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Question: 5.14.9. If different from 1.11, contact point for matters connected with the lease:
| Lender | Answer |
|---|---|
| Accord Buy to Let |
As 1.11a. With regard to ground rent, please note that we have the following additional requirements to those set out in Part 1 of Section 5.14.9: * the maximum ground rent at the start of the lease term must not exceed £1000 a year; * the ground rent must not be capable of being increased during the first 21 years of the lease, and not more frequently than every 21 years during the rest of the lease term; * when the ground rent is reviewed, any increase must not exceed the higher of i) 100% of the ground rent payable immediately before the date of the rent review: ii) a figure increased in accordance with the equivalent percentage change in the Index of Retail Prices since the date of the previous rent review. Note: where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be an assured shorthold tenancy under the Housing Act 1988, please either: (i) arrange a suitable indemnity policy to protect us; or (i) arrange for the lease to be formally varied such that it is no longer capable of being an assured shorthold tenancy. |
| Accord Mortgages Ltd |
As 1.11a. With regard to ground rent, please note that we have the following additional requirements to those set out in Part 1 of Section 5.14.9 * the ground rent at the start of the lease term must not exceed £1000 a year * the ground rent must not be capable of being increased during the first 21 years of the lease, and not more frequently than every 21 years during the rest of the lease term * When the ground rent is reviewed, any increase must not exceed the higher of i)100% of the ground rent payable immediately before the date of the rent review: ii) a figure increased in accordance with the equivalent percentage change in the Index of Retail Prices since the date of the previous rent review. Note: where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be an assured shorthold tenancy under the Housing Act 1988, please either: (i) arrange a suitable indemnity policy to protect us; or (i) arrange for the lease to be formally varied such that it is no longer capable of being an assured shorthold tenancy. |
| Adam & Company | See 1.11 |
| Adam & Company International |
See 1.11 |
| Ahli United Bank (UK) plc |
Ground Rents We will not lend on properties with onerous ground rent provisions. Ground rent must not exceed 0.1% of the property value when being taken as security. It is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index, however ground rent provisions that contain unreasonable multipliers (i.e. doubling every 5, 10 or 15 years) are not acceptable as standard and must be referred to Central Administration Unit. |
| Aldermore Bank PLC |
As 1.11. Maximum ground rent at the start of the lease term – the greater of £500 or 0.1% of the property value. The ground rent must be reasonable and: - - Increase in line with RPI or a similar index - Double no more frequently than every 20 years If the ground rent exceeds the above, but you consider it to be reasonable or are unsure if it is reasonable, please refer us. |
| Allied Irish Bank (GB), a trading name of AIB Group (UK) | Refer to AIB Group (UK) plc, Central Securities (GB), 92 Anne Street, Belfast, BT1 3H |
| April Mortgages |
As per 1.11 Lease terms such as ground rent and event fees must be reasonable at all times during the term of the lease and adhere to our requirements below. If you’re unsure as to whether the terms of a lease are unreasonable or onerous, please refer the details to us in plain English for Valuer consideration. If the potentially onerous terms are in relation to the ground rent please include the current ground rent figure per annum, how often it will be reviewed and the price structure it will be reviewed against . |
| Atom Bank plc |
As per 1.11. You should enquire whether the landlord or managing agent foresees any significant increase in the level of the service charge in the reasonably foreseeable future and, if there is, you must report to us (see part 2). With regard to the ground rent provisions within the lease, Atom has the following additional requirements: - the ground rent must be no more than 0.2% of the property value; and - the ground rent review frequency must be greater than 10 years. Subject to the requirements above, ground rent escalation in line with the Retail Price Index will be acceptable. Where there is the potential for the ground rent provisions to cause the lease to be treated as an assured shorthold tenancy for the purposes of the Housing Act 1988 (either at the outset or during the term of the mortgage), we require the lease to be varied so that we are suitably protected from the risks of the lease being deemed to be an assured shorthold tenancy. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy. |
| Aviva Equity Release UK Ltd | See 1.11 |
| Bank of China | mortgages@bank-of-china.com |
| Bank of Ireland (UK) plc |
See 1.11 If you consider any terms of the lease to be onerous then you must report to us. Specifically, ground rent provisions will be subject to the below criteria: • The maximum ground rent at the start of the lease term must not exceed 0.1% of the property value or £500 a year whichever is the higher. • The ground rent must remain reasonable at all times during the lease term, with unreasonable multipliers not allowed. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index and where this is the case we do not need to be advised. However, unreasonable multipliers of ground rent will not be permitted, for example, doubling every 5, 10 or 15 years. These must be referred to us and we will advise if our mortgage offer remains valid. If you are unsure as to whether the terms of a lease are unreasonable, please refer the details to us. The lease must be amended to comply with the above. If not the case cannot proceed. |
| Bank of Ireland as Bank of Ireland Mortgages |
See 1.11 If you consider any terms of the lease to be onerous then you must report to us. Specifically, ground rent provisions will be subject to the below criteria: • The maximum ground rent at the start of the lease term must not exceed 0.1% of the property value or £500 a year whichever is the higher. • The ground rent must remain reasonable at all times during the lease term, with unreasonable multipliers not allowed. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index and where this is the case we do not need to be advised. However, unreasonable multipliers of ground rent will not be permitted, for example, doubling every 5, 10 or 15 years. These must be referred to us and we will advise if our mortgage offer remains valid. If you are unsure as to whether the terms of a lease are unreasonable, please refer the details to us. The lease must be amended to comply with the above. If not the case cannot proceed. |
| Bank of Scotland Beginning A | Bank of Scotland Plc, Mortgage Operations, Pentland House, 8 Lochside Avenue, Edinburgh, EH12 9DJ. Tel: 0345 603 1136 Fax: 0131 339 2366 |
| Bank of Scotland Beginning O |
Address and telephone number on the Mortgage Offer. |
| Bank of Scotland Private Banking | |
| Barclays Bank UK PLC |
If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. If the proposed security is not a new, qualifying long residential leasehold property within scope of the Leasehold Reform (Ground Rents) Act 2022: Peppercorn or low ground rents are acceptable. In respect of RPI linked Ground rents: • Ground rent is indexed to RPI no more frequently than every 5 years. • Ground rent up to 0.1% of the current market value is acceptable • We may accept Ground rent up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed, In respect of Doubling ground rents: • Should not double more frequently than every 20 years • Ground rent up to 0.1% of the current market value is acceptable • We may accept Ground rent up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed, In respect of Fixed increase ground rents: • Should not increase more than doubling; • These are acceptable up to 0.1% of the current market value • We may accept ground rent of up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed In respect of Open Market Value linked ground rents: • These are not acceptable to Barclays and should be referred to us as soon as identified AST Indemnity: An AST or Occupation Contract Tenancy (Wales) indemnity is required if, during the term of the mortgage, the ground rent charge is (or will) exceed £1,000 in London or £250 outside of London. This does not apply to BTL properties where there is deemed to be no assured tenancy risk. |
