Lease inc. foundations and exterior walls - deed of variation or indemnity policy?

kbhm

Hi all,

I am a first time buyer who had an offer accepted on a flat back in February. Everything has progressed well so far with my solicitor stating that he only needed the copy of the original lease from the vendor (they originally only supplied the lease extension) and if that was all in order we could progress to contracts.

However, the original lease was sent through this week and there is a problem. The flat is on the ground floor and lease includes not only the interior as expected but the external walls and foundations. The landlord is a company in which all the flats are equal shareholders and does have the appropriate buildings insurance which includes the exterior of the building and foundations. My solicitor has said that in practice it looks like the provisions in the lease regarding the exterior walls and foundations are ignored and the landlord maintains the building exterior and structure.

My solicitor has advised me that although in reality I most likely won't be responsible this will stop my mortgage funds from being released by the lender. To satisfy the lender he has stated that I will need a deed of variation but that this is a lengthy and potentially costly process that may still not go through as it requires the approval of the landlord which is not guaranteed. He has also said that he is not aware of any indemnity policy which is viable to cover this particular issue.

Is my solicitor right or does anyone have an experience which getting an indemnity policy for something like this? Will a deed of variation be as much hassle as he has made it seem? Surely there must be a benefit because the landlord is a company jointly owned by the leaseholders or will this be a nightmare as there are 12 flats and all will need to agree?

Any help is very much appreciated!

anselld

kbhm wrote: »

My solicitor has advised me that although in reality I most likely won't be responsible this will stop my mortgage funds from being released by the lender. To satisfy the lender he has stated that I will need a deed of variation but that this is a lengthy and potentially costly process that may still not go through as it requires the approval of the landlord which is not guaranteed. He has also said that he is not aware of any indemnity policy which is viable to cover this particular issue.

Why would you not trust your solicitors advice?
Even if a bunch of people on the internet think otherwise, your solicitor also acts for the Mortgage Co so he will insist on the variation for their benefit.

Secondly, if you want to buy this place it would be in your long term interest (ie when you want to sell) not to have a defective lease.

propertyman

your solicitor may have conflated repairs and
and insurance, under the lease you repair, the company insures. In older blocks,its not common to have flats repairing their walls, all you need is have your name on the policy. I cannot accept the in practice its unlikely bit as faced with a big bill you bet the others will read the lease and say your problem! So check the insurance clause as i suspect you insure and the company had agreed to insure as a block unaware that they cannot recover it as service charge and you can refuse to pay and insure yourself as the lease intended. Do pass this on to your solicitor.ihave
dealt with this as above many times and its usually not a lease that needs varying but the result of a wel lintentioned error by insuring as they have jointly

buglawton

1. Knock on the neighbours doors and ask how they bought.
2. Speak to the mortgage company itself, they may have an advisor or a knowledge base to refer to.

kbhm

propertyman wrote: »

your solicitor may have conflated repairs and
and insurance, under the lease you repair, the company insures.

Actually I think I may have conflated the two as there was another issue with insurance which he says can be solved with an indemnity policy. As a FTB I think I got myself confused over what my solicitor was trying to tell me.

I have now gone back and re-read my solicitor's email and he states: The demise is not just limited to the interior of the flat as you would normally expect. It includes the foundations and interior and exterior walls. It means the foundations and exterior walls of the flat are down to the leaseholder to repair and not the landlord. [...] Unfortunately the wording of the lease is technically important to render it acceptable for mortgage purposes and for it to be marketable from a legal point of view.

As it is the repairs he is concerned with and not the insurance this is why he has mentioned the deed of variation. Does this now mean I am back to square one and it is either a deed of variation or an indemnity policy (which my solicitor seems to think still won't be a viable solution)?

I'm hoping there is a suitable policy for now and that a deed of variation could be drawn up at a later date so I don't have this issue when I come to the sell the flat in what I hope will be many years time.

propertyman

While I cannot speak to the wording of the lease and its suitability for a loan,this repair arrangement is not unusual in one up one down blocks ( look like a semi but there is a side door) and older leases. For many developments it was fairly standard in the late 60's/70's.

Think of it as layer cake each flat is repsonsibe for its layer inside and out but its bit tough on the ground floor flat which get lumped with the foundatiojs and the top who look after the roof. Common parts were often insured communally and flats insured their layer.

Where the block is insured the answer as said is for it to be insured by the company and each flat owner as policy holder but I accept that if the tems of the lease don't allow you to insure like this, then as some of your repairs might need insurance eg subsidence, it creates a problem. It all comes down to the wording of the lease but you being responsbile for your layer is not unusual and a deed of variation will not be forthcoming as no other flat owner will want to have to acccept that they might have to pay for something that they arent liable for now.

Richard_Webster

If you have to maintain the structure of your part of the building and insure it then you may have to have a contingent buildings insurance policy that covers you in case one of the other flat owners does not insure. If insurance is done mutually by a group that isn't in itself a problem, but you still need the contingent insurance just in case the mutual insurance ceases and its continuity cannot be enforced because of the wording of the lease.

I agree with Propertyman that this set up is not uncommon and I think the solicitors are being over fussy in saying it is not mortgageable per se.