the lender on your purchase has to be satisfied with it, and a future buyer’s lender may apply a different and stricter test. The clause itself is fixed; what changes over time is how the market treats it.

From the e-ROT archive

This scenario is drawn from Report on Title material dealing with this specific circumstance.

Lexsure master Report on Title paragraph: Ground Rent Increase — Doubling Every 25 Years (Leasehold Flat) · See the wording

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I’ve already bought the property I have found out about the doubling clause since completing, and want to know what should have been explained. Check what this could mean →WhenIBought.com I’m a conveyancer I need Report on Title wording for this situation. View professional options →

What a doubling clause actually does

The lease fixes a ground rent and then multiplies it on a stated anniversary — commonly every 25 years, sometimes every 10 or 15. The arithmetic is entirely predictable, which is both the appeal of the clause to a landlord and the problem with it. A rent of £250 doubling every 25 years is £500 after 25 years, £1,000 after 50 and £2,000 after 75; on a 125-year lease that is four doublings before the term runs out.

Nothing about this is hidden or unusual in the sense of being rare. The clause is in the lease, it will be reported to you, and it was in the lease when the seller bought. What has changed over the last decade is the reaction to it — from lenders first, and from buyers once lenders started asking.

The Lexsure master wording makes the point that matters most and is easiest to miss: the clause has to be considered against the requirements of the lender on <i>this</i> purchase, and a future buyer’s lender may apply different requirements. Being satisfied yourself does not dispose of the question, because the person you eventually sell to has to satisfy their own lender, not you.

Already bought a flat with a doubling ground rent?

If the clause came as a surprise after completion, what was explained to you at the time is the place to start.

Find out what should have been explained → WhenIBought.com

What can be done about the clause

Before completion, your conveyancer can ask the seller to approach the landlord for a deed of variation reducing the rent. The seller may well decline, because it costs them money and time on a sale they have already agreed, and the landlord is under no obligation to agree at all. It is worth asking, and it is worth asking early rather than in the week of exchange.

After completion there are two routes. The first is to negotiate with the landlord, which is a commercial conversation with no statutory backstop. The second is a statutory lease extension, which for a qualifying flat replaces the rent with a peppercorn for the whole of the new term — that is to say, it removes the ground rent rather than reducing it.

That second route costs a premium, plus the landlord’s reasonable costs within the statutory rules, plus your own. Whether it is worth doing is a valuation question before it is a legal one, and the figure depends on the lease, the flat and the rent itself. Specialist lease-extension valuation advice before you commit is the standard advice for a reason.

What not to rely on

Reform. Successive governments have proposed capping or removing ground rents in existing leases, and the master wording is explicit that a proposal should not be treated as changing the rent currently payable under this lease. You should make your decision on the basis of the law in force, not on the assumption that reform will arrive within any particular period.

That is not a prediction that reform will fail. It is the observation that a buyer who pays more for a flat today because a clause may be abolished later has taken the risk of the timetable onto themselves, and it is a risk nobody can price.

Will a mortgage lender accept a doubling ground rent?

Some will, some will not, and the ones that will often attach conditions. Lender requirements differ on the amount of the rent, the review mechanism and the remaining term, and they have to be applied to this lease rather than to escalating ground rents in general.

Where the conveyancer also acts for the lender, the clause may need to be referred rather than simply reported. On a referral the lender may seek valuation advice, impose conditions, or decline to proceed — and the borrower’s own willingness to accept the clause does not displace the lender’s requirements.

Lender approval, where it is given, is comfort about the lending decision rather than about the clause. The master wording still encourages referring the provision to a surveyor or valuer for comment, which is the question lending approval does not answer: what the clause does to the price.

Research lender requirements → Lexsure Lender Archive

From the e-ROT archive

Report on Title paragraph

Ground Rent Increase — Doubling Every 25 Years (Leasehold Flat)

Master precedent Lexsure e-ROTScope Doubling ground rent clauseWord count 76Status Current master paragraph

The lease provides for an annual ground rent of £{ }, which doubles on every 25th anniversary of { }. Provisions of this kind, often described as "escalating ground rents", may be acceptable to some buyers, but concerns have been expressed about their effect on the value and mortgageability of leasehold property. The clause needs to be considered against the requirements of the lender on this purchase; a future buyer's lender may apply different requirements. …

Master precedent wording. This is current Lexsure Report on Title material, shown here in extract. The braces are merge fields in the precedent, not omissions. It is professional precedent wording and is not advice about any particular property.

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