| Barnsley Building Soc, a trading name Yorkshire Building Soc | As 1.11a. |
| Better HomeOwnership (Mortgages) | See 1.11 |
| Birmingham Bank | mortgages@birminghambank.com |
| Birmingham Midshires |
Completions Team at office issuing mortgage instructions. See Offer for contact details. |
| Bluestone Mortgages | As per 1.11. |
| Bradford & Bingley Limited | As 1.11a |
| Britannia, a trading name of The Co-operative Bank plc |
Unreasonable multipliers of ground rent or other onerous ground rent provisions are not allowed and must be reported to us. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index, and where this is the case, we do not need to be advised. However, neither fixed increases which are clearly above inflation expectation nor unreasonable multipliers of ground rent (for example, doubling every 5, 10 ,15 or 20 years) will be permitted. Ground rent must not exceed 0.1% of the market value of the property when taken as security. However, we may accept ground rent up to 0.2% of such market value, subject to review. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988, this need not be reported to us if either: (i) arrangements are made for the lease to be formally varied to restrict the ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London)); or (ii) a suitable indemnity policy (which complies with our requirements as set out in section 9 (Indemnity Insurance)) is put in place to protect us. |
| Buckinghamshire Building Society |
Buckinghamshire Building Society, High Street, Chalfont St Giles, Bucks, HP8 4QB e-mail mortgages@bucksbs.co.uk Tel: 01494 879517 Fax: 01494 877259 |
| Chelsea Building Society (a trading name of Yorkshire BS) |
As 1.11a. With regard to ground rent, please note that we have the following additional requirements to those set out in part 1 of Section 5.14.9: * the maximum ground rent at the start of the lease term must not exceed £1000 a year * the ground rent must not be capable of being increased during the first 21 years of the lease, and not more frequently than every 21 years during the rest of the lease term * when the ground rent is reviewed, any increase must not exceed the higher of i) 100% of the ground rent payable immediately before the date of the rent review: ii) a figure increased in accordance with the equivalent percentage change in the Index of Retail Prices since the date of the previous rent review. Note: where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be an assured shorthold tenancy under the Housing Act 1988, please either: (i) arrange a suitable indemnity policy to protect us; or (i) arrange for the lease to be formally varied such that it is no longer capable of being an assured shorthold tenancy. |
| CHL Mortgages |
Please note CHL does not accept underleases. For all other matters, as per 1.11. |
| Clydesdale Bank plc |
If the matter concerns the ground rent and section 96 of the Housing Act 1996, you don’t need to contact us. Instead, you will need to arrange for the lease to be varied so that the ground rent does not rise above the current threshold at any time during the lease term. Otherwise, contact us at: The team at Clydesdale Bank Sunderland SR43 4JE Tel – 0800 121 4203 |
| Co-operative Bank plc |
Unreasonable multipliers of ground rent or other onerous ground rent provisions are not allowed and must be reported to us. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index, and where this is the case, we do not need to be advised. However, neither fixed increases which are clearly above inflation expectation nor unreasonable multipliers of ground rent (for example, doubling every 5, 10 ,15 or 20 years) will be permitted. Ground rent must not exceed 0.1% of the market value of the property when taken as security. However, we may accept ground rent up to 0.2% of such market value, subject to review. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988, this need not be reported to us if either: (i) arrangements are made for the lease to be formally varied to restrict the ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London)); or (ii) a suitable indemnity policy (which complies with our requirements as set out in section 9 (Indemnity Insurance)) is put in place to protect us. |
| Coutts | See 1.11 |
| Coutts Finance Co | See 1.11 |
| Coventry Building Society |
Ground rent and other fees referred to within the Lease must be reasonable at all times during the Lease term. Ground rent increases linked to RPI or similar indexes are generally acceptable but unreasonable multipliers of ground rent are not acceptable. If you are in doubt you should refer to us and we shall refer this to our valuer. Any ground rent which is currently at a level or, may reach a level referred to within the Housing Act 1988 (hence allowing a long lease to be treated as an AST) is NOT acceptable unless the Lease is varied or where this is not possible a suitable indemnity policy is put in place to protect us. The applicable legislation relates to leases with an annual ground rent of more than £250 (or over £1,000 for properties in London). Compounded RP1 Increases are not acceptable Property price linked escalations are not acceptable |
| Cynergy Bank |
As per 1.11.b We will not lend on leasehold properties where the ground rent or service charge is onerous; ground rent and other analogous property fees must be reasonable at all times during the lease term and must not exceed more than 0.1% of the property value at the start of the lease term. It is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index or to escalate periodically in line with the increase in the RPI since the date of the last review. Unreasonable multipliers of ground rent will not be permitted and cases other than as described above must be referred to us. |
| Danske Bank |
As at 1.11a. Ground Rents: 1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions). 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to us e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. |
| Darlington Building Society |
If the lease is a regulated lease under the Leasehold Reform (Ground Rent) Act 2022, you must check that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”. If the lease is not a regulated lease under the Leasehold Reform (Ground Rent) Act 2022: • Peppercorn or low ground rents are acceptable • Ground rent must be reasonable and not exceed 0.1% of the market value of the property when taken as security. • Provisions which allow for ground rents to be increased over and above Retail Price Index (or other inflation-linked index) are not acceptable • Unreasonable multipliers of ground rent (for example, doubling every 5, 10, 15 years) are also not acceptable and must be reported to us • Any ground rent provisions which cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an AST under the Housing Act 1988 are NOT acceptable unless: a) the Lease is varied to restrict the ground rent below the statutory level; or b) a suitable indemnity policy is put in place to protect us which complies with our requirements as set out in section 9 (Indemnity Insurance). The applicable legislation relates to leases with an annual ground rent of more than £250 (or over £1,000 for properties in London).” |
| DB UK Bank Ltd |
db mortgages PO Box 890 Newport NP20 9LZ Tel: 0845 650 6281 DX Address - not available |
| Dudley Building Society | As 1.11a |
| Ecology Building Society | As 1.7 |
| Family Building Soc (a trading name of National Counties BS) |
Loans Underwriting Department, Ebbisham House, 30 Church Street, Epsom, Surrey KT17 4NL Email: loansunderwriting@familybsoc.co.uk We will not lend on properties with onerous ground rent provisions. We consider ground rent provisions to be onerous where: - the maximum ground rent at the start of the lease term exceeds 0.1% of the property value or £500 per year whichever is higher; - the ground rent must remain reasonable at all times during the lease term, with unreasonable multipliers not allowed. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index and where this is the case we do not need to be advised. However, unreasonable multipliers of ground rent will not be permitted, for example, doubling every 5, 10 or 15 years. These must be referred to us and we will advise if our mortgage offer remains valid. If you are unsure as to whether the terms of a lease are unreasonable, please refer the details to us. The lease must be amended to comply with the above. If not, the case cannot proceed. |
