The small print that turned one million flat owners into mortgage prisoners
Nearly one million leases have escalating ground rents, according to the Competition and Markets Authority (CMA), meaning the annual charge increases over time.
Mortgage lenders often require certain conditions to be met before lending against these properties – for example, the annual ground rent cannot exceed 0.1pc of the property's value.
However, experts said 'toxic' increases led by high inflation in recent years had left some flat owners trapped in 'unsellable properties'.
Ground rent is an annual fee paid by leaseholders to the freeholder for the right to occupy the land their property is built on.
Earlier this month, the Government introduced a white paper replacing leasehold systems, where third-party landlords owning the building belonging to several flats will be replaced with 'commonhold' schemes, which will give all owners more control over the buildings they live in.
In addition, new buildings will no longer pay 'ground rent'. While the Leasehold and Freehold Reform Act 2024, passed under the previous government but not yet fully in force, includes some ground rent measures, neither a £0 or £250 cap have been legislated for.
Britain's consumer watchdog, the CMA, has separately banned freeholders and developers from ground rent clauses that double the payment every review period; however, they can still increase them by the retail price index (RPI). Over the past few years, the RPI rose rapidly and spiked at 14pc in November 2022.
Paula Higgins, of the Homeowners Alliance said: 'The CMA rightly stamped out doubling ground rents, but now some lenders are refusing mortgages on properties with RPI-linked increases or rent reviews every 10 years or less. What once seemed reasonable has become toxic under high inflation, trapping hard-working homeowners in unsellable properties.'
For example, if your ground rent was charged at £290 a year in January 2020, it would rise with the RPI to £391 this year, an increase of 35pc, and would require the property to be worth over £391,000 in value to be compliant with lenders' terms.
Nicholas Mendes, of brokerage John Charol, said ground rents were becoming 'more topical' with lenders.
Mr Mendes said: 'Lenders are more aware of it from their level, looking at it and giving brokers the right guidance.'
He added that many borrowers have opted to use product transfers in recent years that do not require their property to be revalued. However, he said that when the market settles in 'a year or two, more issues will come to light'.
Leaseholders in a 122-flat development in Illford, east London, are subject to ground rent charges that increase every five years by the retail price index (RPI). The charge, which is in breach of most banks' lending terms, means the homeowners can no longer sell or remortgage.
The freeholder, The Freehold Corporation, has Labour peer, Lord Carter of Coles, as a director. The company collects the payment through its operating company Emerald Ground Rent.
David Hollingworth, of brokerage L&C, said: 'Lenders will have general guidelines around what clauses are likely to be acceptable. That's put an end to the doubling of ground rent every five years that was so problematic for some.
'Being linked to RPI can be acceptable but anything that could be seen as enough to affect the 'marketability' of the property. The valuation could pick up on an onerous ground rent which would affect the lender's security and so could result in a decline by the mortgage lender.'
Harry Scoffin, the founder of the campaign group Free Leaseholders, added: 'Onerous ground rent is destroying people's homes, money and lives. It is also jamming up the flats market as a number of lenders refuse to mortgage them. Ground rent victims are the new mortgage prisoners.
'According to the latest Competition and Markets Authority data, around 940,000 leases have escalating ground rents. In its investigations, the CMA has also raised eyebrows at some RPI clauses.
'We know of increasingly desperate leaseholders trying to extend their leases or buy the freehold to remove onerous ground rents, but it's punitively expensive. Leaseholders who come to us just don't have a spare £20,000 lying around at the back of their sofa.'
An MHCLG spokesman said: 'Far too many leaseholders across the country struggle with punitive and escalating ground rents.
