Leasehold, Deed of Variation Ground rent

Unhappy51

Hello I am desperate for some advice. I sold my flat last July 2020 and had to get a deed of variation sorted at the insistence of buyers solicitor whereby the rent will increase with Retail Price Index. This took well over 5 months to get the Landlord to agree to and activate at a cost of £1500 including my solicitors charge. because it took so long my buyer pulled out. I was lucky to quickly get another buyer but after 12 weeks the new buyers solicitor is wanting a further clause added to the deed of variation stating that 'the freeholder won't rely on Housing Act 1988 for repossession' This was put to the management company in July 2021 and so far have received no response despite my solicitor trying to chase. Is it usual for a buyers solicitor to want both clauses? I will point out my buyer is a cash buyer and not relying on a mortgage. I am in a stale mate situation and cannot afford further costs or the length of time to get sorted even if the management company agree. It is immoral that the management company/landlord can act in this way and I feel like a prisoner with no way out. I am having to pay 2 mortgages as I now live in a different area and cannot sustain this. I have racked up so much debt and need the sale of the flat to be able to pay them off. My solicitor is offering no solutions and this is seriously affecting my mental health. I also feel my solicitor should have forewarned me in the early stages of the first sale that leasehold sales could have the potential  to be difficult. Any advise would be greatly appreciated. 

TripleH

How old is your leasehold property?

Is it a recent build (last few years) or 20+ years old?

Unhappy51

It was built in 2005

chainpain

I presume the previous Deed of Variation perhaps doesn't fully address the AST issue if the ground rent goes over £250 per annum? 

Will the buyer's solicitor accept an indemnity policy to cover this instead? I can't see why they wouldn't when they are a cash buyer and the Lender doesn't need to be considered. I know my freehold company won't enter into DoV on this specific issue because they are anticipating that the law will be changed in the next few years. 

I feel your pain. A similar problem has caused us all kinds of issues with trying to sell. 

eddddy

chainpain said:

Will the buyer's solicitor accept an indemnity policy to cover this instead? I can't see why they wouldn't when they are a cash buyer and the Lender doesn't need to be considered. I know my freehold company won't enter into DoV on this specific issue because they are anticipating that the law will be changed in the next few years. 

I feel your pain. A similar problem has caused us all kinds of issues with trying to sell. 

The Forfeiture of Lease Indemnity Policies that I've come across only protect the mortgage lender - they don't protect the leaseholder.

i.e. if the lease is forfeited due to non-payment of ground rent, a mortgage lender would get their money back, but the leaseholder gets nothing.

So it offers no benefit to a cash buyer.

eddddy

... but as the buyer is a cash buyer - are they buying the property for BTL or second home?


If so, the lease can't be forfeited under the 'loophole' in the Housing Act 1988. The loophole only applies if the property is the Principle Residence of the leaseholder.

But the buyer might still be unhappy - as it might make re-selling to an owner/occupier difficult in the future (unless the legislation is  updated by then).

Unhappy51

Thanks for your responses. The buyers are buying BTL as they are taking on the tenant already in there.  

Unhappy51

Hey eddddy where is this written down regarding BTL and the loophole only applying if the property is the Principle Residence of the leaseholder. It is worth advising my solicitor. I will try anything.

TripleH

Unhappy51, sorry I can only sympathise with you. (We had rent to pay onto of our mortgage when we moved).

I asked the year because I know leasehold contracts in recent years are unappealing at the moment (and no guarantee what changes to legislation will bring).

It does sound a weak business model if your prospective buyer is concerned about forfeiture if they fail to pay.

You might be worth relisting