How To Reduce Your Ground Rent With A Deed Of Variation

Leasehold Properties and Ground Rents

Most leasehold properties are subject to a Ground Rent – a payment due to the freeholder of the building, usually payable annually.

Ground Rents have been a subject of much debate over the years and until the Leasehold Reform (Ground Rent) Act came into force on 30 June 2022, the only way to “extinguish” the ground rent on a leasehold property was to extend your lease via the statutory route pursuant to the Leasehold Reform, Housing and Urban Development Act 1993 (see Lease Extension page)

The implementation of the Act in 2022 meant that any new lease term would be subject to a “peppercorn” (zero) ground rent.  Although a welcome change for leaseholders, it was met with some dissatisfaction by freeholders.

Leasehold and Freehold Reform Bill and Ground Rents

One of the proposals in the Leasehold and Freehold Reform Bill was that all existing ground rents be set at a “peppercorn”.  However, Michael Gove’s proposal met with fierce resistance from the Treasury and The Times newspaper reported this Sunday (24 March 2024) that Gove has back-peddled somewhat and is now trying to Push the Treasury into a “halfway house” which would see all ground rents capped at £250 per year.

It is feared that the long-awaited Reform will not come into effect this parliament, as it was speculated it would, and it could be some considerable time before we see any material changes.

Mortgage Companies and Ground Rents

Mortgage companies’ criteria changes in relation to what they will lend on.  10-year doubling ground rents are generally not acceptable to a lot of lenders.  They may accept ground rents which double over a longer period, i.e. every 25 years, but most lenders do not like to see a ground rent of more than 0.1% of the value of the property.

Of course, buyers will be governed by lenders’ requirements and are not attracted to properties with doubling (or onerous) ground rents as it affects the mortgagability of the property.

Taylor Wimpey’s Ground Rent Review Assistance Scheme

The Competition and Markets Authority (CMA) opened an investigation into the leasehold housing market in 2019 and investigated 4 housing developers with regard to their 10-year doubling ground rents.  Taylor Wimpey invested £130m into their voluntarily launched Ground Rent Review Assistance scheme whereby any homeowner who purchased their leasehold property from Taylor Wimpey directly, or from a previous owner, would be offered to enter into a Deed of Variation converting the 10-year doubling ground rent to a RPI-based ground rent.

From 22 December 2021, Taylor Wimpey amended this offer so that they would not collect any ground rent above the initial ground rent sent in the original lease.  They extended this offer to leaseholders who had already entered into the Deed of Variation to convert to an RPI-based rent, so that they could again vary their lease to benefit from the set ground rent now being offered.

Your Costs for the Deed of Variation

Taylor Wimpey cover the cost of your legal fees up to £750 (inclusive of VAT) and we would not expect our charges to exceed this amount.  If you are the owner of a Taylor Wimpey property and you think you may be eligible for the scheme, then please get in touch via wewillhelp@jonathanlea.net or call us on 01444 708 640 and we will be happy to deal with the Deed of Variation on your behalf.