Collective enfranchisement question

eddddy

tom741 said:

This is her answer for my question 

The fact that a lower rent is paid in practice does not remove this problem, albeit the risk of forfeiture is low on account of this and the fact that the landlord is a company in which you will own a share. 

That quote, and your mention of indemnity insurance, makes it sounds like the problem is ground rent over £250 (or over £1000 in London).

But you say your ground rent will be £250 (according to the lease) - so I can't see what the problem is.

tom741

eddddy said:

tom741 said:

This is her answer for my question 

The fact that a lower rent is paid in practice does not remove this problem, albeit the risk of forfeiture is low on account of this and the fact that the landlord is a company in which you will own a share. 

That quote, and your mention of indemnity insurance, makes it sounds like the problem is ground rent over £250 (or over £1000 in London).

But you say your ground rent will be £250 (according to the lease) - so I can't see what the problem is.

The ground rent for the lease is more than a £1000 in 40 years

the ground rent pay in practice in the head lease is fix 250.

the solicitor is worried about the lease one .

make sense?

tom741

She is saying since there is nothing in writing ( in the headlease) saying we DONT pay the building lease she can’t ignore it.

so she asked for a deed of variation from the head lease and in the meantime asking the lender if the insurance will be ok for them.

tom741

I’m thinking she is making a problem when there is no problem, but she think differently...

inwill say that many apartments were sold in the building and I’m guessing most of them with mortgage and she couldn’t find any deed of variation in other apartments leases when she checked

eddddy

tom741 said:

The ground rent for the lease is more than a £1000 in 40 years

OK - I think we're finally getting there.

You want to buy a leasehold flat with an escalating ground rent that increases to over £1000 in 40 years.

That introduces 2 mortgage problems

1. Mortgage lenders don't like leases with fast escalating ground rent
2. Mortgage lenders don't like leases with ground rents over £1000 in London or over £250 outside London

For point 2 - you can get indemnity insurance. That removes the risk for the mortgage lender, but it doesn't remove the risk for you.

For point 1 - there is no easy solution. If the mortgage lender doesn't like the ground rent increases, the lease would need to be changed - which usually takes a long time and is expensive.



None of the following are relevant to the mortgage lender. They don't make any difference:

• The ground rent payable by other flats
• The ground rent payable by the headlease holder
• The fact that the ground rent hasn't been collected for some time
• The fact that the freehold is owned by the leaseholders

 

tom741

eddddy said:

tom741 said:

The ground rent for the lease is more than a £1000 in 40 years

OK - I think we're finally getting there.

You want to buy a leasehold flat with an escalating ground rent that increases to over £1000 in 40 years.

That introduces 2 mortgage problems

1. Mortgage lenders don't like leases with fast escalating ground rent
2. Mortgage lenders don't like leases with ground rents over £1000 in London or over £250 outside London

For point 2 - you can get indemnity insurance. That removes the risk for the mortgage lender, but it doesn't remove the risk for you.

For point 1 - there is no easy solution. If the mortgage lender doesn't like the ground rent increases, the lease would need to be changed - which usually takes a long time and is expensive.



None of the following are relevant to the mortgage lender. They don't make any difference:

• The ground rent payable by other flats
• The ground rent payable by the headlease holder
• The fact that the ground rent hasn't been collected for some time
• The fact that the freehold is owned by the leaseholders

 

Thanks!

so all this headlease with low ground rent dosent really matter? What is the value of it in this case? They did it and they pay less ground rent but legally it dosent matter? Struggling to understand the value of it.

Any idea if the annual rent starts at £250 but increases every 25 years – to £400, then to £800, again to £1,600 and, finally, to £3,200 Will consider to be reasonable for the lender? Cause in Halifax guide book they say they will accept growing ground rent if it’s reasonable... 

eddddy

tom741 said:

so all this headlease with low ground rent dosent really matter? What is the value of it in this case? They did it and they pay less ground rent but legally it dosent matter? Struggling to understand the value of it.

You would have to ask whoever created the headlease why they did it.

The headlease may have been created before the 'Collective Enfranchisement' or it may have been created after it.


But there may be a clue in what the solicitor said " the “headlease” is the 999 year lease held by the company in respect of the third floor and airspace."

Normally, you only lease the airspace above a building if somebody wants to build an extra floor (or floors) on the building. And the flats on the 3rd floor might need major work during the building - for example, parts of their roofs and ceilings might need to be removed.

So maybe somebody bought a headlease for the 3rd floor and airspace in the hope of building another floor (or floors) but the project never happened.