Mortgage Leasehold Flat Forfeiture Housing Act

Sherman2019

Hello,

I’m sure there will be many other people in the same situation as this either buying or selling. 
We are in the process of selling our leasehold flat but because the ground rent is above £250, it is classed as an assured tenancy. So under the housing act 1988 there is a forfeiture clause/right to re enter if the ground rent is not paid. This is obviously not good from the mortgage lenders point of view. Just to confirm that there is no issue in the lease or no onerous rent issues. The most formal solution is to request a deed of variation in which the freeholder would give 30 days notice to the mortgage lender before starting any legal enforcement, however the quote we had was ridiculous as they wanted £1000 in legal fees and then £1500 per annum extra. Maybe this is the going rate I’m not sure. We have about 110 years on our lease left and extending the lease is a cost we can’t afford to pay for and move.

We have come across what looks like a fairly new Forfeiture of lease (Housing Act) Indemnity insurance which would cover the mortgage lender for any loss or legal fees if the freeholder was to take action if ground rent went unpaid.

Has any one had any experience with this whether lenders are accepting? Our buyers mortgage is with HSBC I believe but I can’t see anything with their lenders hand book and all in says is that in some cases they may accept Indemnity insurance.

Any help would be appreciated. We have consulted our solicitor but they’re not sure if this would be accepted either with HSBC so we have put the request in but they are taking quite a while to respond, especially now with the Christmas period. So if anyone has had any success with HSBC or any other mortgage lender, if you could please post as I’m sure this will help others reading as well.

Thank you

Solutionsplease

Hi. I am in a similar boat and about to loose the house I am buying due to the hold up. Your solicitor and the solicitor for your buyer should be the ones looking into this for you. It is not your responsibility to find an appropriate indemnity policy - although I too have been looking for one as my solicitor seems incapable. What I have been told to date is that the policy will need to be bespoke, and so your solicitor will need to speak to an insurance company who do such insurance to have something specifically worded... I wish you luck! I hope we both manage to get a solution to this issue asap - I think this will crop up more and more this year due to mortgage lenders becoming far stricter, so one way or another it needs to be sorted so we don't get stuck where we are forever. Such archaic legislation. Sigh.. If you hear anything more please do update us!

emma_829

A Deed or Variation is the preferred option in these circumstances. You can usually just add a clause either reducing the annual ground rent to a level that brings it under £250.00 or confirming that for the provisions of section 8 of the Housing Act 1988 don’t apply by saying for statutory purposes the ground rent will be classed as £1.00 less than the ground rent listed in the legislation. They will charge a premium to do this as they’re effectively removing a right or they’re reducing the ground rent they will receive. Indemnity is the second option and usually the preferred option from the seller’s perspective. Namely because it’s cheaper and quicker, however as HSBC don’t confirm this in the lender handbook the policy has to be sent for their approval. The issue is all lenders are so backlogged at the moment it is taking time to get a response. 

Rachel*

Not sure if this is helpful to you or not, but I’m currently buying a leasehold flat with ground rent of £250. My mortgage was approved in October and it’s with HSBC. I do have a large deposit so not sure if that made any difference, however I did speak to my solicitor at the time about assured tenancy and he was quite confident that it wouldn’t be an issue - and it seems that way so far. 

Solutionsplease

My solicitor has said that it also comes down to solicitors missing this point when reviewing lease documents.. if it isn't picked up and brought to the lenders attention, which apparently seems to be the case with so many, then that is very lucky. The solicitor for my buyer has so far rejected three indemnity policies, and I don't have time to go down the amendment of lease route, as the sellers of the house I am buying are pulling out this Friday if we haven't exchanged by then as it has taken over 6 months to get to this point... primarily because my buyers solicitors sat on the leasehold information pack provided for 2 months without raising enquiries. I sent an email to three insurance companies this morning on behalf of my solicitor to ask for further quotes as she wanted to wait to see what the one she had emailed would say before doing so... so much time wasting it is unbelievable.