Estate Rent Charge - is this something we should walk away from buying because of?

eternal109

My wife and I are in the process of buying a house. The house is freehold and is on a development of new homes being built by a well known developer. However, the house is 4 years old and has one previous owner whom the developer has done a part exchange with. The developer has been very unhelpful during this entire process - trying to rush the sale along, not giving information requested by our solicitor, calling us instead of the solicitor etc. It has now been discovered that the 'service charge' which we were informed about is actually an 'estate rent charge'. I think I understand what this entails and how we must ensure it is paid or they can put a lease on the property etc. I think I am also aware that they could increase this charge in future and there is nothing we can do about it. It seems like a risk but I think we are happy to take that risk.

However, our solicitor is worried more because they say that we may find ourselves unable to remortgage the house in future and find the house is unsalable due to this estate rent charge. The seller is willing to alter the conditions of this rent charge to fit with our lender's requirements but this still may not fit with other lender's requirements, thus trapping us into this mortgage - I think this is correct, from what I understand. Our solicitor is attempting to get them to change this 'estate rent charge' to a 'deed of covenant' (or something like this) which apparently lenders are much happier about and will not render the house unsalable or trap us in this mortgage. However, i feel they will probably refuse to do this.

My question is: is an estate rent charge like this going to make it difficult to remortgage in the future or difficult to sell in the future? Should we, therefore, walk away from this purchase?

This is a very difficult decision to think clearly on for us as my wife is also 8 months pregnant and so walking away will mean staying in this house with the baby - something we do  not want to do. This makes it a very emotional time for us and makes thinking clearly about this difficult so any help that can be offered would be greatly appreciated.

Browntoa

We have an estate management charge which covers gardening and other estate wide works. 

Never been an issue with a mortgage

The issue is normally that they rapidly raise costs year on year if there is no cap to RPI or CPI each year. 

daveyjp

An estate management chare may not be in the form of a rent charge, which can be very draconian in nature.

AdrianC

Nobody knows what lenders may or may not decide unpalatable in the future. You will go mad playing that game.

eidand

I would take the advice of your solicitor on this one.
Yes, it might be annoying now, if you have to start over and find something else, but compare that with being stuck in a place you can't sell, later on.

jimbog

Browntoa said:

We have an estate management charge which covers gardening and other estate wide works. 

The Estate Rent Charge is not the same as the Estate Management Charge.
This recent thread explains what happened to another member:
https://forums.moneysavingexpert.com/discussion/6149361/jb-leitch-threaten-to-enter-my-home/p1

eternal109

Yes, it is an estate rent charge not just a management charge (despite what they old us at first). I think I understand how horrible they can be if we do not pay but do they really affect mortgages to the point where we may be unable to remortgage or sell the house in the future?

GDB2222

eternal109 said:

Yes, it is an estate rent charge not just a management charge (despite what they old us at first). I think I understand how horrible they can be if we do not pay but do they really affect mortgages to the point where we may be unable to remortgage or sell the house in the future?

Nobody can answer that question, but I'd be very, very concerned.  It will only take a few cases where they lose their security, and banks will refuse to lend on these properties.

The law needs amendment, because rentcharges are unreasonable, but there's no guarantee that will happen. In the meantime, there's a risk to home owners and lenders. 

The biggest concern I'd have is that there'll be growing resistance from buyers to rentcharges in future, as there's been a lot of very bad publicity about them. You're far from the only person to have expressed concerns on this forum. Once they start losing lots of sales because of rentcharges,  developers will simply move over to covenants. Then there won't be the same impetus for a change in the law, and you'll be stuck with a problem property.