'We remain firmly committed to tackling unregulated and unaffordable ground rents, and we will deliver this in legislation, with further details set out in due course.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Glasgow Times
an hour ago
- Glasgow Times
Starmer faces Labour turmoil and global volatility as he marks year in Number 10
The Prime Minister led his party back into power with more than 400 MPs on July 4 last year – clinching a majority just short of Sir Tony Blair's landslide in 1997. But with a daunting in-tray of problems including a stuttering economy, creaking public services and global volatility, his political honeymoon period was short-lived. The Prime Minister said his Cabinet should look back with a sense of 'pride' at the first year in office (Carl Court/PA) His personal popularity is now the lowest of any British premier after their first 12 months in office, political scientist and polling guru Professor Sir John Curtice said. 'There were pretty clear potential weaknesses before they even started, and most of those weaknesses have basically just been exposed over the course of the last 12 months,' he told the PA news agency. Sir John said part of the problem lay in what he described as a failure of narrative in setting out the Government's vision for change to the public. 'They're portraying themselves as a repair gang rather than the builders of a new Jerusalem. Pessimism doesn't necessarily go down very well,' he told PA. 'The thing with Starmer is, he's a brilliant prosecution lawyer… But prosecution lawyers present cases that have been (put together) by someone else. The problem is that as a political leader you've got to prosecute your own case. 'Maybe he needs new personnel? Either he's got to learn to do it himself or get someone in to do it for him.' That verdict was echoed by some dissenting voices within Labour ranks, where there is lingering discontent among rebels over the Government's Welfare Bill despite Number 10 offering major concessions on the legislation. The Government saw off the threat of a major Commons defeat over the legislation on Tuesday after shelving plans to restrict eligibility for the personal independence payment (Pip), the main disability benefit in England. 'I think he really needs to think about why he wants to be a Labour Prime Minister and what is it he actually cares about,' one long-serving Labour MP said. They said Tuesday had marked 'the lowest point' in Sir Keir's premiership so far and raised questions about his authority, warning that backbenchers may now feel emboldened to demand further U-turns elsewhere. Sir John said that the Government's challenges in passing legislation were unsurprising with the broad but fragile coalition of support on which Labour built its election victory, securing 412 seats on just 35% of the vote. That means many MPs defending narrow majorities and raises the prospect of 'a large body of people who are nervous about their political futures,' he said. The Government's original welfare proposals had been part of a package that ministers expected to save up to £5 billion a year, leaving Chancellor Rachel Reeves needing to look for the money elsewhere. The fallout threatens to cause lasting damage to morale in Labour ranks, with some rebels calling for a reset in relations between the parliamentary party and the leadership before fractures widen. Images of the Chancellor crying in the Commons on Wednesday have also led to questions about her future, although a Treasury spokesman cited a 'personal matter' as the cause of her distress and Number 10 said she would remain in post. Asked whether it was time for a course correction, Downing Street has said the Prime Minister will 'plough on' with the 'very busy agenda' of Government. But the MP quoted above said: 'The idea that they can keep carrying on as they've been carrying on is suicidal. 'They have no real sense of how the party thinks and feels.' Others had a more optimistic view of the year ahead, with a Starmer loyalist who supported the Bill suggesting the upset could be salvaged with a 'measured but solid response' from the Government. 'The worst they can do is nothing,' the backbencher added. The Prime Minister used a Cabinet meeting on Tuesday to defend his record in office, telling ministers the welfare Bill was 'to help those who can work into employment and ensure dignity and security for those who can't work.' He said they could all 'rightly look back with a real sense of pride and achievement' on the last 12 months, pointing to a reduction in NHS waiting lists and a series of economic agreements struck with the US, EU and India. Abroad, the Prime Minister faces a tricky diplomatic balancing act as he seeks to strengthen ties with both Europe and Washington amid global instability from the Ukraine war and Middle East crisis. Sir Keir Starmer secured a trade deal with the US last month (Suzanne Plunkett/PA)h At home, Labour is staring down a threat from Nigel Farage's Reform UK party, which turned opinion poll momentum into widespread gains at the ballot box during the local elections in May. Sir John said that parties such as Reform and the Greens offer more choice to voters wanting to express their discontent with Labour while the Tories continue to flounder in the polls. 'The character of the challenge is different from what it has been historically,' he said. Tim Bale, professor of politics at Queen Mary University, said people had been expecting bold change on areas such as workers' rights and growth, and the Government's achievements so far were 'pretty small beer' by comparison. Critics say the first year has instead been marked by a series of U-turns, including a partial reversal of cuts to the winter fuel payment and the move to launch a national inquiry into grooming gangs after months of resisting opposition pressure to do so. The Government disputes that framing, pointing out for example that ministers had never explicitly ruled out a statutory probe into child sexual exploitation but waited for a review to be carried out before making a decision. Prof Bale said he believed the first year had gone 'worse than most people imagined' and warned 'it's difficult for a leader who starts badly to persuade people that he or she is what they need.' But he said the problems were not necessarily fatal, adding that setbacks early on in a premiership have an upside in allowing for more time to 'turn it round'. 'If you look back to Margaret Thatcher, she was able to do that, so it's not a foregone conclusion that all is lost, even for Keir Starmer himself,' he said. Arguing that the Government could recover in the polls if its plans for the economy and public services pay off, he added: 'I think you can see the light at the end of the tunnel, but it's a very long tunnel.' Sir Keir has pledged to lead a 'decade of national renewal' through a phased approach to Government, the first year of which he said would involve 'cleaning up the mess' his administration had inherited. In a speech last week seeking to set the tone for the future, he said: 'We've wiped the state clean, we've stabilised the economy, and now we can go on to the next phase of government, building on that foundation.' A Government spokesperson said: 'We were elected with a commitment to deliver change and security for working people – and we are getting on with the job. 'We are delivering our Plan for Change – wages are rising faster than prices, interest rates have been cut four times, immigration has come down with 30,000 people with no right to be here removed and over four million NHS appointments have been delivered. 'Progress has been made, but we know people are impatient for change – and we are too – so we will continue to govern in the national interest for British people and deliver a decade of national renewal.'
