Historic rent charge - Ways to solve quickly???

sidthecat96

The house we are buying has a historic rent charge (not estate charge) of £3 a year. Just before exchange HSBC (our lender) have said they are not happy with the rent charge and want it redeemed before they will mortgage it.

I've asked the gov department who are involved in the formal charge redemption process and they say the process takes about 4-5 months currently, which isn't an option.

Our other options may be:
- Pay off the rent charge directly with the rentcharge owner and get informal notice from them that it has been paid off.
- Ask to change the terms of the rent charge so that HSBC are more okay with it.
- Not sure what else.

Majorly panicking. Has anyone been through this before? Are there other options available? Are either of the mentioned options likely to work?

user1977

Are you doing your own conveyancing? If not, what's your solicitor's advice?

sidthecat96

Solicitor says she hasn't dealt with this before. We're trying the first option first and seeing if it sticks but just wanted the advice of anyone who has done this before.

user1977

sidthecat96 said:

Solicitor says she hasn't dealt with this before..

Presumably she can find a colleague who has?

babyblade41

Really time to find an appropriate colleague who can take over this case as the one assigned to you isn't capable to continue .

RiskAverse100

HSBC say nothing about rentcharges in their standard mortgage instructions to solicitors.

This link takes you to Nationwide's mortgage instructions.  Section 5.15.2a is the relevant bit.

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/nationwide-building-society/question-list/

There are various options mentioned, although indemnity insurance will undoubtedly be the easiest if the other options involve getting the rentcharge owner to agree to any changes.

Just make sure that you haven't approached the rentcharge owner to discuss the issue if indemnity insurance appears suitable.  It is usually a condition of such policies that there has been no contact with the rentcharge owner (other than to simply pay the annual £3 sum perhaps!)

Because HSBC say nothing in their mortgage instructions, your conveyancer is going to need to contact them to raise the issue and then suggest a solution, i.e. indemnity insurance, and ask them to agree to it.

sidthecat96

RiskAverse100 said:

HSBC say nothing about rentcharges in their standard mortgage instructions to solicitors.

This link takes you to Nationwide's mortgage instructions.  Section 5.15.2a is the relevant bit.

There are various options mentioned, although indemnity insurance will undoubtedly be the easiest if the other options involve getting the rentcharge owner to agree to any changes.

Just make sure that you haven't approached the rentcharge owner to discuss the issue if indemnity insurance appears suitable.  It is usually a condition of such policies that there has been no contact with the rentcharge owner (other than to simply pay the annual £3 sum perhaps!)

Because HSBC say nothing in their mortgage instructions, your conveyancer is going to need to contact them to raise the issue and then suggest a solution, i.e. indemnity insurance, and ask them to agree to it.

Email from HSBC:

2  We note the comments of both your letters relating to rent charge and understand that this is a historic rent charge. For historic rent charge, our requirements are confirmed below:

 

• If the rent charge has not been demanded/paid for several years and the rent charge holder is unknown/has not been contacted.

In the above scenario, the rent charge must be bought out or you will need to arrange an indemnity insurance policy.  In addition to our usual requirements the policy will need to protect the bank against the risks associated with the rent charge owner’s remedies for non-payment of rent charge.  The policy must not exclude the insurers’ liability under the policy if there is an awareness of the rent charge or it’s noted in the Land Registry title register.

 

• If the rent charge has been demanded, and is paid up to date, then this must be bought out.

Please provide clarification regarding historic rent charge as per our comments above. Also note that if the rent charge is to be bought out then this should be done, on or before completion.

We fall into that second bullet point category. Do we think simply paying the charge off and showing HSBC a letter from the rentcharge owner saying "accepted and closed" will suffice? Then go through the long formal process after completion?

RoseBerni

My late parents house had an historic rent charge 
the buyers solicitors / mortgage company were happy with an indemnity policy that I had to buy via my solicitors 
cost about £80

This was April last year so recent 

RoseBerni

Problem with rent charge is that if for any reasons it’s not paid 
the owner of the rent charge can in theory repossess your house
unlikely as most of the historic rent charges owners are dead and buried a long time ago 

i know that seems absolutely crazy but it’s what I was told by my solicitor
And if you search on line you can find more details of this .

so this why the bank aren’t happy with it being in place as someone else other than them could repossess their property 

RoseBerni

On the plus side it’s really common historic rent charges and generally a indemnity policy is fine 

RiskAverse100

sidthecat96 said:

We fall into that second bullet point category. Do we think simply paying the charge off and showing HSBC a letter from the rentcharge owner saying "accepted and closed" will suffice? Then go through the long formal process after completion?

It seems that your only option if time is short is to contact the rentcharge owner (and I assume that you know who this is) and offer to 'buy out' the rentcharge.

I think the the going rate is around 20 times the annual rentcharge sum on the basis that most rentcharges of this kind are going to come to an end in July 2037 or 60 years after they first became payable, whichever is the later.  However, you may need to offer a sum quite a bit more than this plus legal costs to persuade the rentcharge owner to accept!

If you can agree a buy out sum then the rentcharge has to be extinguished by deed and this will need to be registered at the Land Registry.

I would hope that supplying a copy of the signed and dated deed to HSBC will be sufficient to allow the mortgage to proceed.

The extinguishment process which is on the gov.uk website would be appropriate if you cannot agree a figure with the rentcharge owner (or don't want to approach them about this) for them to enter into an extinguishment deed.  The Rentcharges Unit calculate the sum to pay and you then pay it to the rentcharge owner.  If they cooperate then they will receipt a form to confirm that payment has been made and, on production of this to the Rentcharges Unit, they send you a certificate of redemption which would be registered at the Land Registry.

The process assumes that the rentcharge owner might not be 100% cooperative as proof of payment would normally be enough to enable the certificate of redemption to be issued if the form acknowledging receipt of the payment from you is not signed.