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What can homeowners do about onerous ground rent clauses?

It has been reported that many homeowners who bought leasehold new-build properties from developers in the last ten years have been left with onerous ground rent clauses.  There is evidence that homeowners have been unable to sell their leasehold homes because prospective buyers have baulked at the onerous ground rent clause.


A typical ground rent clause would normally increase in line with the Retail Price Index (RPI) every 25 years.  However, it is reported that Taylor Wimpey imposed a ground rent clause in their leases that increases every ten years from £295 a year to £9,440 a year in the space of 50 years.  The leases can be up to 999 years long, which means that for a majority of the lease term, the ground rent is almost £800 per month.  Even during the first 20 years of the lease, the ground rent increases to £600 a year, which, based on the current interest rates, requires a capital investment of almost £30,000.    Would-be lenders are reluctant to lend on properties such as this, meaning the properties are potentially blighted and worth considerably less.

The government has promised to stamp out these onerous ground rent clauses.  However, those who have purchased leasehold properties with these ground rents may encounter ongoing difficulties selling their homes, as would-be purchasers cannot find mortgage companies willing to lend.

Deed of variation

Taylor Wimpey also recently announced a scheme to help leaseholders who bought directly from them to amend the ground rent clause (called a ‘deed of variation’) to more favourable terms.  This scheme will not work for every leaseholder, as Taylor Wimpey no longer own the freehold for every property they sold and cannot force the current freeholder to agree to a deed of variation if they do not want to.  Also, the scheme does not apply to homebuyers who did not purchase the property directly from Taylor Wimpey.

If you are in a position where you believe you may be eligible for the scheme, you will need a solicitor to provide legal advice on the terms of the deed of variation.  Lyons Davidson would be happy to discuss the assistance we can give you with this.  At the same time, if the scheme does not apply in your circumstances, you may consider whether your conveyancing solicitor, or indeed any other party connected to the sale, was at fault.

Professional negligence

A solicitor’s duty when acting for a client buying a leasehold property is to ensure that the client is aware of and understands the significance of any potentially onerous clauses.  If the solicitor has not given a proper explanation of the ground rent, they may have failed to carry out their duty and the buyer may have a claim against the solicitor for negligence and breach of contract. Lyons Davidson act for many clients with claims against solicitors and if you are concerned about your position please contact Tom Spearpoint in the Bristol Professional Negligence Department by emailing tspearpoint@lyonsdavidson.co.uk or by calling 0117 904 5795.

Posted on Jun 5th, 2017 by Lyons Davidson