| First Direct |
Lease terms such as ground rents must be reasonable at all times during the term of the lease and adhere to our requirement below. If you are unsure as to whether the terms of a lease are reasonable or onerous, please refer the details to us for consideration. If the potentially onerous terms are in relation to the ground rent, please include the current ground rent figure per annum, how often it will be reviewed and the mechanism by which any increase is calculated. See the guidance below: Acceptable: • Maximum Ground Rent p.a. must not exceed £250 (£1,000 in Greater London) per year. If there is the potential (within the lease provisions) for the ground rent to exceed these levels then the rent should be reduced to within the required threshold. This would require a lease variation on the lines that under no circumstances could reviewed rent be increased so that it comes within the applicable Assured Shorthold Tenancy (AST) thresholds in the Housing Act 1988 (as amended) or in any legislation amending or replacing it or in any subordinate legislation issued under it. If the lease cannot be varied, a suitable indemnity policy must be put in place to protect the risk to the Bank • Ground Rent less than or equal to 0.2% of the current property value (New Builds restricted to 0.1%) • Grounds Rent review period greater than or equal to 10 years • Ground Rent escalation less than or equal to RPI. Any RPI increase must not exceed the AST thresholds under the Housing Act 1988. • Ground Rent doubles every 20 years or over any longer period and does not continue to double after 125 years. Any doubling of ground rent must not be capable of exceeding the AST thresholds. Unacceptable: • Ground Rent greater than 0.2% of the current property value (New Builds greater than 0.1%) • Ground Rent review period is less than 10 years • Ground Rent escalation greater than RPI or linked to any other indices • Ground Rent doubles less than every 20 years Where ground rent provisions cause (or, during the term of the mortgage and/or lease, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy (AST) under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; OR b. If the lease cannot be varied, a suitable indemnity policy is put in place to protect the risk to the Bank (Please refer to paragraph 9 for the Bank’s requirements for Indemnity Insurance). |
| Fleet Mortgages |
See 1.11a. 1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Tenancy under the Housing Act 1988, this need not be reported to us if either:- a. The lease can be varied to restrict ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London); or b. A suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with our instructions); or 2. Any onerous ground rent provisions should be reported to us. Onerous provisions would include, but are not limited to, provisions which allow for ground rents to double after fixed periods of less than 25 years, ground rents calculated by reference to the capital value of the mortgage property from time to time (whereupon we will expect to be given full details of the method of calculating a new capital value, who bears the costs associated with the process and how any disputes are ultimately resolved) or allow for fixed increases by reference to an inflation-linked index but which are clearly above inflation expectations. We expect any leases granted after 22nd June 2022 to be regulated leases under the Leasehold Reform (Ground Rent) Act 2022 and for any lease extensions granted after that date to also comply with that Act. |
| Foundation Home Loans |
See 1.11.a Acceptable: • Increases linked to Retail/ Consumer Price Index (or similar indices) • Doubling (or an acceptable monetary increase) of any ground rent over periods of 20 years or more, providing the current figure is believed to be reasonable. These should be referred to FHL for individual consideration. Unacceptable: • Unreasonable multipliers of ground rent or other provisions; • Doubling of ground rent over short periods, less than 20 years (e.g. 5, 10, 15 years); • Increases linked to the value of the property; • Fixed increases clearly above inflation expectation. Starting ground rent must not exceed 0.1% of the market value of the security property. However, we may accept ground rent up to 0.2% market value but these must be referred to us for individual consideration. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988, this need not be reported to us if either: (i) arrangements are made for the lease to be formally varied to restrict the ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London); or (ii) a suitable indemnity policy (which complies with our requirements as set out in Part 1 paragraph 9 (Indemnity Insurance) is put in place to protect us. |
| Furness Building Society | As 1.11a |
| GE Money Home Lending Ltd | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Gen H |
If you need to contact us, please do so through Secure Link which is accessed via LMS Conveyancer Zone. If the proposed security is a new, qualifying long residential leasehold property covered by the provisions of the Leasehold Reform (Ground Rents) Act 2022, you must check that the ground rent is no more than one peppercorn per year and report any discrepancies to us. There must be an adequate maintenance charge in place. In all other cases of properties which do not qualify, the Lease must not be subject to onerous clauses in respect of excessive or escalating ground rent and must be reasonable. If the annual ground rent exceeds £250 (or £1000 in Greater London) you must either: arrange for a lease variation to amend the ground rent terms to ensure they are no longer impacted by the Housing Act 1988 (as amended) provisions, or if the lease cannot be varied and in your professional opinion you can arrange satisfactory indemnity insurance to protect our security and can submit a clear certificate of title on completion, you may proceed with indemnity insurance in respect of this issue. If you are aware of any potentially onerous ground rent clause, please report this to us for our consideration. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index and where this is the case we do not need to be advised. However if the ground rent review period is not equal to or greater than 10 years, if the ground rent doubles sooner than 20 years, or if the ground rent is higher than 0.2% of the current property value (for new builds this is restricted to 0.1%), we may be unable to lend. These types of issues must be referred to us and we will confirm if you may proceed. |
| Godiva Mortgages Ltd |
Ground rent and other fees referred to within the Lease must be reasonable at all times during the Lease term. Ground rent increases linked to RPI or similar indexes are generally acceptable but unreasonable multipliers of ground rent are not acceptable. If you are in doubt you should refer to us and we shall refer this to our valuer. Any ground rent which is currently at a level or, may reach a level referred to within the Housing Act 1988 (hence allowing a long lease to be treated as an AST) is NOT acceptable unless the Lease is varied or where this is not possible a suitable indemnity policy is put in place to protect us. The applicable legislation relates to leases with an annual ground rent of more than £250 (or over £1,000 for properties in London). Compounded RP1 Increases are not acceptable Property price linked escalations are not acceptable |
| Habito | as per 1.11 |
| Halifax |
Customer Services Centre,(see offer for address and fax number) |
| Halifax Loans Ltd |
Halifax Loans Limited, Trinity Road, Halifax, HX1 2RG |
| Hampden & Co. plc | See 1.11 |
| Handelsbanken | Refer to Branch office instructing you. |
| Harpenden Building Society | As 1.11a |
| Hinckley and Rugby Building Society | Principal Office, Completions Team |
| Hodge |
Service Charge There must be no history of significant service charge arrears and the maximum annual service charges do not exceed 1% of the property value. The Valuer must be made aware of the annual service charge and confirm that it is reflected in the valuation provided and is not likely to present any resale difficulties Ground Rent Ground rent over 0.1% of value are unacceptable (Value x 0.001). Escalating ground rents shall not double more frequently than 20 years and shall not be geared to the value of the building/property. RPI reviews of 10 year frequency or more are acceptable. |
| Hodge Equity Release |
