Solicitor Terminology issue

Sharon333

Hi
Can anyone help me - I seem to be having a real issue with a house sale that is going through (I am the seller) The property is a first floor maisonette, so it's leasehold, and although I own it, it's in a block, with a management charge payable every month to a housing association.managment company. Anyway, the buyers solicitors have gone crazy over the forefiture clause in the lease, (which my solicitor tells me is a standard clause in just about every leashold porperty lease in England) and it's now at the stage wher the buyers lender has refused to proceed until I sort the lease out . My solicitor is saying the issue is being caused by the buyers solicitors, they thought the property was part equity and informed the mortgage lender, and then realised it was not, but have not been able to make the mortgage lender understand this Her solicitors are still saying there is an issue with the forefiture clause and my solicitor says its a standard clause - Stalemate!

Does anyone know if there is a way round this clause issue - after 5 months I just want the sale to finalise, and we can't even get to exchange!!!

Thanks!

G_M

I'm afraid your post is a bit confused - I don't really understand what you're saying.

gone crazy over the forefiture clause in the lease,

Without knowing what this says it's impossible to comment.

they thought the property was part equity

Meaning what? The buyer is unlikely to be offered a 100% mortgage these days so there must be some equity in the property. But this is not really anything to do with you.

Richard_Webster

You will need to answer the points G_M has asked.

There can be issues with forfeiture clauses - some old flat leases contain clauses saying the lease is forfeited on bankruptcy of the lessee. This imperils a lender's security because the landlord can forfeit and deprive the lender of its security.

If that is the case there is a problem, but frankly it is pretty basic for a conveyancing solicitor to know that such clauses are not acceptable. Forfeiture clauses allowing for forfeiture on bankruptcy are not "standard", so I am assuming it is something else that is causing the problem. Nobody can really comment until you let us see the wording of this forfeiture clause.

m_13

What I'm gleaning from your post is that you own a leasehold maisonette in a block that is managed by a local housing association.

The buyer's solicitors got confused when they realised the housing association were involved and informed the buyer's lenders that the property was not wholly owned by you, but instead was some form of shared equity/part-ownership which is incorrect.

The buyer's solicitors now acknowledge that the property is not shared-ownership but for some reason the buyer's lenders now won't believe that their customer is buying 100% of a leasehold property.

To add to the complication either whilst they thought it was shared ownership or before or since, the buyer's solicitors have become unhappy with a forfeiture clause in the lease. Your solicitor says its a standard clause for a leasehold property; the buyer's solicitors say not. This clause allows the leaseholder to take back the leasehold property under certain circumstances.

Am I correct so far?

As G_M states, unless you provide the forfeiture clause that is causing the issue, no opinion can be given on whether it is standard or not. Your solicitor might be best taking advice fromThe Leasehold Advisory Service on 020 7374 5380 (their website is here: http://www.lease-advice.org).

The Commonhold and Leasehold Reform Act 2002 has changed the rules on leases in lots of respects - self management, for example - and forfeiture is one of these areas. It may be that the grounds for forfeiture in your lease are no longer enforceable in law.

Sharon333

Sorry -m_13, you got the gist of what i was trying to say.

I don't know exactly what the clause says as I already sent my copy of the lease to my solicitors, only that both solicitors are arguing over the point, but here in brief is what has been said between the solicitors & mortgage lander today:

ML to Buyers Solicitor- with ref to your letter regarding the forfeiture clause, we can advise that in all cases you must give notice of our mortgage to the scheme provider. The lease/agreement must restrict the scheme provider from starting forfeiture or reposession proceedings without reason able notice to the mortgagee. The scheme provider must also allow Lender at lease 28 days if the lender confiems it will undertake necessary action to resolve the problem.

Buyers Solicitor to mine: We refer to previous correspondence and we enclose a copy of reply from mortgage lender, which is self explanatory. for you ref, the scheme provider is actually the freeholder. we look forwad to hearing that you will deal with the deed of variation of the lease to amend the forfeiture clause.

My solicitors to the buyers-We note that the Mortgae lender refers to the scheme provider, however there is no scheme. This is a straightforward lease that was originally done under a right to buy any any liability for repayment of discount was limited to the original purchaser and has long expired. Please explaing to the mortgage lender ther is no scheme, the property is not shared equity and therefore the amendments they require are not necessary. It is for you as solicitors acting for the mortgage lender to advise them of this fact. Please do so immediately. What is an extremely starightforward leasehold purchase has now been proceeding for over 4 months. Can we now finalise this transaction?

The sagae continues, and it seems all I can do is call eveeryday and chase for progress!!!

Any one got any words of wisdom?

Richard_Webster

Yes it sounds as if the buyer's solicitors are being silly and are not being strong enough with their client's mortgage lender. The provision that a freeholder should give notice to a mortgage lender before it commences proceedings for possession when it has forfeited the lease for non-payment of rent etc is one that a few lenders like to see in new leases.

The reality is that very few leases contain this provision and it would not be reasonable for a lender to insist on it with an existing lease. In practice freeholders always give notice to lenders if they are owed money because they hope the lender will pay up in order (and add it to the borrower's mortgage debt) to keep their mortgage safe on the property. (If the freeholder forfeits then the lender loses its security!)