Deed of Variation - Sale Worry!

mousical

Hi,

Selling my Leasehold flat and purchasing a bigger property.

Am very close to exchange but a spanner has been thrown in the works by the Freeholder/Managing Agent.

Said spanner is a Draft Deed of Variation that the FH/MA have been working on in the background but have not yet shared with leaseholders - but it did go in the pack to my buyers solicitor.

The deed of variation is to alter service charge proportions- this being because the service charge amounts in the block (15 flats) do not add up to 100% - the reason being that there were 10 to start with and then 5 added later so the total amount now exceeds 100%. The idea is to make this fairer and slightly shift everyones % - we are talking a minimal amount (the difference will be say £100 per year on service charge) I am one of the 5 flat who will go up. but for the original 10 its a step down in service charge.

With their being so many flats- the freeholder is going to the Tribunal route for speed and as this seem the fairest route.

as mentioned this was all news to me and my solicitor has hit the alarm button and told me this will likely be a major issue and i should be prepared to lose the sale. She thinks that as its an uncertainty that both the buyer and his lender will have issue with this.

Personally it doesn't seem such a big deal to me and as it hasn't been communicated to the Leaseholders yet its more of an FYI to the buyer that this will happen in 2-3 months.

is my solicitor being dramatic? could this be a deal breaker? Could the lender refuse to release funds?

I have trawled the internet but cant seem to find any similar cases.

any advice welcome please.

Tom99

Providing that the proposed service charge percentage for your flat seems fair and reasonable I would agree with you that it's not a big deal.
Perhaps provide the buyer with the information about the number of flats size etc in an easy to understand way to give them some reassurance.

eddddy

Tribunals can 'force' lease variations in some cases where service charges don't add up to 100% - but I'd be surprised if that applies in this case.

In this case, I'd expect all leaseholders to have to agree voluntarily - getting 15 leaseholders to agree voluntarily could be a nightmare.


But I guess you could just tell your buyer...

• If the 15 leaseholders agree, the service charge breakdown will be [whatever]
• If the 15 leaseholders don't agree, the service breakdown will be what it is currently

But, for example, the lease variation might be more worrying than you imagine because,

• It sounds like you live in the modern 'extension' to the building, so I guess you are only responsible for a share of repair costs for the modern bit.

• It sounds like the lease variation will make you responsible for a share of the repair costs for the whole building - the modern 'extension', and the old part.

• The old part may be more expensive to maintain and/or it may need a lot of repair work. (Repainting, re-roofing etc)

• So a worst case scenario is that the deed of variation goes through, and you then get a big bill for repairs to the old part of the building.

SmashedAvacado

Your seller could agree with the landlord now and amendment to the lease changing the percentage to "a fair and reasonable amount as determined by the landlord acting reasonably and in the interests of good estate management". This would allow everyone to move forward and would not require all of the leases to be changed at the same time.

mousical

HI, thanks for all the replies

I am the seller here.

My buyer is still keen to complete but her solicitor is the now the one saying that he cannot give a clear certificate of title to the Lender knowing that their could be a change in service charge percent. he said lenders are risk adverse and wont sign this off knowing their may be a tribunal in the works,

my view is that as the application hasn't gone in yet then surely this is a mute point?

I cant believe i will lose my sale over something that hasn't even happened yet!

SmashedAvacado

if you are the seller, ask your landlord to change the allocation to fair and reasonable and then have the landlord confirm that the updated percentages are what it considers to be fair and reasonable. This is more than acceptable for a service charge regime. The buyer should accept this - as should its lenders as there are thousands of leases that work like this without issue.

SmashedAvacado

My buyer is still keen to complete but her solicitor is the now the one saying that he cannot give a clear certificate of title to the Lender knowing that their could be a change in service charge percent. he said lenders are risk adverse and wont sign this off knowing their may be a tribunal in the works,

Has someone explained to the lenders that the proposed change is to reduce the amount?

mousical

as far as I know the buyers Solictor hasn't spoken to the lender - he is just saying based on the uncertainty that he cant give a clear certificate of title and thus the property becomes unmortgageble. For my flat the service charge proposal would increase (a nominal amount)

I am just worried this is just the opinion of the conveyancers - surely they should check with the Lender.

as I say is also only in draft stage.

mousical

UPDATE: this has now gone to the Buyers Lender for referral on her request. I am hoping as she has a big deposit and low LTV they might see this as low risk, although the solicitor seems to think they will not release funds until the future of the service charge is certain.