Service Charge There must be no history of significant service charge arrears and the maximum annual service charges do not exceed 1% of the property value. The Valuer must be made aware of the annual service charge and confirm that it is reflected in the valuation provided and is not likely to present any resale difficulties Ground Rent Ground rent over 0.1% of value are unacceptable (Value x 0.001). Escalating ground rents shall not double more frequently than 20 years and shall not be geared to the value of the building/property. RPI reviews of 10 year frequency or more are acceptable. |
| Holmesdale Building Society | Lender. |
| HSBC UK Bank plc |
Lease terms such as ground rents must be reasonable at all times during the term of the lease and adhere to our requirement below. If you are unsure as to whether the terms of a lease are reasonable or onerous, please refer the details to us for consideration. If the potentially onerous terms are in relation to the ground rent, please include the current ground rent figure per annum, how often it will be reviewed and the mechanism by which any increase is calculated. See the guidance below: Acceptable: • Maximum Ground Rent p.a. must not exceed £250 (£1,000 in Greater London) per year. If there is the potential (within the lease provisions) for the ground rent to exceed these levels then the rent should be reduced to within the required threshold. This would require a lease variation on the lines that under no circumstances could reviewed rent be increased so that it comes within the applicable Assured Shorthold Tenancy (AST) thresholds in the Housing Act 1988 (as amended) or in any legislation amending or replacing it or in any subordinate legislation issued under it. If the lease cannot be varied, a suitable indemnity policy must be put in place to protect the risk to the Bank • Ground Rent less than or equal to 0.2% of the current property value (New Builds restricted to 0.1%) • Grounds Rent review period greater than or equal to 10 years • Ground Rent escalation less than or equal to RPI. Any RPI increase must not exceed the AST thresholds under the Housing Act 1988. • Ground Rent doubles every 20 years or over any longer period and does not continue to double after 125 years. Any doubling of ground rent must not be capable of exceeding the AST thresholds. Unacceptable: • Ground Rent greater than 0.2% of the current property value (New Builds greater than 0.1%) • Ground Rent review period is less than 10 years • Ground Rent escalation greater than RPI or linked to any other indices • Ground Rent doubles less than every 20 years Where ground rent provisions cause (or, during the term of the mortgage and/or lease, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy (AST) under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; OR b. If the lease cannot be varied, a suitable indemnity policy is put in place to protect the risk to the Bank (Please refer to paragraph 9 for the Bank’s requirements for Indemnity Insurance). |
| Intelligent Finance |
Securities, Intelligent Finance, PO Box 890, Leeds, LS1 9UG |
| Investec Bank plc | See 1.11 |
| ITL Mortgages |
Ground rent and other fees referred to within the Lease must be reasonable at all times during the Lease term. Ground rent increases linked to RPI or similar indexes are generally acceptable but unreasonable multipliers of ground rent are not acceptable. If you are in doubt you should refer to us and we shall refer this to our valuer. Any ground rent which is currently at a level or, may reach a level referred to within the Housing Act 1988 (hence allowing a long lease to be treated as an AST) is NOT acceptable unless the Lease is varied or where this is not possible a suitable indemnity policy is put in place to protect us. The applicable legislation relates to leases with an annual ground rent of more than £250 (or over £1,000 for properties in London). Compounded RP1 Increases are not acceptable Property price linked escalations are not acceptable |
| JPMorgan Chase Bank, N.A. | Refer to office issuing Mortgage Instructions. |
| Kensington Mortgage Company Ltd |
Kensington Mortgages, New Business Operations Centre, Ascot House, Maidenhead Office Park, Maidenhead, SL6 3QQ. Tel: 03444 990011 Fax: 03444 990022. If the lease is a regulated lease under the Leasehold Reform (Ground Rent) Act 2022, you must check that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”. If the lease is not a regulated lease under the Leasehold Reform (Ground Rent) Act 2022: • Peppercorn or low ground rents are acceptable • Ground rent must be reasonable and not exceed 0.1% of the market value of the property when taken as security. We may accept ground rent up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed • Provisions which allow for ground rents to be increased over and above Retail Price Index (or other inflation-linked index) are not acceptable • Unreasonable multipliers of ground rent (for example, doubling every 5, 10, 15 years) are also not acceptable and must be reported to us • Any ground rent provisions which cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an AST under the Housing Act 1988 are NOT acceptable unless: a) the Lease is varied to restrict the ground rent below the statutory level; or b) a suitable indemnity policy is put in place to protect us which complies with our requirements as set out in section 9 (Indemnity Insurance). The applicable legislation relates to leases with an annual ground rent of more than £250 (or over £1,000 for properties in London).” |
| Kent Reliance (a trading name of OneSavings Bank plc) | Ground rent and its review mechanism: For owner-occupied, residential properties where the ground rent exceeds £250 (or £1,000 in Greater London), or where it may exceed this limit in the future, you must either have the lease varied to remove any risk of its construction as an Assured Tenancy under the Housing Act 1988 or obtain suitable indemnity insurance. In any event, whether this is an owner-occupied, residential or a buy-to let rental investment applicaiton, you must report to us where either the ground rent exceeds 0.1% of the purchase price or valuation, or the ground rent will increase on review by more than 25% or where it will be reviewed more often than every 25 years as we may need to refer this to our valuer to consider any impact on their valuation as a consequence of the ground rent escalation provisions. |
| Keystone Property Finance |
As 1.11a Any concerns regarding onerous or commercially biased lease terms must be referred to us |
| Landbay Partners Limited |
New leases completed after 30 June 2022 must comply with the Leasehold Reform (Ground Rent) Act 2022. We do not lend on properties with onerous ground rent provisions. The ground rent must not exceed 0.1% of the property's value. Ground rent escalation can be linked to the Retail Price Index (RPI) or a similar index, however unreasonable multipliers (e.g. doubling every 5, 10 or 15 years) are not acceptable. Where ground rent provisions cause (or, during the mortgage term, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988, you do not need to report to us if either: (i) arrangements are made for the lease to be formally varied to restrict the ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London); or (ii) a suitable indemnity policy (which complies with our requirements as set out in Part 1 section 9 (Indemnity Insurance) is put in place to protect us. For Maisonettes or a similar security where the repairing and maintenance obligations contained in the lease are not satisfactory, we will require you to place on risk Maisonette Indemnity for the full purchase price or the valuation plus 10%. You should only refer back to the Completions team for review if the lease does not meet our requirements. |
| Landmark Mortgages Limited |
New Mortgage Completions Landmark Mortgages PO Box 656 Durham DH1 9LY Tel - 0330 159 7152 |
| Leeds Building Society |
