Sale fallen through for second time close to exchange

tink_1983

GDB2222 said:

tink_1983 said:

GDB2222 said:

Is this a rentcharge that you are talking about?

Its a service charge for the estate. The buyers solicitors said it read as a rent charge which was the issue. They offered to reword it slightly but it was not to her satisfaction 

Lots of estate service charges are indeed rentcharges these days. You may struggle to sell, as buyers and their lenders have become more aware of the problem.

What alteration did the builders offer?

They offered a deed of variation to include: 

"Please note that as per the attached requirements of your lender, we intend to insert mortgagee protection provisions of at least 2 months so that in the event of any powers being exercised under S121 Law of Property Act?1925, the mortgagee is provided 2 months? notice to remedy any of these and allow them the scope and time to step in and sort the matter out, and then to take up the matter directly with the mortgagor.? We would also provide such scope for the rentcharge powers under S121(4)?to be sufficiently diluted in that upon full payment of any arrears of the rent charge, reasonable costs of collecting arrears, all reasonable legal costs incurred including court costs of creating and surrendering the lease, then any lease granted under the powers of S121(4)?shall be surrendered immediately without premium. '

We do not propose to offer any sort of agreement or warranty that any service charges payable under the transfer do not constitute a rentcharge.? In our experience in such matters, the above provisions are satisfactory

tink_1983

Flugelhorn said:

we bought a freehold house with a service charge on it, deed of variation was done and was tested against various mortgage providers requirements in case we wanted to sell   

You don't happen to have the wording do you that the lenders would accept? 
We are getting offers in but wondering if I should seek a variation on the Deed before the issues raises its head again.

GDB2222

tink_1983 said:

GDB2222 said:

tink_1983 said:

GDB2222 said:

Is this a rentcharge that you are talking about?

Its a service charge for the estate. The buyers solicitors said it read as a rent charge which was the issue. They offered to reword it slightly but it was not to her satisfaction 

Lots of estate service charges are indeed rentcharges these days. You may struggle to sell, as buyers and their lenders have become more aware of the problem.

What alteration did the builders offer?

They offered a deed of variation to include: 

"Please note that as per the attached requirements of your lender, we intend to insert mortgagee protection provisions of at least 2 months so that in the event of any powers being exercised under S121 Law of Property Act?1925, the mortgagee is provided 2 months? notice to remedy any of these and allow them the scope and time to step in and sort the matter out, and then to take up the matter directly with the mortgagor.? We would also provide such scope for the rentcharge powers under S121(4)?to be sufficiently diluted in that upon full payment of any arrears of the rent charge, reasonable costs of collecting arrears, all reasonable legal costs incurred including court costs of creating and surrendering the lease, then any lease granted under the powers of S121(4)?shall be surrendered immediately without premium. '

We do not propose to offer any sort of agreement or warranty that any service charges payable under the transfer do not constitute a rentcharge.? In our experience in such matters, the above provisions are satisfactory

That seems reasonable to me, and I would hope that it satisfies most lenders.  It would be better if the developer would give two months notice to the lenders before exercising their powers. Perhaps they will agree to that.

Otherwise, I suggest that you pay for whatever deed of variation they are prepared to offer, bearing in mind that you have no real leverage.

GDB2222

I suggest that you have a rummage round the internet. This, for example:
https://www.talbotwalker.co.uk/advice/developers-beware-of-the-rentcharge/

tink_1983

GDB2222 said:

tink_1983 said:

GDB2222 said:

tink_1983 said:

GDB2222 said:

Is this a rentcharge that you are talking about?

Its a service charge for the estate. The buyers solicitors said it read as a rent charge which was the issue. They offered to reword it slightly but it was not to her satisfaction 

Lots of estate service charges are indeed rentcharges these days. You may struggle to sell, as buyers and their lenders have become more aware of the problem.

What alteration did the builders offer?

They offered a deed of variation to include: 

"Please note that as per the attached requirements of your lender, we intend to insert mortgagee protection provisions of at least 2 months so that in the event of any powers being exercised under S121 Law of Property Act?1925, the mortgagee is provided 2 months? notice to remedy any of these and allow them the scope and time to step in and sort the matter out, and then to take up the matter directly with the mortgagor.? We would also provide such scope for the rentcharge powers under S121(4)?to be sufficiently diluted in that upon full payment of any arrears of the rent charge, reasonable costs of collecting arrears, all reasonable legal costs incurred including court costs of creating and surrendering the lease, then any lease granted under the powers of S121(4)?shall be surrendered immediately without premium. '

We do not propose to offer any sort of agreement or warranty that any service charges payable under the transfer do not constitute a rentcharge.? In our experience in such matters, the above provisions are satisfactory

That seems reasonable to me, and I would hope that it satisfies most lenders.  It would be better if the developer would give two months notice to the lenders before exercising their powers. Perhaps they will agree to that.

Otherwise, I suggest that you pay for whatever deed of variation they are prepared to offer, bearing in mind that you have no real leverage.

Thankyou 
This is my next query to my solicitor. If we should get the variation done ASAP for the potential future buyers. 
Appreciate your response and I'll be digging online for more info also 

K_S

@tink_1983 I've come across similar situations faced by my clients where the remedy has been a different lender who is ok with the rent charge and/or deed of variation. 

The problem you have is that this is the buyer's issue to solve and the best you can do is to be upfront with the specifics when you accept an offer so that the buyer or their broker has all the pertinent information to hand before they place the case with a lender.

More commonly what happens is that the vendor is aware but doesn't disclose any of this until it comes up late in the conveyancing process, leading to the situation you've experienced.

GDB2222

@K_S  You make it sound like you think that it is only possible for the buyer to solve this problem? Why can’t the sellers see to it first? 

After all, if there were a hole in the roof, the sellers would probably fix that. This is effectively a hole in the  title.

tink_1983

K_S said:

@tink_1983 I've come across similar situations faced by my clients where the remedy has been a different lender who is ok with the rent charge and/or deed of variation. 

The problem you have is that this is the buyer's issue to solve and the best you can do is to be upfront with the specifics when you accept an offer so that the buyer or their broker has all the pertinent information to hand before they place the case with a lender.

More commonly what happens is that the vendor is aware but doesn't disclose any of this until it comes up late in the conveyancing process, leading to the situation you've experienced.

We where happy to pay for the variation but our vendors solicitor was not happy with what the builders where willing to offer. The buyers solicitors wanted the term rentcharge changed to service charge which the builders didn't agree too.

I will ensure any new buyer knows of this issue upfront and discuss getting the variation done bur to include that the lenders will be informed of arrears too. 

All been  a massive learning curve. Purchased this house alone off plot and guess didn't understand the rentcharge implications at the time 
Thanks again 

tink_1983

GDB2222 said:

@K_S  You make it sound like you think that it is only possible for the buyer to solve this problem? Why can’t the sellers see to it first? 

After all, if there were a hole in the roof, the sellers would probably fix that. This is effectively a hole in the  title.

I will be proactively sorting this out so we don't have this issue again.

Ironically my neighbours just sold and the new owners didn't have this come up as an issue at all?! Think I've been unlucky but also naive as didn't really understand the implications of the rent charge on the house I own 

kazwookie

If next door sold, with the same conditions, then why not down load their deeds and see what wording was used? cost approx £3 Land Registry