People buying new flats from developers — and their solicitors — should beware of a new menace. Homes & Property has learnt that a clause is increasingly appearing in new leases, which states that the ground rent, normally a nominal peppercorn amount, is doubled every 10 years. This is set out in dense legalese, over more than one section of the lease, and a lay buyer may easily not realise what they are signing up to.
But when Irvin Tarn reserved a flat in a new development at Mill Hill, he did understand — and pulled out of the sale, demanding a refund of his £2,000 deposit. He also challenged the developer, Taylor Wimpey, to explain itself.
“Even first-time buyers know about ground rent, but they expect it to be a small and fixed amount, as it has always been,” he told Homes & Property. “But in my case, when I looked through the 19-page draft lease from Taylor Wimpey for a modest flat in Mill Hill, I discovered that the initial ground rent may be only £300 a year — but by 2057 it would be £9,600.
“I have since spoken to several solicitors who confirmed that, like me, they had never heard of this, and described it as outrageous. The estate agents involved claimed to know nothing of it, either.”
Mr Tarn added: “I think that first-time buyers have enough of a struggle to get on the housing ladder without national companies trying to make an extra profit by burying clauses like these in their long leases.”
Taylor Wimpey responded to Mr Tarn by stating that the rent review clause was “George Wimpey UK policy and is in place on all leasehold developments.” It offered to refund his reservation deposit “as a gesture of goodwill”.
David Bridges of Taylor Wimpey said: “Historically, most ground rent review clauses were tied to the Retail Price Index (RPI). But house price inflation has significantly outstripped RPI, and developers are looking at terms and conditions that better reflect this.”