As per 1.11a. Leases granted before 30 June 2022: The lease is unacceptable if it is likely the ground rent provisions could result in the lease being treated as an AST during the term of the lease, this includes a provision for any of the following to apply: • The ground rent is >£250pa (£1000pa in London) • The ground rent is >0.1% of the property value • The ground rent is likely to become unreasonable during the lease term (for example doubling every 5, 10 or 15 years) Unless the solicitor can either: (i) arrange a suitable indemnity policy to protect the Society; or (ii) arrange for the lease to be formally varied such that it is no longer capable of being an assured shorthold tenancy. Any leases granted or extended on or after 30 June 2022 should comply with the Leasehold Reform (Ground Rent) Act, the ground rent should be a peppercorn rent The following checks are not required on shared ownership applications. The solicitors to check if there is more than one tenant sitting above the Borrower, between them and the freeholder within the lease structure. If there is the solicitor should ensure that the wording of the Borrower’s lease and the head lease specifically outlines if there is any forfeiture action relating to other tenants in the structure then the lease our Borrower holds will survive any such forfeiture action and will not be included in any such forfeiture action. If there is no such wording present then variations of the lease and the head lease should be sought. |
| Legal & General Home Finance Ltd | Legal Services Department. |
| LendInvest | See 1.11a |
| LiveMore Capital | As 1.11a |
| Lloyds Bank plc pre fixed 20/40 | Mortgage Processing. Please see 1.11. |
| Lloyds Bank plc pre fixed 50/30/77 | Mortgage Processing. Please see 1.11a |
| Lloyds TSB Scotland plc |
Mortgage Processing. Please see 1.11a |
| M&S Bank | M&S Bank, PO Box 12, Skipton, BD23 2HL. Telephone Number 0345 002 1128 Fax 0345 111 0322 |
| Magellan Homeloans | Issuing Office |
| Manchester Building Society | Underwriting Department. |
| Market Harborough Building Society |
As per 1.7 a. Any ground rent at the start of the mortgage term should not exceed annually £250 outside of London or a £1,000 inside London. If this is the case you must immediately contact the Society. We will advise you if our mortgage offer remains valid. b. Ground rent and other event fees must be reasonable at all times during the lease term. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index and where this is the case we do not need to be advised. However, unreasonable multipliers of ground rent will not be permitted, for example, doubling every 5, 10 or 15 years. These must be referred to the Society and we will advise you if our mortgage offer remains valid. If you are unsure as to whether the terms of a lease are unreasonable, please refer the details to the Society immediately. |
| Masthaven Bank | As per 1.11. |
| Metro Bank plc | As per 1.11. |
| ModaMortgages |
You must report to us any recent increases in ground rent or where ground will be reviewed more often than every 25 years as we may need to refer this to our valuer to consider any impact on their valuation as a consequence of the rent escalation provisions. |
| Molo Finance | As 1.11a. |
| Monmouthshire Building Society |
Lending Operations Department Monmouthshire Building Society Monmouthshire House John Frost Square Newport NP20 1PX |
| Mortgage Agency Services |
Unreasonable multipliers of ground rent or other onerous ground rent provisions are not allowed and must be reported to us. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index, and where this is the case, we do not need to be advised. However, neither fixed increases which are clearly above inflation expectation nor unreasonable multipliers of ground rent (for example, doubling every 5, 10 ,15 or 20 years) will be permitted. Ground rent must not exceed 0.1% of the market value of the property when taken as security. However, we may accept ground rent up to 0.2% of such market value, subject to review. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988, this need not be reported to us if either: (i) arrangements are made for the lease to be formally varied to restrict the ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London)); or (ii) a suitable indemnity policy (which complies with our requirements as set out in section 9 (Indemnity Insurance)) is put in place to protect us. |
| Mortgage Express | As 1.11a |
| Mortgage Express No 2 | |
| MPowered Mortgages |
If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. If the proposed security is not a new, qualifying long residential leasehold property within scope of the Leasehold Reform (Ground Rents) Act 2022: Peppercorn or low ground rents are acceptable. In respect of RPI linked Ground rents: • Ground rent is indexed to RPI no more frequently than every 5 years. • Ground rent up to 0.1% of the current market value is acceptable. If the ground rent is over £250 (or £1,000 in London) or will end up over these figures in the future the property is unacceptable under the Housing Act 1988 In order to proceed a Deed of Variation eliminating this risk must be obtained prior to completion. • We may accept Ground rent up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed, In respect of Doubling ground rents: • Should not double more frequently than every 20 years • Ground rent up to 0.1% of the current market value is acceptable. If the ground rent is over £250 (or £1,000 in London) or will end up over these figures in the future the property is unacceptable under the Housing Act 1988 In order to proceed a Deed of Variation eliminating this risk must be obtained prior to completion. • We may accept Ground rent up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed, In respect of Fixed ground rent: • These are acceptable up to 0.1% of the current market value. If the ground rent is over £250 (or £1,000 in London) or will end up over these figures in the future the property is unacceptable under the Housing Act 1988 In order to proceed a Deed of Variation eliminating this risk must be obtained prior to completion. • We may accept ground rent of up to 0.2% of the current market value subject to review and where this is the case you should refer the matter to us to provide confirmation of whether we are happy to proceed In respect of Open Market Value linked ground rents: • These are not acceptable and should be referred to us as soon as identified Where the management company is not owned by the homeowners covered by the estate rent charge, a maximum cap of 0.1% of the market value of the property, or £1,000, whichever is the lower applies. Increase mechanism limiting any rises to a government index measure for inflation (e.g., RPI or other similar index) is required for the case to be considered. N.B. The ground rent and services charges combined must not exceed 1.5% of the property valuation. Please refer back to us the amount and the nature of the estate charge. Please also refer to Section 5.15.2a |
| National Counties Building Society |
Loans Underwriting Department, Ebbisham House, 30 Church Street, Epsom, Surrey KT17 4NL Email: loansunderwriting@ncbs.co.uk We will not lend on properties with onerous ground rent provisions. We consider ground rent provisions to be onerous where: - the maximum ground rent at the start of the lease term exceeds 0.1% of the property value or £500 per year whichever is higher; - the ground rent must remain reasonable at all times during the lease term, with unreasonable multipliers not allowed. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index and where this is the case we do not need to be advised. However, unreasonable multipliers of ground rent will not be permitted, for example, doubling every 5, 10 or 15 years. These must be referred to us and we will advise if our mortgage offer remains valid. If you are unsure as to whether the terms of a lease are unreasonable, please refer the details to us. The lease must be amended to comply with the above. If not, the case cannot proceed. |
| National Westminster Bank plc |
As 1.11a. 1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| Nationwide Building Society |
