Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • ijones8784
    • By ijones8784 20th Sep 17, 5:55 PM
    • 5Posts
    • 1Thanks
    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 2
    • swathikapu
    • By swathikapu 4th Dec 17, 12:44 PM
    • 4 Posts
    • 0 Thanks
    swathikapu
    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
    Originally posted by strawberries1
    Were you able to exchange and complete on this ? Thank you.
    • swathikapu
    • By swathikapu 4th Dec 17, 3:57 PM
    • 4 Posts
    • 0 Thanks
    swathikapu
    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
    Originally posted by strawberries1
    Could you let me know whether you were able to exchange and eventually complete.
    • glentoran99
    • By glentoran99 4th Dec 17, 4:04 PM
    • 4,906 Posts
    • 3,910 Thanks
    glentoran99
    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.
    Originally posted by da_rule


    does that apply to houses as well as flats?
    • strawberries1
    • By strawberries1 5th Dec 17, 1:57 PM
    • 665 Posts
    • 140 Thanks
    strawberries1
    Could you let me know whether you were able to exchange and eventually complete.
    Originally posted by swathikapu
    No and it doesn't look likely!
    • cinnamon442
    • By cinnamon442 5th Dec 17, 3:31 PM
    • 38 Posts
    • 35 Thanks
    cinnamon442
    I've just had exactly the same problem with our buyers. They got their mortgage approved weeks ago but in the last minute checks before exchange, their solicitors noticed that we have a doubling of ground rent in our leasehold. It's currently £100 a year and it'll double to £200 a year in 2031, doubling again every 25 years. They notified their lender and the lender then pulled their mortgage completely.

    We, the buyers, both sets of solicitors, the broker and the estate agent all went into panic mode and started working on fixing it, to see if they could convince the lender that it's a clause in leaseholds all over the country, it's such a small amount and it in no way is the same as the doubling rent stories that have been in the media recently. Our management company said they've never heard of it happening before, our broker said it was ridiculous and the agent said they'd never seen this happen before either. We were a day away from exchanging.

    Luckily for us, the agents and broker worked their magic, managed to convince the lender they'd overreacted and they had their mortgage reinstated 24 hours later. We exchanged two days after that with completion due to take place on Friday. Your flat isn't unmortgageable, it CAN be fixed, you just need a lender willing to listen, buyers and a mortgage broker willing to fight and a really good agent motivated by their commission disappearing before their eyes!
    • strawberries1
    • By strawberries1 5th Dec 17, 5:38 PM
    • 665 Posts
    • 140 Thanks
    strawberries1
    The lesson here is to bear in mind doubling GR make a property harder to sell and it's best to go for those without doubling GRs. Of course if you're a seller you'll hope it's not noticed or noticed too late and if one is a home owner in the market to extend a lease it's best to go the statutory route.
    • ThePants999
    • By ThePants999 5th Dec 17, 6:08 PM
    • 897 Posts
    • 1,049 Thanks
    ThePants999
    I don't understand the problem with doubling ground rent every 25 years. The ones that double every 10 years are ludicrous, but doubling every 25 years is equivalent to a 2.811% annual increase - that's less than current inflation.



    Except it's actually better than that - because you effectively defer all the increases to the 25th year, you save a lot. Over 100 years, the total amount you pay under a double-every-25-years scheme is actually the same as what you pay with a 2.3% annual increase. On this graph, you're looking at the area under the lines.

    • buglawton
    • By buglawton 6th Dec 17, 12:31 AM
    • 7,031 Posts
    • 3,271 Thanks
    buglawton
    I've just had exactly the same problem with our buyers. They got their mortgage approved weeks ago but in the last minute checks before exchange, their solicitors noticed that we have a doubling of ground rent in our leasehold. It's currently £100 a year and it'll double to £200 a year in 2031, doubling again every 25 years. They notified their lender and the lender then pulled their mortgage completely.

    We, the buyers, both sets of solicitors, the broker and the estate agent all went into panic mode and started working on fixing it, to see if they could convince the lender that it's a clause in leaseholds all over the country, it's such a small amount and it in no way is the same as the doubling rent stories that have been in the media recently. Our management company said they've never heard of it happening before, our broker said it was ridiculous and the agent said they'd never seen this happen before either. We were a day away from exchanging.

    Luckily for us, the agents and broker worked their magic, managed to convince the lender they'd overreacted and they had their mortgage reinstated 24 hours later. We exchanged two days after that with completion due to take place on Friday. Your flat isn't unmortgageable, it CAN be fixed, you just need a lender willing to listen, buyers and a mortgage broker willing to fight and a really good agent motivated by their commission disappearing before their eyes!
    Originally posted by cinnamon442
    This rather proves the level of education and competence of the average lender management decision makers we have today. One minute they're offering 105% of equity loans, the next (well, 10 years later) they pull stunts like you describe here.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

232Posts Today

1,457Users online

Martin's Twitter