Rent / Ground Charge

lgreggster

Hello,

My partner and I are first time buyers. We're currently on our third house (no fault of our own) and it is a new build. We are ready to exchange apart from our solicitor says there is a problem with the wording of the contract and they need to change it regarding the rent / ground charge. It's a freehold house so the charge is for maintenance. The problem is it can affect future sale-ability and only a select choice of what banks will lend on the house. The housing company have said they won't change it and have spoken to the house company director who stated many houses have sold on no problem. However our solicitor has stated it can be changed but we are at bit of a stand still.

Has anyone else had this problem or problem selling the house on?

Thanks

Tom99

I guess the developer want all the sales to have exactly the same wording. If you cannot agree a change and your solicitor, who is also acting for your mortgage co, will not accept the current wording then you will have to pull out.
Do you know exactly what it is your solicitor objects to?
There are some horror stories of freehold house owners being stuck with high maintenance charges for common areas over which they have no control. You will have less rights to challenge any charge than you would have if your house was leasehold.

Davesnave

I don't think anyone can comment more usefully here than Tom has without knowing the wording your solicitor objects to and the exact reason for the objection.

I imagine you chose your own solicitor rather than go with one suggested by the developer, which was the right thing to do. It sounds as if they're protecting you and your lender from an unfair clause which they believe might impact on charges in the future, thus affecting resale.

Having come up against resistance from the developer's legal dept. you need to have a face to face meeting with your solicitor to decide the next move.

AdrianC

Of course it can be changed. The question is one of whether the vendor is willing to change it.

If they are, then that's going to introduce an inconsistency between your property and the others in the development over how maintenance of the common areas is funded.

If they aren't, then you need to decide whether to live with it or walk away from this property. Your lender may make the decision to walk on your behalf.

lgreggster

Thank you for your replies.
So the lender hasn’t said they won’t lend. But I believe the problem is to do with that the current contract would not inform the mortgage company notice if they were to take the property due to stopped/no payments of the charge and some mortgages wouldn’t lend on this (future saleability affected). My solicitor wants it changed to ‘section 121(4) of the Law of Property Act are excluded and the rentcharge owner covenants to serve notice on the mortgagee prior to taking enforcement action’. Our solicitors spoke with them again on Friday and were just awaiting a response now.

GDB2222

There are a lot of complaints on this forum about rent charges. The theoretical penalties for late payment of maintenance charges are draconian. In practice, I have never heard of the penalties being applied, but it’s a possibility. I would avoid buying a property with a rent charge as it could be hard to sell. Or even impossible to sell. That may mean not buy a new build altogether, though.

Kyresa

GDB2222 wrote: »

There are a lot of complaints on this forum about rent charges. The theoretical penalties for late payment of maintenance charges are draconian. In practice, I have never heard of the penalties being applied, but it’s a possibility. I would avoid buying a property with a rent charge as it could be hard to sell. Or even impossible to sell. That may mean not buy a new build altogether, though.

There are actually companies who buy estate rent charges up from the companies who put them on and then stick a lease on the house when payment of the £1 a year fixed charge of whatever isn't made. Then the owner is left with not only the £1 ground rent, but the company charges fees for all the leasehold work that's been done and it starts to run into a few thousand - and that's how they make profit!

There's recent case law on it as someone failed to pay and the company stuck a lease on the house ... Judge said nothing he could do!!!

http://www.bailii.org/uk/cases/UKUT/TCC/2016/395.html

Kyresa

lgreggster wrote: »

Thank you for your replies.
So the lender hasn’t said they won’t lend. But I believe the problem is to do with that the current contract would not inform the mortgage company notice if they were to take the property due to stopped/no payments of the charge and some mortgages wouldn’t lend on this (future saleability affected). My solicitor wants it changed to ‘section 121(4) of the Law of Property Act are excluded and the rentcharge owner covenants to serve notice on the mortgagee prior to taking enforcement action’. Our solicitors spoke with them again on Friday and were just awaiting a response now.

Your solicitor is ABSOLUTELY correct to do this. If they won't exclude then make sure you pay whatever is demanded, even if they say they don't want the (usual) £1 fixed charge....

See my previous post above this for why!

G_M

It is way past time developers realised they cannot impose whatever terms, costs etc they want in property sales.


Trouble is, until either the law is changed, or buyers start refusing to buy unless the terms are changed, they will continue as they currently do.


Buyers need to vote with their feet and developers will then start changing their business tactics to ensure sales.


But that means people like you must be prepared to find another property.........

AdrianC

G_M wrote: »

It is way past time developers realised they cannot impose whatever terms, costs etc they want in property sales.

Oh, but they can...

Trouble is, until either the law is changed

Which ain't going to happen. Even if it did, there would be other similar (but legally compliant) clauses come in their place.

or buyers start refusing to buy unless the terms are changed, they will continue as they currently do.

And that's the only thing that'll stop 'em.

Buyers need to vote with their feet and developers will then start changing their business tactics to ensure sales.

Lenders, of course, can also vote with their feet, and protect most buyers from their complacency.

But that means people like you must be prepared to find another property.........

<nods>