Issuing Office - Our minimum unexpired lease term is 55 years, except where lending is over 85% of the purchase price/valuation on a second hand flat, in which case our minimum unexpired term is 90 years. - There must be at least 30 years remaining at the end of the mortgage term (regardless of the length of lease at the start). Where the unexpired lease term is different to that recorded on the mortgage offer, the following clarifies if we need to be informed: Second hand property: - If the unexpired lease term on the offer is 85 years or more - only advise us if the actual lease term is less than 85 years - if the unexpired lease term on the offer is less than 85 years – advise us if the actual lease term is different than reported - For equity share applications - advise us if the actual lease term is different than reported on the offer - Where lending is over 85% of the purchase price/valuation on a second hand flat and the unexpired lease term on the offer is 90 years or more - only advise us if the actual lease term is less than 90 years. New build property: - If the unexpired lease term stated on the offer is 125 years (flat) / 250 years (house) or more - only advise us if the actual lease term is less than 125 years (flat) / 250 years (house) - For equity share applications - always advise us if the actual lease term is different than reported on the offer Lease terms such as ground rent and event fees must be reasonable at all times during the term of the lease and adhere to our requirements below. If you’re unsure as to whether the terms of a lease are unreasonable or onerous, please refer the details to us in plain English for Valuer consideration. If the potentially onerous terms are in relation to the ground rent please include the current ground rent figure per annum, how often it will be reviewed and the price structure it will be reviewed against. See the guidance below. SECOND HAND PROPERTIES Unacceptable - advise Issuing Office (Will be declined): - Unexpired lease term less than 55 years - Unexpired lease term less than 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat - Less than 30 years remaining at the end of the mortgage term - Ground Rent greater than 0.5% of the property value - Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) - acceptable if doubles every 20 years or more - Ground Rent is compounded RPI - Ground Rent review period is less than or equal to 5 years Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability): - Unexpired lease term is 55 to 85 years - Ground Rent greater than 0.1% and less than or equal to 0.5% of the property value - Ground Rent escalation is linked to any indices greater than RPI - Ground Rent escalation is linked to the value of the building* - Ground Rent review period is greater than 5 and less than 10 years - Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial, etc - Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover) - Service Charges greater than 1% of property value p/a (please provide details of what the charges cover) - Anything that appears onerous, unusual or out of the ordinary Acceptable (no requirement to advise Issuing Office): - Unexpired lease term greater than 85 years (Minimum 90 years where we are lending more than 85% of the purchase price/valuation on a second hand flat) - Ground Rent less than or equal to 0.1% of the property value - Ground Rent review period greater than or equal to 10 years - Ground Rent escalation less than or equal to RPI NEW BUILD PROPERTIES (includes office conversions) Unacceptable - advise Issuing Office (Will be declined) - Unexpired lease term less than 125 years on a new build flat or less than 250 years on a new build house (does not apply to Shared Ownership) - Any lease which is subject to a Ground Rent (or Annual Rent) being charged which is more than on a peppercorn basis - Any lease which is subject to a Ground Rent (or Annual Rent) being charged which is more than on a peppercorn basis Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability): - Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial etc - Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover) - Service Charges greater than 1% of property value p/a (please provide details of what the charges cover) - Anything else appears onerous, unusual or out of the ordinary Acceptable (no requirement to advise Issuing Office): - Unexpired lease term greater than or equal to 125 years on a new build flat or greater than or equal to 250 years on a new build house - A lease subject to a peppercorn Ground Rent (Annual Rent) charges For the avoidance of doubt, any New Build properties completed but not sold pre-30 June 2022 will only be acceptable if the Lease conforms to the above guidance. * Where the Ground Rent escalation is linked to the value of the building, please provide the following: - How is the value of the block/unit currently calculated and if the assessment relates to the block(s), how is the Ground Rent calculated/apportioned per property? - The current valuation and Ground Rent for each unit - What is the mechanism for future valuations of the block and how is the Ground Rent calculated/apportioned? - What is the right of appeal? And is this a documented process within the lease? - Who bears the cost of the valuation (and appeal) process? - Confirmation the review period is not less than twenty years. Lease Extensions We require all Lease Extensions to be completed under the Leasehold Reform Housing and Urban Development Act 1993 and to meet the above criteria as a minimum. Where you become aware that it does not meet these requirements, please refer to Issuing Office. |
| Nedbank Private Wealth Ltd | You must refer to us. |
| New Street Mortgages |
New Street Mortgages, PO Box 4761, Maidenhead, SL60 1HW. Tel: 0333-300-3100, Fax: 0333-300-3132, email: enquiries@newstreetmortgages.com Any ground rent which is currently at a level or, may reach a level referred to within the Housing Act 1988 (hence allowing a long lease to be treated as an AST) is NOT acceptable unless the Lease is varied or a suitable indemnity policy is put in place to protect us. The applicable legislation relates to leases with an annual ground rent of more than £250 (or over £1,000 for properties in London). |
| NRAM Ltd | See 1.11a |
| Paragon Buy to Let Mortgages |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Tenancy under the Housing Act 1988, this need not be reported to us if either:- a. The lease can be varied to restrict ground rent below the statutory level; or b. A suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with our instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to us e.g multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. |
| Paragon Residential Owner-Occupied Mortgages | As 1.11a. |
| Paratus AMC Ltd |
New Business Department, Foundation Home Loans, 5 Arlington Square, Downshire Way, Bracknell, RG12 1WA Email: FHL@foundationhomeloans.co.uk Tel: 01344 770 8033 -Unreasonable multipliers of ground rent or other onerous ground rent provisions are not allowed and must be reported to us. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index, and where this is the case, we do not need to be advised. However, neither fixed increases which are clearly above inflation expectation nor unreasonable multipliers of ground rent (for example, doubling every 5, 10 ,15 or 20 years) will be permitted. Starting Ground rent must not exceed 0.1% of the market value of the security property. However, we may accept ground rent up to 0.2% market value but these must be referred to FHL for individual consideration. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988, this need not be reported to us if either: (i) arrangements are made for the lease to be formally varied to restrict the ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London); or (ii) a suitable indemnity policy (which complies with our requirements as set out in Part 1 paragraph 9 (Indemnity Insurance) is put in place to protect us. |
| Parity Trust | As 1.7 |
| Pepper Money | Pepper Money Completions Department Tel No. 0333 370 1101 or email lendingenquiries@pepper.money |
| Pepper Money (PUK) | Pepper Money Completions Department Tel No. 0333 370 1101 or email lendingenquiries@pepper.money |
| Perenna | Please contact our Mortgage team by either telephone: 0330 341 2013 or Email: conveyancing@perenna.co.uk |
| Platform (a trading name of The Co-operative Bank p.l.c.) |
Unreasonable multipliers of ground rent or other onerous ground rent provisions are not allowed and must be reported to us. For example, it is acceptable for ground rent escalation to be linked to RPI (Retail Price Index) or a similar index, and where this is the case, we do not need to be advised. However, neither fixed increases which are clearly above inflation expectation nor unreasonable multipliers of ground rent (for example, doubling every 5, 10 ,15 or 20 years) will be permitted. Ground rent must not exceed 0.1% of the market value of the property when taken as security. However, we may accept ground rent up to 0.2% of such market value, subject to review. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an assured shorthold tenancy under the Housing Act 1988, this need not be reported to us if either: (i) arrangements are made for the lease to be formally varied to restrict the ground rent below the statutory level (currently, an annual ground rent of more than £250 (or over £1,000 for properties in London)); or (ii) a suitable indemnity policy (which complies with our requirements as set out in section 9 (Indemnity Insurance)) is put in place to protect us. |
