Indemnity Policy for Ground Rent

Sheepy19

Hello
Apologies if this has been posted before but I couldn't find it.

We are currently selling our house which is an old mid terraced house, freehold. However we are being asked to take out an indemnity policy for an old ground rent charge on the house which comes up in the searches. This rent was there when we bought the house 6 Years ago but we were told at the time that as its such an old charge (£2.50 in 1985 between two sets of people) it's unlikely to ever come to light and therefore neither side took any action, and our solicitor at the time said its not worth pursuing from the seller..and so it was left. 

6 years later the same issue has arisen again and we've said to our solicitors that it is an archaic charge and don't want to pay..but now are being told that an indemnity policy of £40 MUST be taken out by either party. Which seems odd but am I right in thinking that the maximum that could potentially be claimed off the owners is less than £40 anyway?

How come we weren't required to pay it as buyers but now required to pay it as sellers?
 If some sort of change in the law has taken place recently then we'd be willing to go halves with the seller and we don't want it to cause the chain to break down and yes we can afford £40 but out of principle seems illogical to pay this.

Any advice?
Thanks
S...

AdrianC

I presume that the house was originally leasehold, then the freehold bought some time after 1985?

Thank your solicitor very kindly for the offer of the policy, and decline...
If they suggest that the buyer requires it, then point out that the buyer is more than welcome to pay for it.

There is never any legal requirement for an indemnity policy. All it is is a way of protecting against legal costs over the issue at some point in the future.
And, as you point out, it's completely unnecessary since the most anybody can enforce is six years, or £15. But the person enforcing it would be the freeholder...

Sheepy19

AdrianC said:

I presume that the house was originally leasehold, then the freehold bought some time after 1985?

Thank your solicitor very kindly for the offer of the policy, and decline...
If they suggest that the buyer requires it, then point out that the buyer is more than welcome to pay for it.

There is never any legal requirement for an indemnity policy. All it is is a way of protecting against legal costs over the issue at some point in the future.
And, as you point out, it's completely unnecessary since the most anybody can enforce is six years, or £15. But the person enforcing it would be the freeholder...

Thanks for the quick reply. Pretty much every house in the area is freehold so the charge seems like some sort of anomaly. It sounds bad to say as normally you'd ask your solicitor (which I have done for a proper explanation) maybe the covid they are rushed off their feet and just want the easy way out without looking into it...the letters all have spelling mistakes which is never a good sign!

loubel

It sounds like a rentcharge, in which case recent case law has led to change in how these are dealt with and an indemnity policy will be required for the buyer's lender. Usually it is the seller's responsibility to pay for these but if you really don't want to then the buyer will have to in order to buy your house.

steampowered

It could be a matter of policy for your buyer's lenders.

If the buyer is taking a mortgage, and the lender says there must be an indemnity policy in place for any suspected ground rent arrears, your buyer has no choice in the matter. 

It could also just be your conveyancers - or the buyer's conveyancers - being incompetent and unhelpful. 

Not worth arguing about even if the risk is ridiculously small. For the sake of £40 I'd just pay it.

Sheepy19

loubel said:

It sounds like a rentcharge, in which case recent case law has led to change in how these are dealt with and an indemnity policy will be required for the buyer's lender. Usually it is the seller's responsibility to pay for these but if you really don't want to then the buyer will have to in order to buy your house.

Okay thanks, if that is the (legal) case then I don't want to undermine the solicitors. It just seemed unlikely that something to have changed in 6 years but if you're aware of something then it probably has.

Just seems silly someone is making money out of such a nonsense thing. But I guess cases like ours are few and far between...

greatcrested

When we recently sold my mum's house after her death we found a similar ret charge existed. Yes,property was freehold, but the rent chare was set upback in 189-somenthing when local landlowner sold off land for development.

It was 1 shilling pa (5p in today's money. Hopefully after Jan 2020 we'll revert to realmoney. Isn't that what Brexit was for??)

We were quoted over £100 for indemnity, but told the buyer it was a nonsense. I have no idea if they bought a policy themselves but we heard no more about it.

loubel

Sheepy19 said:

loubel said:

It sounds like a rentcharge, in which case recent case law has led to change in how these are dealt with and an indemnity policy will be required for the buyer's lender. Usually it is the seller's responsibility to pay for these but if you really don't want to then the buyer will have to in order to buy your house.

Okay thanks, if that is the (legal) case then I don't want to undermine the solicitors. It just seemed unlikely that something to have changed in 6 years but if you're aware of something then it probably has.

Just seems silly someone is making money out of such a nonsense thing. But I guess cases like ours are few and far between...

The problem isn't with the size of the rentcharge itself but the legal rights the rentcharge owner has to register a lease against the property for non-payment. No-one used to worry about this until a few years ago when this right was successfully applied in court. A freehold subject to a lease loses all its value so you are left over a barrel. It's unlikely to be an issue for most properties but once there is precedent lenders get very nervous.  It's a reason to always pay your rentcharge on time!

Sheepy19

 Cheers. I did manage to hear from the solicitor today who more or less said the Same thing....the amount is irrelevant its the legal right they have due to a court ruling. Question is do we refuse and let the buyer pay (as its their house to be) or pay for the policy. I assume that means every time the house is sold a subsequent policy needs to be taken out by either buyer or seller??

NameUnavailable

So, you refuse to pay and risk losing your buyers.......

Sheepy19

We've just agreed to pay it. Ridiculous! Thanks for your replies