In the past decade, real estate developers began to insert unnecessary clauses into the leasehold contracts. This caused the ground rent to regularly escalate and double indiscriminately over the course of every 10 years. What appeared to be insignificant fee became doubled. Ground developers' income began to skyrocket. This led to what is now known as the ground rent scandal.
Generally, these ridiculous clauses were included in new builds and houses that were relatively of low value. Usually, the affected properties were low-low-budget leaseholds and not flats.
Are homebuyers aware?
Typically, only a few homebuyers became aware of this fraudful ground rent escalation. This is because they only monitored the starting rent price. However, the infamous ground rent scandal is all about a long-term accumulation.
The inserted clauses are such that will make the rent snowball into absurd levels which were really hard to detect.
An example of what scandal looks like
Here's a typical example of the spiralling ground rent clause:
· Take for example that a rent which is supposedly meant to last from October 2018 to 2028 is worth around £100 per year. A typical ground rent fraud will take it to £200 in the next decade, starting from November 2029. And the rent keeps doubling thereafter, following the course of every 10 years.
Explaining further, if you remain in your leasehold home for 70 years, you will have a yearly rent fee of £12,800. If you stay for 120 years, the rent would have spiralled into a whopping £409,600 per annum. Now, that's grand!