| Precise Mortgages (Charter Court Financial Services Ltd) | Ground rent and its review mechanism: For owner-occupied, residential properties where the ground rent exceeds £250 (or £1,000 in Greater London), or where it may exceed this limit in the future, you must either have the lease varied to remove any risk of its construction as an Assured Tenancy under the Housing Act 1988 or obtain suitable indemnity insurance. In any event, whether this is an owner-occupied, residential or a buy-to let rental investment applicaiton, you must report to us where either the ground rent exceeds 0.1% of the purchase price or valuation, or the ground rent will increase on review by more than 25% or where it will be reviewed more often than every 25 years as we may need to refer this to our valuer to consider any impact on their valuation as a consequence of the ground rent escalation provisions. |
| Principality Building Society |
Ground rent and other fees referred to within the Lease must be reasonable at all times during the Lease term. Ground rent increases linked to RPI or a similar index are generally acceptable but unreasonable multipliers of ground rent are not acceptable. If you are in doubt you should refer to us and we shall refer this to our valuer. Any ground rent which is currently at a level or, may reach a level referred to within the Housing Act 1988 (hence allowing a long lease to be treated as an AST) is NOT acceptable unless the Lease is varied or a suitable indemnity policy is put in place to protect us. The applicable legislation relates to leases with an annual ground rent of more than £250 (or over £1,000 for properties in London). The risk is that a Court has no option other than to grant an order for possession in arrears situations and also the power of a Court to grant relief from forfeiture of the lease does not apply to ASTs if at least 3 month's rent is more than 3 months overdue. The Court has no choice in such cases - it must terminate the lease and give possession back to the freeholder. Usual provisions for relief from forfeiture are not applicable. *With effect from 1 December 2022 sections 1-25 of the Housing Act are not applicable to dwellings in Wales. As in 1.7: Mortgage New Business PO Box 89 Queen Street CARDIFF CF10 1UA 0330 333 4021 |
| Reliance Bank Ltd |
mortgages@reliancebankltd.com or 0207 398 5422 - Option 1 Discuss New Lending/Option 2 Discuss existing Reliance Bank Mortgage |
| Rooftop Mortgages Ltd | The address and contact details shown on the mortgage offer. |
| Saffron Building Society |
Please refer if the Ground Rent exceeds £250 (£400 in London). Ground rent must not exceed 0.2% of property value or 0.1% for new build properties. RPI linked ground rents are acceptable providing rent is reviewed not more frequently than once every 5 years. Doubling ground rents are acceptable provided they do not double more frequently than every 20 years and does not continue to double after 125 years. Fixed increase ground rents should not exceed more than double. Property price linked escalations are not acceptable. Referals were necessary to be made to: Mortgage Processing Team Saffron Building Society, Saffron House, 1A. Market Street, Saffron Walden, Essex. CB10 1HX Mortgage.processing@saffronbs.co.uk Telephone 01799 582966 Fax 01799 581901 |
| Sainsbury's Bank | Contact point as detailed in 1.11a. |
| Santander UK plc |
Ground Rents 1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. |
| Scottish Building Society | |
| Scottish Widows Bank | New Business Processing (see 1.11a). |
| Secure Trust Bank PLC | As 1.11 |
| Skipton Building Society |
Completions Team via LMS Secure Link GROUND RENT & EVENT FEES Ground rent and other event fees must remain at a reasonable level at all times during the lease term with a minimum period of 10 years between any increases. The ground rent and other event fees must not exceed more than 0.1% of the property value at the start of the lease term. It is acceptable if the ground rent escalation is linked to the Retail Price Index (RPI) or a similar index. Compounded RPI increases are not acceptable. Clauses providing for Ground Rent increases that 'double' (or more) the preceding level are not acceptable. A ground rent clause which allows the ground rent charge to exceed £250 p.a. outside of London or exceed £1,000 p.a. in London is not acceptable. If the terms of the lease do not meet our requirements as set out above, we require that you revert to the Landlord to have the lease terms varied in the first instance. If this isn’t possible, we may be agreeable to you obtaining suitable indemnity insurance but we will require that you notify us prior to any indemnity insurance being effected. You must confirm that any indemnity insurance proposed will adequately protect us and you still must be able to certify that the title is good and marketable. We will require a copy of the policy schedule to be submitted to us with the Certificate of Title. You must also confirm that you have drawn the borrower’s attention specifically to any conditions relating to leasehold properties in the mortgage offer. |
| St James Place Bank | Mortgage Administration, St James's Place Bank, Administration Centre, PO Box 1869, Livingston EH54 7XS |
| State Bank of India UK | As 1.11a. |
| Swansea Building Society |
11/12 Cradock Street Swansea SA1 3EW 01792 739100 |
| The Mortgage Business |
The Mortgage Business, PO Box 548, Leeds LS1 1WU. Fax no. 0845 6039009 |
| The Mortgage Lender Limited |
completions@themortgagelender.com Tel: 0344 257 0426 |
| The Mortgage Works |
Minimum unexpired lease term is 70 years with 30 years remaining at the end of the mortgage term. Where the unexpired lease term is different to that recorded on the mortgage offer, the following clarifies if we need to be informed: Second hand property: - If the unexpired lease term on the offer is 85 years or more - only advise us if the actual lease term is less than 85 years - if the unexpired lease term on the offer is less than 85 years – advise us if the actual lease term is different than reported - For equity share applications - advise us if the actual lease term is different than reported on the offer New build property: - If the unexpired lease term stated on the offer is 125 years (flat) / 250 years (house) or more - only advise us if the actual lease term is less than 125 years (flat) / 250 years (house) - For equity share applications - always advise us if the actual lease term is different than reported on the offer Lease terms such as ground rent and event fees must be reasonable at all times during the term of the lease and adhere to our requirements below. If you’re unsure as to whether the terms of a lease are unreasonable or onerous, please refer the details to us in plain English for Valuer consideration. If the potentially onerous terms are in relation to the ground rent please include the current ground rent figure per annum, how often it will be reviewed and the price structure it will be reviewed against. See the guidance below. SECOND HAND PROPERTIES Unacceptable - advise Issuing Office (Will be declined): - Unexpired lease term less than 70 years - Less than 30 years remaining at the end of the mortgage term - Ground Rent greater than 0.5% of the property value - Ground Rent doubles less than every 20 years (e.g. doubles every 5, 10 or 15 years) - acceptable if doubles every 20 years or more - Ground Rent is compounded RPI - Ground Rent review period less than or equal to 5 years Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability): - Unexpired lease term is 70 to 85 years - Ground Rent greater than 0.1% and less than or equal to 0.5% of the property value - Ground Rent escalation is linked to any indices greater than RPI - Ground Rent escalation is linked to the value of the building* - Ground Rent review period is greater than 5 and less than 10 years - Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial etc - Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover) - Service Charges greater than 1.0% of property value p/a (please provide details of what the charges cover) - Anything that appears onerous, unusual or out of the ordinary Acceptable (no requirement to advise Issuing Office): - Unexpired lease term greater than 85 years - Ground Rent less than or equal to 0.1% of the property value - Ground Rent review period greater than