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    • ijones8784
    • By ijones8784 20th Sep 17, 5:55 PM
    • 5Posts
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    ijones8784
    Selling house and buyer had mortgage rejected due to doubling ground rents
    • #1
    • 20th Sep 17, 5:55 PM
    Selling house and buyer had mortgage rejected due to doubling ground rents 20th Sep 17 at 5:55 PM
    Hi. Just hoping someone out there can help shed some light on an issue weíre having. Itís a very long story but Iíve tried to cut it short!

    Weíre currently selling our flat in London. We were supposed to exchange last week then suddenly heard the buyerís mortgage was rejected. Because our ground rent will double in 25 years, from £200 a year to £400 a year. His solicitor has now told us that our flat is unmortgageable. My solicitor says thatís nonsense, there will be a mortgage out there. But weíre also looking at asking the landlord for a deed of variation. Can anyone (brokers etc) help me understand how £200 on 25 years is seen as untenable?

    Also, any idea of rough time frame / cost of deed of variation?

    Also any opinions welcome as to whether or not we truly are unmortgageable and if we need to look to put it back on the market and purely look for a cash buyer.

    Iíll be honest, I donít teallt know what Iím asking, I just feel hopeless and helpless and I feel like I need to do something.

    Thank you in advance
Page 1
    • Nobbie1967
    • By Nobbie1967 20th Sep 17, 5:59 PM
    • 679 Posts
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    Nobbie1967
    • #2
    • 20th Sep 17, 5:59 PM
    • #2
    • 20th Sep 17, 5:59 PM
    Does it double every 25 years?
    • ijones8784
    • By ijones8784 20th Sep 17, 6:01 PM
    • 5 Posts
    • 1 Thanks
    ijones8784
    • #3
    • 20th Sep 17, 6:01 PM
    • #3
    • 20th Sep 17, 6:01 PM
    It does yes. Currently £200, so in 25 years it will be £400
    • Mutton Geoff
    • By Mutton Geoff 20th Sep 17, 6:46 PM
    • 998 Posts
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    Mutton Geoff
    • #4
    • 20th Sep 17, 6:46 PM
    • #4
    • 20th Sep 17, 6:46 PM
    Millions of leasehold properties have rent escalations. Yours is very modest. The current issue is with new builds that have high initial rents that double every 10 years.

    I doubt the story you're hearing is entirely true.
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £4,014

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
    • aneary
    • By aneary 20th Sep 17, 6:53 PM
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    aneary
    • #5
    • 20th Sep 17, 6:53 PM
    • #5
    • 20th Sep 17, 6:53 PM
    I got a mortgage in April with doubling ground rent every 25 years mine started at £150.
    • ijones8784
    • By ijones8784 20th Sep 17, 6:59 PM
    • 5 Posts
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    ijones8784
    • #6
    • 20th Sep 17, 6:59 PM
    • #6
    • 20th Sep 17, 6:59 PM
    Thanks for replying - we are really starting to think that thereís something else going on. All the horror stories Iíve read recently about leases have been about ground rent doubling in 10 years, and all on new builds. Not sure what our next move is. Of course I didnít bother to mention the full chain above us, but there will come a point when our purchase wants to pull out and find someone else.
    I feel like itís a lot of Chinese whispers right now between solicitors and estate agents. My solicitor certainly is adamant this shouldnít be a problem. But apparently theirs is adamant there is. We feel stuck
    • aneary
    • By aneary 20th Sep 17, 7:23 PM
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    aneary
    • #7
    • 20th Sep 17, 7:23 PM
    • #7
    • 20th Sep 17, 7:23 PM
    Ground rent is not the reason for the mortgage rejection.

    What is your service charge like I only ask because my mortgage was reduced due to the service charge and with you hearing third hand it's possible the two have been confused.
    • ijones8784
    • By ijones8784 20th Sep 17, 8:11 PM
    • 5 Posts
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    ijones8784
    • #8
    • 20th Sep 17, 8:11 PM
    • #8
    • 20th Sep 17, 8:11 PM
    Sorry if you get this twice, I donít think it posted the first time! [ok I realised its because I tried to post a link to a story about mortgage lenders rejecting on the grounds of doubling ground rents and Iím not allowed to paste a link)

    The doubling ground rent issue has been gaining a bit of press recently, sounds like since May. Nationwide is apparently one of the worst, though everything i read relates to new builds and ours is a Victorian conversion!
    • buglawton
    • By buglawton 20th Sep 17, 8:21 PM
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    buglawton
    • #9
    • 20th Sep 17, 8:21 PM
    • #9
    • 20th Sep 17, 8:21 PM
    Looking at 1st post, I challenge OP to get that rejection reason in writing, as it simply isn't true. The buyer got cold feet, is obfuscating, who knows.
    • da_rule
    • By da_rule 20th Sep 17, 8:28 PM
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    da_rule
    In terms of a deed of variation, you're not likely to get it, as why would the freeholder voluntarily give up some of their income? If you do then you're probably looking at the lost ground rent income plus their legal costs, plus anything else they want to throw in.

