A West Midlands law firm is being sued by a client who claims it failed to tell of a “ridiculous” ground rent that doubles every five years – meaning she will be paying £1m a year in 50 years.
Complaints about inadequate advice on ground rent and other clauses in leases have been growing in recent times, increasing nervousness among professional indemnity insurers.
Carole Patterson bought a one-bedroom flat in East Dulwich, South London in 2011 for £170,000 as an investment and says FBC Manby Bowdler failed to tell her about the ground rent clause.
It rose to £525 in 2016 and £1,050 this year. In another 20 years, the ground rent will be £16,800 and over £1m in 50. In a century, it will be more than half a billion pounds a year.
Ms Patterson said “It is just ridiculous. It effectively means the flat is worthless as nobody would buy it now and there is also no way I can afford the ground rent in a few years’ time…
“What’s even more infuriating is that my flat is the only one in the block with this doubling of the ground rent clause. My solicitors at the time should have alerted me to this clause, but they didn’t…
“Unless the lease is amended, I will end up having to hand the keys to the freeholder as the ground rent will be too expensive for me to pay.”
The landlord has offered to change the terms of the lease for a payment of £100,000 – a quarter of the current value of the property.
London firm Osbornes Law is acting for Ms Patterson. Head of litigation Shilpa Mathuradas said: “Our client has been left in a horrendous position of not being able to sell her property while the ground rent doubles every five years to unaffordable proportions.
“We argue that this doubling of the ground rent clause was left in as a direct result of negligence on the part of the acting solicitors for failing to provide a service to a reasonable standard.”
In a statement, FBC Manby Bowdler said it could not comment on the specific case for reasons of client confidentiality, but that it always strove to offer a first-class service to all its clients.
“FBC Manby Bowdler is an award-winning law firm which places the highest importance on its responsibilities to its clients and adherence to the Solicitors’ Professional Code of Conduct.
“This is a complex area of law and something which raises broader issues which are now being addressed by Parliament.”