or equal to 10 years - Ground Rent escalation less than or equal to RPI NEW BUILD PROPERTIES (includes office conversions) Unacceptable - advise Originations (Will be declined): - Unexpired lease term less than 125 years on a new build flat or less than 250 years on a new build house - Any lease which is subject to a ground rent (or annual rent) being charged which is more than on a peppercorn basis - Any lease which is subject to a ground rent (or annual rent) being reviewed and altered on any review basis or methodology Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability): - Ground Rent is linked to any indices greater than RPI - Ground Rent is linked to the value of the building* - Event clauses exist for normal use e.g. changing the carpet, installing a TV aerial etc - Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover) - Service Charges greater than 1.0% of property value p/a (please provide details of what the charges cover) - Anything else appears onerous, unusual or out of the ordinary Acceptable (no requirement to advise Issuing Office): - Unexpired lease term greater than or equal to 125 years on a new build flat or greater than or equal to 250 years on a new build house - A lease subject to a peppercorn ground rent (annual rent) charges For the avoidance of doubt, any new build properties completed but not sold pre 30 June 2022 will only be acceptable if the lease conforms to the above guidance * Where the Ground Rent escalation is linked to the value of the building, please provide the following: - How is the value of the block/unit currently calculated and if the assessment relates to the block(s), how is the Ground Rent calculated/apportioned per property? - The current valuation and Ground Rent for each unit - What is the mechanism for future valuations of the block and how is the Ground Rent calculated/apportioned? - What is the right of appeal? And is this a documented process within the lease? - Who bears the cost of the valuation (and appeal) process? - Confirmation the review period is not less than twenty years LEASE EXTENSIONS We require all lease extensions to be completed under the Leasehold Reform Housing and Urban Development Act 1993 and to meet the above criteria as a minimum. Where you become aware that it does not meet these requirements, please refer to Issuing Office |
| The Royal Bank of Scotland plc |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| The Royal Bank of Scotland plc Direct Line Mortgages |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| The Royal Bank of Scotland plc Direct Line One |
As detailed above in 1.11a. |
| The Royal Bank of Scotland plc First Active |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| The Royal Bank of Scotland plc Natwest one Account |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| The Royal Bank of Scotland plc One Account |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| The Royal Bank of Scotland plc Virgin One |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| The Tipton & Coseley Building Society | Mortgage Department. |
| Together Personal Finance Limited | Contact point as detailed in 1.11a above. |
| Topaz Finance Ltd |
Topaz Finance Limited Gateway House, Gargrave Road, Skipton, North Yorkshire, BD23 2HL 0345 389 1672 |
| TSB Bank plc |
Mortgage Processing. Please see 1.11a With regard to ground rent, please note the below. Ground Rent Criteria In these circumstances there is no requirement to contact TSB for consent to proceed permitting the below remedies can be applied: Ground rents on properties built pre-2005 are acceptable subject to being reasonable throughout the lease term and on the basis of the following criteria: * Increases linked to RPI or similar index are acceptable at any review period. * Ground rents which double periodically every 20 years or more is acceptable. * Ground rents which double periodically every 19 years or less are unacceptable. Ground rents on properties built since 1st January 2005 are subject to the above criteria and on the basis of the following maximums: * New build houses - 0.1% of Market Value per annum. * New build flats/maisonettes - the higher of 0.1% of Market Value or £250 per annum. * Second hand/resale properties - the higher of 0.1% of Market Value or £250 per annum. Ground Rent Remedies * Regardless of year built, where ground rent provisions cause (or during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988 (£250, or £1,000 in Greater London), a suitable indemnity policy which complies with our requirements as set out in Section 9 (Indemnity Insurance) is to be put in place. |
| Ulster Bank |
1. Where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be treated as an Assured Shorthold Tenancy under the Housing Act 1988, this need not be reported to us if either: a. the Lease can be varied to restrict the ground rent below the statutory level; or b. a suitable indemnity policy is put in place to protect us (but please notify us about the policy in accordance with the Indemnity Insurance instructions) 2. Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation. 3. Where it has not been possible to vary the terms of the lease so that we are appropriately protected, then we will accept a suitable indemnity insurance policy. You must be satisfied that the policy adequately protects the bank from the risks of the lease being deemed to be an assured shorthold tenancy and be able to provide a clean COT on the basis of the policy being in place. We do not review the terms of any proposed policy 4. If the proposed security is a new, qualifying long residential leasehold property, covered by the obligations laid down in the Leasehold Reform (Ground Rents) Act 2022 you must check: • that the ground rent is no more than “one peppercorn per year” or “peppercorn rent”; and • that there are adequate provisions for repairs, maintenance, insurance etc. and an adequate maintenance charge. |
| Vida Homeloans |
As 1.11a |
| Virgin Money |
If the matter concerns the ground rent and section 96 of the Housing Act 1996, you don’t need to contact us. Instead, you will need to arrange for the lease to be varied so that the ground rent does not rise above the current threshold at any time during the lease term. Otherwise, contact us at: Mortgage Processing Operations Virgin Money Gosforth Newcastle upon Tyne NE3 4PL Solicitors Helpline: 0845 604 4858 |
| Whistletree (a trading name of TSB Bank plc) | Details as 1.11a |
| Yorkshire Bank Home Loans Ltd |
If the matter concerns the ground rent and section 96 of the Housing Act 1996, you don’t need to contact us. Instead, you will need to arrange for the lease to be varied so that the ground rent does not rise above the current threshold at any time during the lease term. Otherwise, contact us at: The team at Yorkshire Bank Sunderland SR43 4JF Tel – 0800 121 4203 |
| Yorkshire Building Society |
As 1.11a. With regard to ground rent, please note that we have the following additional requirements to those set out in part 1 of Section 5.14.9: * the maximum ground rent at the start of the lease must not exceed £1000 a year * the ground rent must not be capable of being increased during the first 21 years of the lease, and not more frequently than every 21 years during the rest of the lease term * when the ground rent is reviewed, any increase must not exceed the higher of i) 100% of the ground rent payable immediately before the date of the rent review: ii) a figure increased in accordance with the equivalent percentage change in the Index of Retail Prices since the date of the previous rent review. Note: where ground rent provisions cause (or, during the term of the mortgage, are likely to cause) the lease to be an assured shorthold tenancy under the Housing Act 1988, please either: (i) arrange a suitable indemnity policy to protect us; or (i) arrange for the lease to be formally varied such that it is no longer capable of being an assured shorthold tenancy. |
| Zephyr Homeloans | We will not lend where the lease reserves a ground rent in excess of £1000 per annum. Ground rent increases which reference the retail price index are acceptable to us. Please refer to us if a different index is referenced. Where ground rent increases reference a fixed multiplier, the minimum period over which the ground rent may double is 25 years. For example, a ground rent which doubles every ten years is not acceptable to us. If you are unsure as to whether the terms of a lease are unreasonable or onerous, please refer the details to us for Valuer consideration. |