Building Safety Act 2022 - Underlease flat landlord certificate issues

watermelonice

Hi, 

Background

- Mortgage offer provided by HSBC on 27/06/2023 valid for 6 months
- Leasehold property - Freeholder Council > An Intermediate leaseholder who owns a headlease (building developer company L&Q) > The leaseholder (me a.k.a sub-leaseholder) 
- L&Q was the leaseholder on 14 Feb 2022 

Issue

We were about to exchange contracts and our solicitor raised an issue about landlord certificate. 

She demands that Deed Of Certificate must be signed off by local council (Freeholder a.k.a Superior Landlord) instead of our immediate landlord (L&Q), since there isn’t a clause in the lease term between the Council and L&Q clarifying who would be liable for future defect as per BSA 2022 if L&Q goes into receivership.

It is said that this is very new legislation (came out on May 2023 I believe), therefore nobody is aware of such requirement, neither seller’s solicitor nor the council. The case is kind of stuck as both seller’s solicitor and the Council suggests that L&Q’s signature on DOC is sufficient, but our solicitor still insists and raised this to HSBC last week to find out if L&Q’s signature is sufficient for HSBC to approve mortgage deal. 

We’re quite worried about our mortgage deal now, as it’s been 2.5 months past since we received the mortgage offer and we don’t want to lose our position. Do you think we should change our solicitor and find a new firm to handle the case? 

eddddy

watermelonice said:

Do you think we should change our solicitor and find a new firm to handle the case? 

Just taking a step back, I guess you understand the background...

Your solicitor looks after your interests and the interests of your mortgage lender.

Your solicitor wants the council to sign the deed in order to...

• Reduce the risk of you losing money
• Reduce the risk of your mortgage lender losing money

You are free to say your solicitor "I am happy to take that risk of losing money - please exchange contracts without the council signing."

But it's up to your mortgage lender whether they say "We are happy to take the risk - so we'll lend the money without the council signing" or "We're not happy to take the risk - so we won't lend the money without the council signing"



Now that your solicitor has told your mortgage lender about the risk, I doubt that changing to another solicitor will impact the mortgage lender's decision.

Maybe, if you changed to another solicitor and another mortgage lender - and the new solicitor didn't say anything to the new mortgage lender - that might work. But there's no guarantee that would happen, and I guess you don't want to cause that much delay anyway.

watermelonice

 Thanks for the reply @eddddy  

Yes, we understand the background but assuming L&Q would go receivership just makes things overcomplicated. 
Also, if L&Q goes into receivership, all liabilities of L&Q be would be owned by that third party taking the control. 

We don't want to change our lender since we secured a good mortgage deal with a good interest rate.  

Unfortunately our only option is just waiting to hear from lender. I will update here once we hear back.

eddddy

watermelonice said:

Yes, we understand the background but assuming L&Q would go receivership just makes things overcomplicated. 

Your solicitor isn't "assuming" that L&Q will go into receivership - he/she is considering the (possibly remote) risk that L&Q might go into receivership.

As I said above, if you're happy to take that risk, you can tell your solicitor to proceed anyway.

(But your mortgage lender needs to be happy to take that risk as well.)

watermelonice said:

Also, if L&Q goes into receivership, all liabilities of L&Q be would be owned by that third party taking the control. 

That statement definitely isn't correct.

If a company goes into receivership - the receiver sells the assets of the company.  The liabilities don't get transferred to anyone.

For example, L&Q's head lease is (probably) an asset - although some leases can end up with a negative value, making them a liability.


There's also the question of what happens if L&Q's head lease is forfeited - for example, because they get into financial difficulties and don't pay their ground rent and/or fail to maintain the building.



New leasehold legislation often has "gaps" in it. It often ends up that it has to be tested in court - which is generally very expensive. I guess your solicitor thinks it's better if the council signs a deed, rather than you risking a very expensive court case (which you might lose).


Maybe your solicitor is being very sensible - or maybe he/she is being overly cautious.

watermelonice

I don't think we can take the risk after this point. We need to make the lender happy as well! 

eddddy said:

There's also the question of what happens if L&Q's head lease is forfeited - for example, because they get into financial difficulties and don't pay their ground rent and/or fail to maintain the building.

Our solicitor raised this issue as well and we purchased an indemnity insurance for this case. 

charliefinn4

Hi, 

I am in a similar position with buying a flat in Ruskin Park House - an Underlease of a Head Lease (where the head lease / management company is owned by the leaseholders of just that building) but the freeholder is Southwark Council. No one seems to know if this certificate is relevant and if so - who issues it. The seller's solicitor say it isn't relevant, but my solicitor thinks it is.

Have you had any progress? My solicitor wont allow me to purchase the flat without it and we cant get an response from the council or management company as to why it doesn't appy (as it seemingly meets the criteria)

did you get around it somehow?

Thanks in advance.