As discussed in a my previous article there are two ways to extend your lease - using the statutory route or by agreement. 

If you extend by agreement, you usually pay a lower premium if you agree to pay a higher ground rent. However, be careful when you agree to an increased ground rent because it can make your lease more difficult to sell and mortgage. 

Once the ground rent exceeds £250 per annum (outside London) or £1000 per annum (in London), the lease becomes an assured tenancy and is therefore subject to the rules relating to those types of tenancies. This includes a right for the landlord to gain possession when the rent arrears exceed 8 weeks or 2 months if the rent is paid monthly. This right is mandatory which means that the Court has no choice but to grant the possession order.

This right overrides any mortgagee protection clause in a lease. A mortgage protection clause requires the landlord to contact the lender before taking action to take possession of the property for rent arrears. 

Understandably lenders are therefore becoming more wary of accepting high ground rents. 

So what can you do if you have a high ground rent?

We are currently helping leaseholders who own the freehold title to their flats (through a limited company) amend their lease to prevent the lease being rejected by lenders in the future because of this situation. If you want us to help you - whether you are a landlord or tenant - please get in touch.