Selling house and buyer had mortgage rejected due to doubling ground rents

swathikapu

strawberries1 wrote: »

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

Could you let me know whether you were able to exchange and eventually complete.

glentoran99

da_rule wrote: »

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.

does that apply to houses as well as flats?

strawberries1

swathikapu wrote: »

Could you let me know whether you were able to exchange and eventually complete.

No and it doesn't look likely!

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

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

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

cinnamon442 wrote: »

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!

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.