Setting up a deed of variation, how hard can it be?

Brown_Eyed_Girl

I've reached an impasse in my purchase and i'm trying to get a sense of how difficult it would be to remedy.

Basically the lease wasn't registered correctly with the land registry. It's the same lease as all the other flat, but where they are meant to put in the details of which one of the 100+ it is (number floor etc) they haven't. I'm told they need a simple deed of variation from the freeholder confirming that the lease we have relates to the property - this all sounds pretty sensible as without it, the lease doesn't relate to anything.

But sellers solicitors keep saying it's fine, it's all registered so nothing to worry about. But the fact that it has been ok until now, doesn't mean i want to rely on that - in fact the mortgage lender would get funny.

There is also an old thing about being able to claim ground rent being able to be charged at 1/100 of the properties value in about 20yrs from now - which was fine in the 70s when that was written but things have changed & currently it is set at £100 so just need to recognize that in a deed.

So given that, this should be simple right? This shouldn't take weeks of going round in circles? They can't sell to anyone with out this being sorted - at lease anyone with a mortgage and a cash buyer would surely be wary

Lunchbox

We had a similar problem with the headlease being incorrectly registered. It took around two months for them to get it sorted, meanwhile we (and everyone else buying in the same development were being told it could be 'tomorrow or several months', they couldn't give us a timescale. we then had a further delay of three weeks because the developers solicitors needed to deal with the backlog of exchange/completions that had been held up.

eddddy

I assume you're buying an existing lease from a current leaseholder - rather than a new lease from the freeholder.


You say that all that's needed is a simple deed of variation of lease, but if the freeholder refuses to agree to one - your seller (and you) are pretty much stuck.

If the lease is defective (as defined in the Landlord and Tenant Act 1987), the seller could apply to a tribunal to get it varied. But that would take many months - and TBH it doesn't sound like the changes you want are defects covered by the act.

Another option is for the seller to offer the freeholder a chunk of money, in return for the variation.

What does your solicitor say?

Brown_Eyed_Girl

eddddy wrote: »

I assume you're buying an existing lease from a current leaseholder - rather than a new lease from the freeholder.


You say that all that's needed is a simple deed of variation of lease, but if the freeholder refuses to agree to one - your seller (and you) are pretty much stuck.

If the lease is defective (as defined in the Landlord and Tenant Act 1987), the seller could apply to a tribunal to get it varied. But that would take many months - and TBH it doesn't sound like the changes you want are defects covered by the act.

Another option is for the seller to offer the freeholder a chunk of money, in return for the variation.

What does your solicitor say?

Yes this is being bought from an existing leaseholder, rather than from the freeholder.

Mine is saying that a document just needs to be drawn up by the freeholders solicitors, they say it's not a big thing, they just need the lease with the number of the flat.

Whether they have been asked to do this by the sellers solicitors is unclear - they keep sending the same document which is incorrect going ' ok are we good now?' which is still no.

They've had this since mid August, I think they assume my solicitor will either get tired of asking or convince my solicitors it's fine (which is stupid cause the mortgage company won't accept me buying a leasehold that has no indication of what it's for). It might be that there is a reluctance to incur a cost but that hasn't been given as a reason (and would be dumb as without it, it makes the property worthless)

EA has spoken to the sellers about it - but not sure how he has phrased it, but it's in his interest to get this sorted as if i end up pulling out (i'd rather not) then he'd come up against this problem again.

Brown_Eyed_Girl

So, finally have something that shows the lease belongs to the flat. It's not in the section it should be but it's enough for the solicitor to think the mortgage lender will go for it.

Now he ground rent clause. It basically says that at some point in the future (can't remember the date but not near) the freeholder can charge X amount or 1/200th of the properties value. Which would be a lot on today's prices & likely more by the time it could come into force.

Currently the management company have agreed this is unsustainable so have set it at £100. But solicitors wanted the deed of variation to stop anyone in future reverting to the old calculation. The sellers won't even ask so we've had to ask the lenders if they'd accept it.

