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Home Prices and Markets

Ground Rents fund reinstates its double or inflation offer

Ground Rents fund reinstates its double or inflation offer – On 21 December, the Government announced new measures in response to its leasehold market consultation. It proposed to introduce legislation to prohibit new-build leasehold houses and to set future residential ground rents to zero. It is also to consider introducing a ‘prescribed formula’ that would […]

Edward Marten by Edward Marten
2018-02-16 10:16
in Prices and Markets
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Ground Rents fund reinstates its double or inflation offer – On 21 December, the Government announced new measures in response to its leasehold market consultation. It proposed to introduce legislation to prohibit new-build leasehold houses and to set future residential ground rents to zero. It is also to consider introducing a ‘prescribed formula’ that would make it easier for leaseholders to buy their freehold.

Ground Rents Income Fund’s latest fact sheet says that  “Disappointingly, little further detail was provided on this specific point, but the Directors take comfort that such a formula would also need to ensure ‘fair compensation’ to the landlord in such instances.”

In order to protect leaseholders the Government also announced plans to help professionalise residential managing agents and tackle unfair service charges. Importantly, the proposals will need to be reviewed by Parliament and the Law Commission, with the introduction of any new primary legislation being subject to the availability of Parliamentary time.

Ground Rents Income Fund says that its board has now considered the statement made by the Communities Secretary, the Department for Communities and Local Government’s consultation responses and the subsequent Government response to the consultation, and is pleased to confirm that its Asset Management Plan will resume with immediate effect. The Asset Management Plan enables affected leaseholders to elect to have their ground rent review terms to choose between doubling and the lesser of doubling or inflation, as measured by RPI.

They have also decided to continue to progress with its committed pipeline of asset purchases. As such, two sites in London and one in Birmingham have been acquired. These will provide £99.7k of additional RPI-linked income for a purchase price of £2.31 million (excluding costs), or a gross ground rent yield of 4.31%.

The rate of inflation as measured by the Retail Prices Index (RPI) crept up to 4.1% in the 12 months to December, the highest level in six years. Due to weak productivity gains, inflation, therefore, overtook pay growth in 2017, putting a squeeze on household budgets.

GRIO : Ground Rents fund reinstates its double or inflation offer

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