Estate Rentcharges

princeofpounds

Hi all! 

Funny one this - after mainly giving out advice on and off for a few years I’ve got a question all of my own.

Got a relative who is buying a freehold house. The catch is that this house is subject to an estate rentcharge. 

I understand the problems with estate rentcharges that arose a couple of years back as a result of the Morgoed decision.

Their solicitor is advising them not to proceed unless a deed of variation is agreed between vendors and management company that prevents them using the more exploitative powers in event of late payment.

They are cash buyers, so don’t need a mortgage, but obviously they want a house that can be sold at a normal valuation if necessary - it’s their biggest asset.

They also don’t want to take the risk of buying and waiting for the government to sort it out with a reform. They think the chances are high eventually, but it’s already been several years with no action and who knows how long it will take.

The rentcharge cannot be redeemed as it is an estate rentcharge. It obviously doesn’t have the required protections in the deed at this stage.

Unfortunately, the vendors don’t understand the issue yet. They claim through the estate agent they got a remortgage just a year ago so can’t understand the problem.

The estate agent is ignorant. The seller’s solicitor is very old school, doesn’t appear to have encountered the issue before and has just gone on a summer holiday without telling anyone.

My relative’s solicitor obviously does understand there is a problem, but seems to assume the seller’s solicitor understands too, so is only sending out a perfunctory explanation and basically just tells the seller and their solicitor to speak to each other. So my relative only properly understood the issue after I talked to them and will try to educate the EA and seller and get them to pursue the variation if possible.

So - my question - what’s the latest state of play on estate rentcharges? And how unmortgageable have they become? Any good recent sources on the topic? I’m unfortunately a bit behind the times on this subject.

Any assistance will earn a HUGE thanks!

Flugelhorn

we bought a house for cash that had estate rentcharge on it, solicitor pointed out that mortgage companies would not like this and would need DoV, vendors solicitor arranged it, signed by management company, developers and us, our solicitor happy that it would meet the requirements of mortgage companies came into force on day of completion and noted on land registry entry. Several people on the estate have done similar - some at the time of sale, some proactively to make sale easier

princeofpounds

Flugelhorn said:

we bought a house for cash that had estate rentcharge on it, solicitor pointed out that mortgage companies would not like this and would need DoV, vendors solicitor arranged it, signed by management company, developers and us, our solicitor happy that it would meet the requirements of mortgage companies came into force on day of completion and noted on land registry entry. Several people on the estate have done similar - some at the time of sale, some proactively to make sale easier

Thanks - that’s obviously the way we hope it will pan out, but the concern of course is if the management company refuse, ask for silly money or drag their feet.

The other concern is that the vendor doesn’t believe it’s a problem and refuses to even ask for a variation, although hopefully we can get through to them. That’s why any information on the current state of mortgageability would be useful - the CML handbook used to be publicly accessible but I note that it has gone behind a paywall since they became part of U.K. Finance

Flugelhorn

Yes tricky if they don't see that there is a problem - TBH our solicitor commented when the DoV appeared that it had arrived promptly and looked like a standard template, ie the management company / developers had been doing a lot of these recently.

the vendors will be anxious if they remortgaged last year as they may think that there will now be a problem or that the sale won't go through and they could be stuck and unable to sell the property.   nuisance that the CML handbook is not available!

Flugelhorn

PS is the free trial here any use ? https://www.lexisnexis.co.uk/legal/guidance/uk-finance-mortgage-lenders-handbook

princeofpounds

Flugelhorn said:

Yes tricky if they don't see that there is a problem - TBH our solicitor commented when the DoV appeared that it had arrived promptly and looked like a standard template, ie the management company / developers had been doing a lot of these recently.

Supposedly the management company have never come across the problem before, according to the EA. It's a very small estate and the houses here don't change hands frequently, so that may be true. I'm not sure at this stage about the identity of the management company and whether they are a professional outfit handling multiple sites or really just some tiny outfit looking after this site.

Flugelhorn said:

PS is the free trial here any use ? https://www.lexisnexis.co.uk/legal/guidance/uk-finance-mortgage-lenders-handbook

I'll check it out, thanks!

Tiglet2

Does this help at all?

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1865/

princeofpounds

Thanks Tiglet, that's great. Looks like it's done the job - at least the vendor's estate agent seems to understand now. Let's see how the manage to work it out.

Ditzy_Mitzy

Would it be possible to approach the management company directly and ask them for a written commitment to sign a Deed of Variation post sale?  That would get the vendor, solicitors and various extraneous cooks presently spoiling the broth out of the way and allow the buyer to sign into an agreement of their own making.