Buyer already has mortgage offer worried about ground rent

worriedseller2022

My buyer already has his mortgage offer accepted, its a buy to let mortgage, large deposit. However started to worry as someone is trying to buy similar property in area and their solicitor is saying a mortgage won't be approved a deed of variation will need to be done etc. So close to completing. Worried this will be a last minute problem. Lease was originally 125 years has 113 years left. Ground rent currently £250 doubles every 25 years. Property was sold for £213,000 worried they will take away his mortgage offer based on what I'm reading online. His mortgage is with Satandar which just mentions inflation 

K_S

@worriedseller2022 I think your buyer *should* be fine. This is what Santander asks the conveyancer to check -

"Any onerous ground rent provisions should be reported to us. In particular, provisions which allow for ground rents to be increased over and above the Retail Price Index (or other inflation-linked index) are considered to be onerous and are unlikely to be acceptable to the Bank e.g. multipliers such as doubling after fixed periods of less than 25 years; or fixed increases which are clearly above inflation expectation."

There might well be other issues with the lease which scupper the transaction, but I would surprised if the 25yr doubling clause were to be an issue.

worriedseller2022

Thanks just got worried as one of the enquiries mentioned that the conveyancor had reported this to the lender but not sure if the enquiry was done prior to mortgage offer

MaryNB

worriedseller2022 said:

Thanks just got worried as one of the enquiries mentioned that the conveyancor had reported this to the lender but not sure if the enquiry was done prior to mortgage offer

If the property is outside of London, the lease will become an Assured Tenancy once the ground rent exceeds £250 (I presume in 13 years which will likely be during the full mortgage term) and some lenders don't like that. An Assured Tenancy means it is much easier for the freeholder to take back the property if the leaseholder is a few months behind on ground rent. 
If it's in London, the threshold is £1000 so not an issue.

Not saying it will be definitely be an issue for your buyer but it could be the issue with the similar property you're referring to (if the ground rent terms are the same).

maxsteam

worriedseller2022 said:

My buyer already has his mortgage offer accepted, its a buy to let mortgage, large deposit. However started to worry as someone is trying to buy similar property in area and their solicitor is saying a mortgage won't be approved a deed of variation will need to be done etc. So close to completing. Worried this will be a last minute problem. Lease was originally 125 years has 113 years left. Ground rent currently £250 doubles every 25 years. Property was sold for £213,000 worried they will take away his mortgage offer based on what I'm reading online. His mortgage is with Satandar which just mentions inflation 

Yes. There are many possibilities. Maybe the lender will not approve, maybe the buyer will reconsider, maybe the transaction will proceed. Only time will tell. You cannot be sure of much until contracts are exchanged.

worriedseller2022

MaryNB said:

worriedseller2022 said:

Thanks just got worried as one of the enquiries mentioned that the conveyancor had reported this to the lender but not sure if the enquiry was done prior to mortgage offer

If the property is outside of London, the lease will become an Assured Tenancy once the ground rent exceeds £250 (I presume in 13 years which will likely be during the full mortgage term) and some lenders don't like that. An Assured Tenancy means it is much easier for the freeholder to take back the property if the leaseholder is a few months behind on ground rent. 
If it's in London, the threshold is £1000 so not an issue.

Not saying it will be definitely be an issue for your buyer but it could be the issue with the similar property you're referring to (if the ground rent terms are the same).

That's the thing I don't know how long buyers mortgage term is. Property is outside of london too

K_S

worriedseller2022 said:

MaryNB said:

worriedseller2022 said:

Thanks just got worried as one of the enquiries mentioned that the conveyancor had reported this to the lender but not sure if the enquiry was done prior to mortgage offer

If the property is outside of London, the lease will become an Assured Tenancy once the ground rent exceeds £250 (I presume in 13 years which will likely be during the full mortgage term) and some lenders don't like that. An Assured Tenancy means it is much easier for the freeholder to take back the property if the leaseholder is a few months behind on ground rent. 
If it's in London, the threshold is £1000 so not an issue.

Not saying it will be definitely be an issue for your buyer but it could be the issue with the similar property you're referring to (if the ground rent terms are the same).

That's the thing I don't know how long buyers mortgage term is. Property is outside of london too

@worriedseller2022 With Santander, the Assured Tenancy is usually not a problem as they are happy with an indemnity policy to provide insurance (to the lender) against the risk of the lease being brought to an end prematurely due to the Assured Tenancy issue.

There are lenders who do not accept indemnity policies and insist on a deed variation, which is perhaps what may have happened to the other similar property purchase you talked about.

Tbh, as a seller you are getting someone to do a detailed review of the mortgageability (and hence saleability) of your property so even if they find issues that you didn't know existed, that still leaves you better informed as to a future sale.

worriedseller2022

Should I be concerned I haven't been asked for the indemnity insurance yet? Buyer is with ppl..