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Nationwide & rent charges

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Hi All, 

Might be a fairly lengthy post, but trying not to have a breakdown at the minute. I am currently going through the process of selling my new build property which was built in June 2021 (by a smaller developer) which has been ongoing for 8 months now. 

All enquiries have been replied to and deemed satisfactory, the final hurdle (of course this has been dropped on us last minute when we are due to complete February 24) we are now facing is the buyers are using Nationwide for their mortgage and after a bit of digging, can see they are notoriously overprotective when issuing their mortgages, in particular, when it comes to rent charges on a property. 

Info provided by my solicitor is a bit ambiguous, they've said Nationwide are more protective and won't accept an indemnity policy, but have done in the past, and it's looked at on a case-by-case basis. Obviously if an indemnity policy is not accepted we'll have to go down the deed of variation route, which I've been told can take several months. We're in constant contact with the buyers, and they've even suggested they may take out an entirely new mortgage, with a lender that isn't so protective. 

Management company have completed a FME1 form and responded to all queries in a timely manner - we've also agreed to settle all arrears upon completion to the management agents. 

The issue now is this rent charge - I understand that there are three clauses of which if the rent charge falls within one of these, most lenders generally accept an indemnity policy: 

1. The provisions under section 121 of the Law of Property Act have been excluded under the estate rent charge clause.

2. The estate rent charge clause includes a mortgagee protection clause, which states that notice of at least 28 days is to be given to the mortgagee prior to any enforcement action being taken by the owner of the estate rent charge.

3. The owner of the estate rent charge is a management company comprising of the residents, who are the shareholders of a private freehold development. 


My solicitor has stated that the reason the lender has an issue is the provisions of the transfer do not exclude provisions under section 121. Relating to clause 1, our transfer on the estate offers remedies which are fine but does not 'exclude' the owner of rent charge using the provisions which is the wording most lenders like, that's what they would include in a deed of variation to amend this wording. 

Currently awaiting on an update from the buyer's solicitor to see what Nationwide say - does anyone have any experience with rent charges and Nationwide or a similarly protective lender? Would having the buyers obtain an entirely new mortgage be the quickest option instead of going down the deed of variation route?

Thanks in advance. 

Comments

  • eddddy
    eddddy Posts: 18,030 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 20 February 2023 at 2:56PM
    kav94 said:

    Obviously if an indemnity policy is not accepted we'll have to go down the deed of variation route, which I've been told can take several months. 

    Just to clarify - when you say "I've been told...", was it a general statement, or a specific comment about your freeholder?  Has your solicitor asked the freeholder (or the management company) about this?

    In simple terms, your freeholder needs to sign a piece of paper. If you ask them to do it, their answer could be anything from...

    "We've signed loads of those before, we'll get yours signed within a week"

    to...

    "Nobody else has ever asked for one of these to be signed, so we don't see why you need one - but we'll ask our solicitors to see what they say. We'll give you more feedback in 2 or 3 weeks." or even "it's not our policy to sign these."

    Or they might even completely ignore your request.


    Maybe you could contact the management company yourself (if your solicitor hasn't), to see how they think your freeholder would react to a request for a deed of variation.


  • kav94
    kav94 Posts: 6 Forumite
    Sixth Anniversary First Post Combo Breaker
    eddddy said:
    kav94 said:

    Obviously if an indemnity policy is not accepted we'll have to go down the deed of variation route, which I've been told can take several months. 

    Just to clarify - when you say "I've been told...", was it a general statement, or a specific comment about your freeholder?  Has your solicitor asked the freeholder (or the management company) about this?

    In simple terms, your freeholder needs to sign a piece of paper. If you ask them to do it, their answer could be anything from...

    "We've signed loads of those before, we'll get yours signed within a week"

    to...

    "Nobody else has ever asked for one of these to be signed, so we don't see why you need one - but we'll ask our solicitors to see what they say. We'll give you more feedback in 2 or 3 weeks." or even "it's not our policy to sign these."

    Or they might even completely ignore your request.


    Maybe you could contact the management company yourself (if your solicitor hasn't), to see how they think your freeholder would react to a request for a deed of variation.


    Regarding 'I've been told' It was a general statement by my solicitor, and having done some research myself. 

    My solicitor has asked the management company in the event we may need a deed of variation, of which they've said they would not be agreeable to this and to go back to the developer's solicitor to request one. 

    In order to speed things up, my solicitor has asked the buyer's solicitor if we can have a deed of variation completed, would the lender be agreeable to seeing a signed and dated copy, then the buyers submit it alongside their application to land registry. My solicitor seems to think this would save months of time, however, it's up to the lender to make that decision. 

    Nationwide have been quite ambiguous with their responses to the buyer's solicitors, asking them to refer to the handbook each time. Now the solicitor is chasing to see if an indemnity policy would suffice, or whether a deed of variation will be required.

    Was supposed to be completing this coming Friday, but it's looking less and less likely now. I'm pretty confident I'm never going to buy a new build again.  
  • fourmarks
    fourmarks Posts: 260 Forumite
    Part of the Furniture 100 Posts Name Dropper Combo Breaker
    edited 20 February 2023 at 8:49PM
    I've probably completely got hold of the wrong end of the stick here, but if you are supposed to be completing on 24th February isn't that a legally binding date which, if the buyers do not have sufficient funds in place to make the purchase, they may forfeit their deposit?

