A leaseholder, Luke Mosson, signed a contract with his freeholder to extend the lease on his flat to 190 years.
However, one of the clauses in the flat contained a term which said that the £250 ground rent would double every ten years.
Luke Mosson bought a flat for £150,000, so a £250 ground rent per year would seem reasonable, and when he signed the contract he looked no further.
But when it came to light he was shocked at what he had done. He calculated that if the ground rent doubled every ten years, over a 190 year period, the ground rent would be something like £1.3bn per annum.
It’s the old grain of rice story: compounding, as Albert Einstein and Warren Buffet say, is the most powerful force on earth.
After the BBC contacted him, the freeholder, Martin Paine, who has been criticised by MP Peter Bottomley, the leasehold campaigner, said that his layers had now reached a settlement with Mr Mosson’s lawyers.
Three important questions arise here:
- What was Mr Mosson doing signing a contract with such a clause?
- What was his solicitor doing, was he asleep?
- What where...
the freeholder’s solicitors thinking when they inserted such a clause in the first place?
The story was first brought to light by James Longman reporting for the Victoria Derbyshire programme – see BBC story here
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