    How long is left on the lease? Have you thought about going down the statutory lease renewal process as this removes ground rent from the lease.

    As everyone else has said, this raise is quite modest, so probably not the true reason.
    • AdrianC
    • By AdrianC 20th Sep 17, 10:19 PM
    • 15,714 Posts
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    AdrianC
    It does yes. Currently £200, so in 25 years it will be £400
    Originally posted by ijones8784
    So it's literally only just doubled from £100 to £200?

    Because if not, then you're already part-way through that 25yrs, and the doubling to £400 is going to be a lot sooner.
    • saajan_12
    • By saajan_12 21st Sep 17, 9:51 AM
    • 996 Posts
    • 672 Thanks
    saajan_12
    Doubling every 25 years is a modest increase, and in line with typical rise by a couple of % every year leases. So there are a few possibilities

    1. The buyer's lender is dim/being conservative and is really rejecting based on the ground rent.
    -> a. encourage buyer to find another mortgage
    -> b. if buyer is convinced this is the common view,

    1. Buyer's lender is being dim/conservative and really rejecting based on the ground rent -> convince buyer to find another lender

    2. Buyer believes house is unmortgageable as their lender is really rejecting based on the ground rent and buyer is convinced this is the common view. -> not much you can do, find another buyer

    3. This is an excuse for cold feet / another issue. -> The fact that they're making excuses suggests they don't want you to resolve the real issue to get the transaction back on track. Find another buyer.
    • Mutton Geoff
    • By Mutton Geoff 21st Sep 17, 10:11 AM
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    Mutton Geoff
    Doubling every 25 years is a modest increase
    Originally posted by saajan_12

    Very modest, in fact just about in line with inflation over the last 25 years, so actual increase in real cost nil.
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £4,014

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
    • wantonnoodle
    • By wantonnoodle 21st Sep 17, 12:06 PM
    • 217 Posts
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    wantonnoodle
    Regardless of the ground rent doubling every 25 years - which as everyone is saying is not a huge increase, I think one thing is being missed. How long is left on the lease? It could be the case that the lender is getting twitchy because the lease is too short. From what I've heard from friends / read in the media (we're freehold so don't have experience of leases), lenders can be reluctant to lend if the lease is less than ~80 years. Could that be the issue?

    If there's plenty of time left on the lease, then I agree that the buyers may be getting cold feet and are using the ground rent as a convenient excuse.
    • CouponClipper
    • By CouponClipper 21st Sep 17, 12:39 PM
    • 23 Posts
    • 98 Thanks
    CouponClipper
    Me and my partner brought a flat in December with a mortgage through Lloyds that has a doubling ground rent ever 25 years and is currently at the base of £300 with approximately 15 years left before it doubles for the first time.

    I agree with the other posters that this really shouldn't be a problem. Someone isn't telling the truth!
    Save 12K in 2017 - #47 - £4,598.51 / £7,000 (65.69%)
    • ijones8784
    • By ijones8784 25th Sep 17, 10:09 PM
    • 5 Posts
    • 1 Thanks
    ijones8784
    Thanks for all replies. 123 years left on the lease - so still considered long. Last ground rent increase was 2009, so next increase will be 2034 - so yes, sooner than 25 years from today but still quite a way off.
    Our Solicitors agree that is not unreasonable, but seller still wants to push for deed of variation. To be honest we’re fully expecting a refusal from the landlord, and since for some reason our buyer is not happy to apply for another mortgage, looks like it’s back on the market for us. Already mentally preparing the flat again! Wasted us £100s but at least we’ll know where we stand soon, it’s the not knowing that’s annoying. Thanks all.
    • strawberries1
    • By strawberries1 20th Oct 17, 3:02 PM
    • 666 Posts
    • 140 Thanks
    strawberries1
    I'm in a similar position about to exchange but so many having issues with doubling ground rent. It's £250 doubling every 25 with 120 left so in 20yrs It'll be £500
    • swathikapu
    • By swathikapu 3rd Dec 17, 3:08 PM
    • 4 Posts
    • 0 Thanks
    swathikapu
    We are about to exchange on a flat with 118 years lease left, ground rent doubling every 25 years.

    2010-2035 - 300 (25 years)
    2036-2068 - 600 (33years)
    2069-2094- 1200 (25 years)
    2095-2120 - 2400 (25 years)
    2121-2135 - 4800 (17 years)

    We are going with Barclays and they are reviewing this at the moment, not sure what would be the outcome. Could you tell me which bank did your buyer went for his mortgage ?
    • swathikapu
    • By swathikapu 3rd Dec 17, 3:10 PM
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    swathikapu
    Were you able to complete on this ?
    • bouicca21
    • By bouicca21 3rd Dec 17, 6:39 PM
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    bouicca21
    You could offer to serve notice of an intent to extend the lease - the buyer can take advantage of that and go down the statutory route which will wipe out the ground rent. Mind you it will be expensive, but you needn't tell the buyer that!
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