    How have contracts been signed and exchanged if the mortgage lender has not rubber stamped the loan?

    Or, is the 24th February a date for exchange of contracts rather than completion?

    This may of course be complete jibberish.
  • eddddy
    eddddy Posts: 18,030 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    kav94 said:

    My solicitor has asked the management company in the event we may need a deed of variation, of which they've said they would not be agreeable to this and to go back to the developer's solicitor to request one. 

    In order to speed things up, my solicitor has asked the buyer's solicitor if we can have a deed of variation completed, would the lender be agreeable to seeing a signed and dated copy, then the buyers submit it alongside their application to land registry. My solicitor seems to think this would save months of time, however, it's up to the lender to make that decision. 

    I don't really follow this. What is the management company not agreeable to?

    The deed of variation needs to be signed by the 'rent owner'.

    If the management company is the 'rent owner', the management company would need to sign it. Alternatively, if the developer is the 'rent owner', the developer would need to sign it.

    But you cannot force the 'rent owner' to sign it. If the 'rent owner' refuses to sign it, you're stuck.


    But if the 'rent owner' does agree to sign the deed of variation, then what you say about the lender seeing a signed and dated copy becomes relevant.


    So step 1 is to make sure you know who the 'rent owner' is, and to find out if they would be happy to sign the deed of variation that you require.  You could leave that to your solicitor to find out, but it might be a lot quicker if you phoned up the 'rent owner' and started the discussion.


  • kav94
    kav94 Posts: 6 Forumite
    Sixth Anniversary First Post Combo Breaker
    fourmarks said:
    I've probably completely got hold of the wrong end of the stick here, but if you are supposed to be completing on 24th February isn't that a legally binding date which, if the buyers do not have sufficient funds in place to make the purchase, they may forfeit their deposit?

    How have contracts been signed and exchanged if the mortgage lender has not rubber stamped the loan?

    Or, is the 24th February a date for exchange of contracts rather than completion?

    This may of course be complete jibberish.
    Sorry - what I meant by February 24 was this is the date that has verbally been communicated between myself and the buyers as a date to aim to exchange contracts and complete. This date is also when their 2 week grace period extension on their mortgage offer expires. If this date is missed, they have a back up mortgage with the same lender, albeit much more expensive.

    Both solicitors are aware of this date and are 'doing everything they can' to achieve this - I just hope Nationwide will accept an indemnity policy instead of a deed of variation. It's all to do with if the purchasers missed payment by 40 days or more to the management company, they bizarrely have a right, as per the transfer, to place a leasehold on the property. Most lenders accept an indemnity policy to cover this, however seeing as though Nationwide are a more protective lender, they may require a deed of variation to change the wording in the transfer.

    It's all quite confusing and I spent most of yesterday just trying to understand exactly what it was all about.  
  • eddddy said:
    kav94 said:

    My solicitor has asked the management company in the event we may need a deed of variation, of which they've said they would not be agreeable to this and to go back to the developer's solicitor to request one. 

    In order to speed things up, my solicitor has asked the buyer's solicitor if we can have a deed of variation completed, would the lender be agreeable to seeing a signed and dated copy, then the buyers submit it alongside their application to land registry. My solicitor seems to think this would save months of time, however, it's up to the lender to make that decision. 

    I don't really follow this. What is the management company not agreeable to?

    The deed of variation needs to be signed by the 'rent owner'.

    If the management company is the 'rent owner', the management company would need to sign it. Alternatively, if the developer is the 'rent owner', the developer would need to sign it.

    But you cannot force the 'rent owner' to sign it. If the 'rent owner' refuses to sign it, you're stuck.


    But if the 'rent owner' does agree to sign the deed of variation, then what you say about the lender seeing a signed and dated copy becomes relevant.


    So step 1 is to make sure you know who the 'rent owner' is, and to find out if they would be happy to sign the deed of variation that you require.  You could leave that to your solicitor to find out, but it might be a lot quicker if you phoned up the 'rent owner' and started the discussion.


    I believe the rent owner is myself as the property is free hold. The issue seems to be that as per the transfer and contract with the management company (as is with most of them I believe) they bizarrely have a right to place a lease on the property, should the occupiers not pay the management fees for 40 days or more. Why or how this is legal, I'm very much struggling to understand - hence the term 'fleecehold' I suppose. 

    The fact that the management agent has refused to agree and sent this back in the direction of the developer's solicitors, already makes me think a deed of variation will take a while to sort out. I'm crossing my fingers that Nationwide accept an indemnity policy - I've heard of them straight up refusing to give mortgages on homes with management agents, but they've approved two mortgages for our buyers so far; I'm hoping this holds some sort of value. My solicitor also said despite them being an overprotective lender, they have been known to accept indemnity in the past... so we'll see. 
  • Nationwide do this for your own protection (and theirs). Freehold companies can be very difficult. And the whole ground rent / service charge scandals have been a real problem for leaseholders. 

    Get your ducks in a row now and ask for what Nationwide recommend. It’s easier when you’re a buyer. Then you won’t need to get it when you sell. If they won’t provide it, look for somewhere else. It means the development isn’t well managed and not customer-friendly. 
  • KSS1991
    KSS1991 Posts: 65 Forumite
    10 Posts Name Dropper
    @kav94 have you got this sorted?
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