By Gemma  Parsons
Legal Executive (GCILEx)

BUYING a flat is often viewed as an initial step in getting on the property ladder for first time buyers – a more affordable way of owning your first home.

There are various additional fees you need to budget for when purchasing a flat, including Ground Rent and service charges.  Rent is essentially profit for the landlord while service charges are what it costs to run the block of flats.  These are often annual fees payable throughout the lifetime of the lease, which can be up to 999 years.

Recently we have seen a trend in companies purchasing freehold titles with a view of making a profit by exploiting the Ground Rent provisions contained in a lease.  Many leases have “doubling up provisions” contained within them so far as the Ground Rent is concerned.  This means that what starts out as a reasonable Ground Rent is doubled every ten years, and therefore quickly escalates to a figure that not only exceeds the service charges but is unaffordable for many.

Many solicitors acting for buyers are now feeling the need to refer punitive Ground Rent clauses to mortgage companies to ascertain whether they impact on the lender’s decision to lend, with the ability to resell being a primary concern.  As ground rent provisions are a contractual term of your lease, a lease which in all likelihood you have acquired and therefore not negotiated the terms, you might feel powerless to do anything about it.

However the Leasehold Reform Housing and Urban Development Act 1993 (as amended) allows for anyone who meets the following criteria to extend their lease.  You must own a residential long lease (of more than 21 years) and you must have owned this lease for two or more years.

While extending your lease can be costly (specifically if you are to follow the provisions of the legislation), long-term benefits can be great.  The act enables your Ground Rent fee to be reduced to that of a peppercorn, but does mean paying the landlord for the extension.

If you are a developer in the process of having leases drafted for your new developments, then it would be sensible to ensure that the Ground Rent provisions are fair and reasonable, otherwise you could find your potential purchasers are limited to cash buyers only.

• Gemma Parsons is a legal executive specialising in residential conveyancing at Chubb Bulleid, who have offices in Wells, Street and Somerton. Phone 01749 836100.