Rhyl Journal
an hour ago
- Rhyl Journal
Starmer faces Labour turmoil and global volatility as he marks year in Number 10
The Prime Minister led his party back into power with more than 400 MPs on July 4 last year – clinching a majority just short of Sir Tony Blair's landslide in 1997. But with a daunting in-tray of problems including a stuttering economy, creaking public services and global volatility, his political honeymoon period was short-lived. His personal popularity is now the lowest of any British premier after their first 12 months in office, political scientist and polling guru Professor Sir John Curtice said. 'There were pretty clear potential weaknesses before they even started, and most of those weaknesses have basically just been exposed over the course of the last 12 months,' he told the PA news agency. Sir John said part of the problem lay in what he described as a failure of narrative in setting out the Government's vision for change to the public. 'They're portraying themselves as a repair gang rather than the builders of a new Jerusalem. Pessimism doesn't necessarily go down very well,' he told PA. 'The thing with Starmer is, he's a brilliant prosecution lawyer… But prosecution lawyers present cases that have been (put together) by someone else. The problem is that as a political leader you've got to prosecute your own case. 'Maybe he needs new personnel? Either he's got to learn to do it himself or get someone in to do it for him.' That verdict was echoed by some dissenting voices within Labour ranks, where there is lingering discontent among rebels over the Government's Welfare Bill despite Number 10 offering major concessions on the legislation. The Government saw off the threat of a major Commons defeat over the legislation on Tuesday after shelving plans to restrict eligibility for the personal independence payment (Pip), the main disability benefit in England. 'I think he really needs to think about why he wants to be a Labour Prime Minister and what is it he actually cares about,' one long-serving Labour MP said. They said Tuesday had marked 'the lowest point' in Sir Keir's premiership so far and raised questions about his authority, warning that backbenchers may now feel emboldened to demand further U-turns elsewhere. Sir John said that the Government's challenges in passing legislation were unsurprising with the broad but fragile coalition of support on which Labour built its election victory, securing 412 seats on just 35% of the vote. That means many MPs defending narrow majorities and raises the prospect of 'a large body of people who are nervous about their political futures,' he said. The Government's original welfare proposals had been part of a package that ministers expected to save up to £5 billion a year, leaving Chancellor Rachel Reeves needing to look for the money elsewhere. The fallout threatens to cause lasting damage to morale in Labour ranks, with some rebels calling for a reset in relations between the parliamentary party and the leadership before fractures widen. Images of the Chancellor crying in the Commons on Wednesday have also led to questions about her future, although a Treasury spokesman cited a 'personal matter' as the cause of her distress and Number 10 said she would remain in post. Asked whether it was time for a course correction, Downing Street has said the Prime Minister will 'plough on' with the 'very busy agenda' of Government. But the MP quoted above said: 'The idea that they can keep carrying on as they've been carrying on is suicidal. 'They have no real sense of how the party thinks and feels.' Others had a more optimistic view of the year ahead, with a Starmer loyalist who supported the Bill suggesting the upset could be salvaged with a 'measured but solid response' from the Government. 'The worst they can do is nothing,' the backbencher added. The Prime Minister used a Cabinet meeting on Tuesday to defend his record in office, telling ministers the welfare Bill was 'to help those who can work into employment and ensure dignity and security for those who can't work.' He said they could all 'rightly look back with a real sense of pride and achievement' on the last 12 months, pointing to a reduction in NHS waiting lists and a series of economic agreements struck with the US, EU and India. Abroad, the Prime Minister faces a tricky diplomatic balancing act as he seeks to strengthen ties with both Europe and Washington amid global instability from the Ukraine war and Middle East crisis. At home, Labour is staring down a threat from Nigel Farage's Reform UK party, which turned opinion poll momentum into widespread gains at the ballot box during the local elections in May. Sir John said that parties such as Reform and the Greens offer more choice to voters wanting to express their discontent with Labour while the Tories continue to flounder in the polls. 