It's then up to me to decide if I will. My gut is I want it changed, but does that need to involve a change to everyone else, as there are 100 other flats? If so that would take forever. In which time I'm definitely paying increased travel + storage costs. So the hypothetical extra would soon be less than what I am shelling out and there's nothing to say this won't just all tank in the meantime leaving me without a flat out having paid for everything else you can before exchange - this is 1 of 3 last little things.

The other thing is that the lease has 88years (87in March) so I'd want to get that extended asap before it drops below 85yrs and starts getting a bit more expensive. Is that a better point to address the issue?

I don't want my tiredness & desire to get in cloud my decision.

eddddy

Brown_Eyed_Girl wrote: »

The other thing is that the lease has 88years (87in March) so I'd want to get that extended asap before it drops below 85yrs and starts getting a bit more expensive. Is that a better point to address the issue?

If you go for a statutory lease extension, part of the price you pay is compensation to the freeholder for lost ground rent.

So if 1/200th of the property's value is high, the price for the lease extension will be high - and it could be difficult to calculate (so scope for lots of legal arguments, and high legal bills).

If you can get the lease varied to fix the ground rent at £100, that would be great from your perspective. But that would be like the freeholder 'throwing away' lease extension money, so the freeholder may not be keen.

Brown_Eyed_Girl

eddddy wrote: »

If you go for a statutory lease extension, part of the price you pay is compensation to the freeholder for lost ground rent.

So if 1/200th of the property's value is high, the price for the lease extension will be high - and it could be difficult to calculate (so scope for lots of legal arguments, and high legal bills).

If you can get the lease varied to fix the ground rent at £100, that would be great from your perspective. But that would be like the freeholder 'throwing away' lease extension money, so the freeholder may not be keen.

Thank you. The thing is they've currently stated that they don't want to use the 1/200th clause in the lease as I'd just be ridiculous - £1000+ each. So if youre thinking of it as throwing away money, they're already doing that. If negotiating the lease extensions gives me the chance to fix this ground rent issue that might be the simplest option. Your right in that they could chose to be a ****** about it though.

At the moment I have no idea how open to the proposal they'd be as the sellers solicitors refuse to ask. :wall:

eddddy

Brown_Eyed_Girl wrote: »

If negotiating the lease extensions gives me the chance to fix this ground rent issue that might be the simplest option.

Yes - if you get a statutory lease extension the ground rent would drop to a peppercorn (zero). But...

if the lease says your ground rent is £100 - the extension is likely to cost you about £5,000.

If the lease says your ground rent is £1000 - the lease extension is likely to cost you about £15,000


(So varying the lease would save you £10,000 - but cause the freeholder to lose £10,000)



See: http://www.moneysavingexpert.com/mortgages/extend-your-lease (I've assumed your flat is worth £200k and you have 80 years on the lease.)

Brown_Eyed_Girl

eddddy wrote: »

Yes - if you get a statutory lease extension the ground rent would drop to a peppercorn (zero). But...

if the lease says your ground rent is £100 - the extension is likely to cost you about £5,000.

If the lease says your ground rent is £1000 - the lease extension is likely to cost you about £15,000


(So varying the lease would save you £10,000 - but cause the freeholder to lose £10,000)



See: http://www.moneysavingexpert.com/mortgages/extend-your-lease (I've assumed your flat is worth £200k and you have 80 years on the lease.)

wowzers that's a lot. But yes that would be if they decided to enforce the clause in the lease (which i think is for every 25yrs after 2003, so 2028, 2053, 2078 etc) I have letter from management company saying they aren't doing this as they get it isn't feasible. However, the fact that it's in there allows them to in future if they choose to, so would potentially have to negotiate something.

It's whether if i wanted to get them to vary the lease now on this, would they have to do that for all leases? Are they allowed to give that condition to one and not other leaseholders.

Or else, if that property bubble burst could happen at exactly the time i am looking to extend the lease... that'd be handy.