Deed of Variation missing-should I buy?

alice_in_wonderland

Hi,
We are two months down the line the process of buying a flat and we have received the following email from our solicitors

'An unusual circumstance has arisen with the property you are purchase, in that whilst the Lease for the property is registered, the provisions have at some point been varied by a Deed of Variation which cannot be traced. The seller’s solicitors have provided a copy of the Deed of Variation for a neighbouring property, on the assumption that the provisions are similar given that both extend the term of the Leases and include a nominal ground rent. However, the Deed of Variation may include unknown rights and covenants. To this end the seller’s [/I]solicitors have indicated that they would be willing to put in place an indemnity insurance policy, at their own expense, to protect you from any financial loss you may incur as a result of this'

I have very little idea of what this means or how this will affect a future sell of the property. Surely a copy of a Deed of Variation can be obtained from the freeholder, or a new one can be drafted?

Any advice would be really appreciated since we are spending all our lives savings on this property and would not want to make a costly mistake.

Many thanks in advance

TrickyDicky101

I can tell you what position I would take if I were considering purchasing this property from you if you came to sell:

I would not rely on another lease's Deed of Variation to confirm an extension of my own lease term. Indemnity insurance will not cover the cost of obtaining such an extension should it later become clear this property had no extension made.

I would not buy this property as a result and I would look elsewhere.

If I were you, I would tell the vendors you won't be buying from them unless they can produce a DoV (which they could obtain - probably at a cost to them - from the freeholder).

AlexMac

Surely you pay your solicitor to advise whether an indemnity is a bombproof substitute for the missing DoV? Or what the alternatives are and wheter they can get the other side to cover whatever it costs? Ask what they recommend and ask them to also reassure you that they will include this as written advice within their Report on the lease and title.

And if they ain't planning to report to you on the title and lease, what are you paying them for?

I get impatient with solicitors (my own or the vendors) who point to problems which can be solved, usually with a bit of legal paper, or if not, an indemnity both/either usually costing £50-£200, but I guess we have to live with this.

Either way, it's the vendor's problem, to be solved at their expense, as you will only buy the gaff if the lease and title are perfect. We have seen vendors forced to cough up for more ridiculous costs than that... An indemnity against a non existent environmental problem on an ancient map... a wayleave over an access road which we and the other thousand people on the estate had used for decades without hindrance... Lawyers; doncha luvvem!

Good luck

alice_in_wonderland

Apologies for my ignorance, but here is a very important question.
My solicitors say that the lease is 'registered'. Wherever this lease is registered, would it state how many years are there left AFTER the DoV was written (according to the vendors in 2004)? Or do they expect the buyer to trust them on the number of years reamining which are stated on a missing document? In my view, this would make this property unsellable. Who is going to spend £350000 and trust the vendor on something that might potentially cost you thousands of pounds when your lease ends?

TrickyDicky101

It should be registered at the Land Registry - you should be able to access the title particulars online (I believe it costs a few £ to download a copy). It may not have the DoV though so if there is a difference between the LR title and what the vendors state the DoV contains, then I agree - it makes the place unsellable without further work.

gollum007

This is how I understand what your solicitor has told you:

Known:
As the lease is registered, a copy of these is specifically on file-
* Ground rent per annum
* Lease term, including the extension.
* Original lease terms.

They've also checked the paperwork for an adjacent property, completed at the same approximate time. This provides a reasonable degree of reassurance that there are no nasties lurking in the missing paperwork.

We Don't Know:
As the specific paperwork is missing, it's a technical possibility that a clause or covenant could be missing from the entries that have been transcribed onto the electronic register.

This is unlikely, but not unheard of.

My next move would depend very much on what the property is-
If it's a house on a long lease with minimal/ peppercorn ground rent, then I wouldn't be worried.

If it's a flat or there are any significant ground rent/ maintenance charges, there is more potential cause for concern, and I'd be looking to investigate a lot further.

-Gollum

alice_in_wonderland

It is a flat with over 900 years left in the lease and peppercorn ground rent...or this is what the estate agent says...I have requested clarification from our solicitors regarding what the actual registered lease states.

What type of worrying covenants could be in a DoV? Could they be covered by indemnity insurance?
Sometimes getting a straight answer from these people can be a lengthy process.
Thank you so much for your advice

Soundgirlrocks

The DoV could be anything or nothing, my vendors had to get a DoV for my flat when I bought as the bay window was missing off the plan. You won't know what has been varied until you can see the paperwork.

bouicca21

I was sort of in a similar position when I bought my flat. My solicitor insisted on getting written agreement from freeholder that the problem would be rectified and a quote for their costs. The vendor then had to make an 'allowance' for the costs of rectification (i.e. those costs plus my costs), so although land registry says I paid £x, I actually paid £x-y.

Of course much depends on how your mortgage lender views the problem.

alice_in_wonderland

Are you saying that the freeholder could write an agreement prior to the sell stating that they will provide the future leaseholders (us) with a new DoV and charge the seller for this? Or do you mean a copy of the DoV already in place?
My biggest concern is the covenants in the DoV. What if after we purchase the property the freeholder provides us with the DoV which states, for example, that you are not to rent the property?

bouicca21

Yes, an agreement with the freeholder that they will write a new agreement that overrides the old DoV - probably using the one for the neighbouring property as a template. And all this of course at the cost of the vendor not you. Cast iron guarantee required because you want the place to be saleable in the future without a problem.

But you will have to satisfy your mortgage lender, so you need to talk to them too.