'The character of the challenge is different from what it has been historically,' he said. Tim Bale, professor of politics at Queen Mary University, said people had been expecting bold change on areas such as workers' rights and growth, and the Government's achievements so far were 'pretty small beer' by comparison. Critics say the first year has instead been marked by a series of U-turns, including a partial reversal of cuts to the winter fuel payment and the move to launch a national inquiry into grooming gangs after months of resisting opposition pressure to do so. The Government disputes that framing, pointing out for example that ministers had never explicitly ruled out a statutory probe into child sexual exploitation but waited for a review to be carried out before making a decision. Prof Bale said he believed the first year had gone 'worse than most people imagined' and warned 'it's difficult for a leader who starts badly to persuade people that he or she is what they need.' But he said the problems were not necessarily fatal, adding that setbacks early on in a premiership have an upside in allowing for more time to 'turn it round'. 'If you look back to Margaret Thatcher, she was able to do that, so it's not a foregone conclusion that all is lost, even for Keir Starmer himself,' he said. Arguing that the Government could recover in the polls if its plans for the economy and public services pay off, he added: 'I think you can see the light at the end of the tunnel, but it's a very long tunnel.' Sir Keir has pledged to lead a 'decade of national renewal' through a phased approach to Government, the first year of which he said would involve 'cleaning up the mess' his administration had inherited. In a speech last week seeking to set the tone for the future, he said: 'We've wiped the state clean, we've stabilised the economy, and now we can go on to the next phase of government, building on that foundation.' A Government spokesperson said: 'We were elected with a commitment to deliver change and security for working people – and we are getting on with the job. 'We are delivering our Plan for Change – wages are rising faster than prices, interest rates have been cut four times, immigration has come down with 30,000 people with no right to be here removed and over four million NHS appointments have been delivered. 'Progress has been made, but we know people are impatient for change – and we are too – so we will continue to govern in the national interest for British people and deliver a decade of national renewal.'
The Herald Scotland
an hour ago
- The Herald Scotland
Starmer faces Labour turmoil and global volatility as he marks year in Number 10
But with a daunting in-tray of problems including a stuttering economy, creaking public services and global volatility, his political honeymoon period was short-lived. The Prime Minister said his Cabinet should look back with a sense of 'pride' at the first year in office (Carl Court/PA) His personal popularity is now the lowest of any British premier after their first 12 months in office, political scientist and polling guru Professor Sir John Curtice said. 'There were pretty clear potential weaknesses before they even started, and most of those weaknesses have basically just been exposed over the course of the last 12 months,' he told the PA news agency. Sir John said part of the problem lay in what he described as a failure of narrative in setting out the Government's vision for change to the public. 'They're portraying themselves as a repair gang rather than the builders of a new Jerusalem. Pessimism doesn't necessarily go down very well,' he told PA. 'The thing with Starmer is, he's a brilliant prosecution lawyer… But prosecution lawyers present cases that have been (put together) by someone else. The problem is that as a political leader you've got to prosecute your own case. 'Maybe he needs new personnel? Either he's got to learn to do it himself or get someone in to do it for him.' That verdict was echoed by some dissenting voices within Labour ranks, where there is lingering discontent among rebels over the Government's Welfare Bill despite Number 10 offering major concessions on the legislation. The Government saw off the threat of a major Commons defeat over the legislation on Tuesday after shelving plans to restrict eligibility for the personal independence payment (Pip), the main disability benefit in England. 