Ground Rent on Freehold - will my lender lend?

Abbots29

We were hoping to exchange this week. We went to the solicitors to sign all the contracts, only for her to inform us that our ground rent may be a problem.

The house that we are trying to buy is a freehold house, on an estate of lots of freehold houses, and leasehold flats. 

Our ground rent is £223 a year so pretty high. We already have a mortgage offer, but when this was offered, none of us were aware of the service charge as my solicitor found out about thus during the searches. 
She has said that unlucky for me, HSBC are one of the lenders that can be pretty strict and may reject our mortgage. She has currently gone to them, telling them we will have a indemnity policy in place and asking if they would still lend.

I am going out of my mind with worry. I've researched until the early hours and now realise how tricky this can  be. It seems alot of people have been hit with this like me, at the 11th hour. 

I found a website called the right mortgage and it states that HSBC specifically changed their policies in November 2021 and have said if a seller can't get a deed of variation from the landlord, then the only other option is a Indemnity policy.
See below

HSBC: We’ve improved our lending policy

With effect from today, Monday 1st November, we will be making the following changes to our lending policy.

We have enhanced our current policy to provide more detail on what HSBC UK considers to be an excessive or unreasonably escalating Ground Rent.

Lease terms such as Ground Rents must be reasonable at all times during the term of the lease and adhere to our requirements below:

• Maximum Ground Rent p.a. must not exceed £250 (£1,000 in Greater London). If there is the potential (within the lease provisions) for the annual Ground Rent to exceed the applicable level, it should be reduced to within the required threshold. This would require a lease variation on the lines that under no circumstances could reviewed rent be increased so that it comes within the applicable Assured Shorthold Tenancy (AST) threshold in the Housing Act 1988 (as amended) or in any legislation amending or replacing it or in any subordinate legislation issued under it. If the lease cannot be varied, a suitable indemnity policy must be put in place to protect the risk to the Bank.
• Ground Rent less than or equal to 0.2% of the current property value (New Builds restricted to 0.1%).
• Grounds Rent review period greater than or equal to 10 years.
• Ground Rent escalation less than or equal to Retail Price Index (RPI). Any RPI increase must not exceed the AST thresholds.
• Ground Rent doubles every 20 years or any longer period and does not continue to double after 125 years. Any doubling of Ground Rent must not be capable of exceeding the AST thresholds.

 Now, I have no idea where I stand with this as this is based on being a leasehold, and the house we are buying is definately freehold.

We are purchasing the property at £226K. Do we fit in the 0.2% ?

Has anyone purchased a freehold property, with ground rent, with a mortgage with HSBC since November 2021?

I'm losing sleep and losing my head worrying that we are going to lose this house. 

diystarter7

Call them withhold your details and ask and take it from there. Take the persons name you speak with.

user1977

Are you sure your solicitor used the words "ground rent"? That doesn't make sense if it isn't a lease. Certainly, none of the stuff above about ASTs can possibly apply to a freehold property.

kingstreet

Service charge or estate charge, shirley?

Abbots29

user1977 said:

Are you sure your solicitor used the words "ground rent"? That doesn't make sense if it isn't a lease. Certainly, none of the stuff above about ASTs can possibly apply to a freehold property.

I hsed the term ground rent but it's a service charge that we pay to a 'Landlord' for the upkeep of a greenary area, no access through road and a car park to the rear of the property. Unfortunately, it's in the deeds that we have to pay this even though it's a freehold property. 
On the same street, there are also flats which are leasehold but all of the houses are freehold but still subject to this charge.
I'm really hoping that this being a freehold property will help my case rather than make it more complex

user1977

Abbots29 said:

user1977 said:

Are you sure your solicitor used the words "ground rent"? That doesn't make sense if it isn't a lease. Certainly, none of the stuff above about ASTs can possibly apply to a freehold property.

I hsed the term ground rent but it's a service charge

If it's a service charge then stop calling it ground rent. It isn't ground rent, so none of the stuff you quoted above is relevant.

But then I'm not sure what your indemnity policy or the variation are about. Is it a rentcharge perhaps? Ask your solicitor to explain.

kingstreet

It is quite usual for newbuild properties to have estate/service charges for the upkeep of common areas which won't be maintained by the local authority. Provided the terms aren't onerous, most lenders don't have an issue with them. Your conveyancer should put the agreement to the lender for approval.

Abbots29

user1977 said:

Abbots29 said:

user1977 said:

Are you sure your solicitor used the words "ground rent"? That doesn't make sense if it isn't a lease. Certainly, none of the stuff above about ASTs can possibly apply to a freehold property.

I hsed the term ground rent but it's a service charge

If it's a service charge then stop calling it ground rent. It isn't ground rent, so none of the stuff you quoted above is relevant.

But then I'm not sure what your indemnity policy or the variation are about. Is it a rentcharge perhaps? Ask your solicitor to explain.

Wow! There really isn't any need to be rude is there?

Service charges/Estate charges and what I quoted above is very relevant to the situation! I spoke to my broker and the 1st thing she read out to me what what I quoted above.

Abbots29

kingstreet said:

It is quite usual for newbuild properties to have estate/service charges for the upkeep of common areas which won't be maintained by the local authority. Provided the terms aren't onerous, most lenders don't have an issue with them. Your conveyancer should put the agreement to the lender for approval.

Yeah, my solicitor has done this, and my broker has since spoken to HSBC and they will accept the indemnity insurance... so phew!