Ground rent, a recurring payment made by leaseholders to freeholders in England and Wales, can sometimes pose a significant financial burden or act as a barrier to selling a property. Fortunately, a Deed of Variation can offer a solution. In this article, Deed Of Variation For Ground Rent, we take a look at the process and mechanism involved.
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For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of deeds of variation for ground rent, and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
Understanding Ground Rent and its Potential Drawbacks
Ground rent is a yearly or periodic charge paid by a leaseholder to the freeholder of the land upon which the property is built. While traditionally a nominal amount, ground rent has seen significant increases in recent years, impacting affordability and marketability of leasehold properties.
Here’s how high ground rent can be problematic:
- Financial Strain: Rising ground rent payments can strain a leaseholder’s budget, especially when combined with other property expenses.
- Mortgage Restrictions: Lenders often have limitations on the ground rent amount they allow when considering mortgages for leasehold properties. High ground rent can make obtaining a mortgage more challenging.
- Reduced Marketability: Properties with high ground rent can be less attractive to potential buyers due to the ongoing financial commitment.
Deed of Variation: A Tool for Modifying Ground Rent Terms
A Deed of Variation is a legal agreement between a leaseholder and a freeholder that formally alters the terms of an existing lease. In the context of ground rent, a Deed of Variation can be used to:
- Reduce the Ground Rent Amount: Negotiating a lower ground rent with the freeholder and formalising it through a Deed of Variation offers significant financial relief for the leaseholder.
- Change Ground Rent Review Periods: Leases often contain clauses allowing the ground rent to increase at specific intervals. A Deed of Variation can extend these review periods, providing greater financial stability for the leaseholder.
- Convert Ground Rent to a Peppercorn Rent: Ideally, a Deed of Variation can be used to convert the ground rent to a peppercorn rent, a symbolic amount typically set at one peppercorn per year. This effectively eliminates the ongoing ground rent obligation.
The Process of Obtaining a Deed of Variation for Ground Rent
Successfully securing a Deed of Variation requires careful planning and execution. Here’s a general overview of the process:
- Initiate Communication: The leaseholder expresses their desire to modify the ground rent terms to the freeholder, ideally in writing.
- Negotiation: Open communication and negotiation are crucial. The leaseholder, potentially with the support of a solicitor, will negotiate the desired changes with the freeholder.
- Reaching an Agreement: If both parties reach an agreement on the revised terms, a solicitor will be instructed to draft the Deed of Variation.
- Legal Review and Signatures: Both the leaseholder and the freeholder will have the opportunity to review the Deed of Variation with their respective solicitors before signing the document.
- Registration (Optional): While not mandatory, registering the Deed of Variation with HM Land Registry provides additional protection and ensures the revised terms are reflected on the official land registry records.
Factors to Consider When Pursuing a Deed of Variation
While a Deed of Variation offers potential benefits, there are some key considerations:
- Freeholder’s Consent: The freeholder is not obligated to agree to a Deed of Variation. Their willingness to negotiate depends on various factors, such as their investment strategy and potential benefits they might receive (e.g., a one-off premium).
- Costs Involved: Legal fees associated with drafting and registering the Deed of Variation will be incurred by the leaseholder. These costs should be factored into the overall benefit of the reduced ground rent.
- Leasehold Enfranchisement as an Alternative: In some circumstances, enfranchisement, a process where the leasehold is purchased from the freeholder to convert it into freehold ownership, might be a viable long-term solution, although it can be a more complex and expensive process.
How we can help
We have a proven track record of helping clients deal with deeds of variation for ground rents. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.
How to Contact Our Commercial Property Solicitors
It is important for you to be well informed about the issues and possible implications of a deed of variation. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Commercial Property solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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