'I think he really needs to think about why he wants to be a Labour Prime Minister and what is it he actually cares about,' one long-serving Labour MP said. They said Tuesday had marked 'the lowest point' in Sir Keir's premiership so far and raised questions about his authority, warning that backbenchers may now feel emboldened to demand further U-turns elsewhere. Sir John said that the Government's challenges in passing legislation were unsurprising with the broad but fragile coalition of support on which Labour built its election victory, securing 412 seats on just 35% of the vote. That means many MPs defending narrow majorities and raises the prospect of 'a large body of people who are nervous about their political futures,' he said. The Government's original welfare proposals had been part of a package that ministers expected to save up to £5 billion a year, leaving Chancellor Rachel Reeves needing to look for the money elsewhere. The fallout threatens to cause lasting damage to morale in Labour ranks, with some rebels calling for a reset in relations between the parliamentary party and the leadership before fractures widen. Images of the Chancellor crying in the Commons on Wednesday have also led to questions about her future, although a Treasury spokesman cited a 'personal matter' as the cause of her distress and Number 10 said she would remain in post. Asked whether it was time for a course correction, Downing Street has said the Prime Minister will 'plough on' with the 'very busy agenda' of Government. But the MP quoted above said: 'The idea that they can keep carrying on as they've been carrying on is suicidal. 'They have no real sense of how the party thinks and feels.' Others had a more optimistic view of the year ahead, with a Starmer loyalist who supported the Bill suggesting the upset could be salvaged with a 'measured but solid response' from the Government. 'The worst they can do is nothing,' the backbencher added. The Prime Minister used a Cabinet meeting on Tuesday to defend his record in office, telling ministers the welfare Bill was 'to help those who can work into employment and ensure dignity and security for those who can't work.' He said they could all 'rightly look back with a real sense of pride and achievement' on the last 12 months, pointing to a reduction in NHS waiting lists and a series of economic agreements struck with the US, EU and India. Abroad, the Prime Minister faces a tricky diplomatic balancing act as he seeks to strengthen ties with both Europe and Washington amid global instability from the Ukraine war and Middle East crisis. Sir Keir Starmer secured a trade deal with the US last month (Suzanne Plunkett/PA)h At home, Labour is staring down a threat from Nigel Farage's Reform UK party, which turned opinion poll momentum into widespread gains at the ballot box during the local elections in May. Sir John said that parties such as Reform and the Greens offer more choice to voters wanting to express their discontent with Labour while the Tories continue to flounder in the polls. 'The character of the challenge is different from what it has been historically,' he said. Tim Bale, professor of politics at Queen Mary University, said people had been expecting bold change on areas such as workers' rights and growth, and the Government's achievements so far were 'pretty small beer' by comparison. Critics say the first year has instead been marked by a series of U-turns, including a partial reversal of cuts to the winter fuel payment and the move to launch a national inquiry into grooming gangs after months of resisting opposition pressure to do so. The Government disputes that framing, pointing out for example that ministers had never explicitly ruled out a statutory probe into child sexual exploitation but waited for a review to be carried out before making a decision. Prof Bale said he believed the first year had gone 'worse than most people imagined' and warned 'it's difficult for a leader who starts badly to persuade people that he or she is what they need.' But he said the problems were not necessarily fatal, adding that setbacks early on in a premiership have an upside in allowing for more time to 'turn it round'. 'If you look back to Margaret Thatcher, she was able to do that, so it's not a foregone conclusion that all is lost, even for Keir Starmer himself,' he said. Arguing that the Government could recover in the polls if its plans for the economy and public services pay off, he added: 'I think you can see the light at the end of the tunnel, but it's a very long tunnel.' Sir Keir has pledged to lead a 'decade of national renewal' through a phased approach to Government, the first year of which he said would involve 'cleaning up the mess' his administration had inherited. In a speech last week seeking to set the tone for the future, he said: 'We've wiped the state clean, we've stabilised the economy, and now we can go on to the next phase of government, building on that foundation.' A Government spokesperson said: 'We were elected with a commitment to deliver change and security for working people – and we are getting on with the job. 'We are delivering our Plan for Change – wages are rising faster than prices, interest rates have been cut four times, immigration has come down with 30,000 people with no right to be here removed and over four million NHS appointments have been delivered. 'Progress has been made, but we know people are impatient for change – and we are too – so we will continue to govern in the national interest for British people and deliver a decade of national renewal.'
