Estate Charges (Rentcharges) - Best Avoid or not really a problem?

Maffy52

eddddy said:

Maffy52 said:

I think I understand what you mean about the adding something to the deed, but I don't think this is practical as this is being sold by the New Homes group and they are basically 'demanding' a quick sale (the property was 'bought' by a developer as a part-exchange!), also the managment company seem unlikely to agree.

Was the house advertised as "cash buyers only"?

No, it was not advertised as cash buyer only. It is being sold with 'limited title', not sure if this is relevant (gets the developer out of any liability if there is a problem I guess!)
My 'solicitor' is the one that was 'strongly recommended' to me by the NHG for a quick and painless sale. Sadly, I get the feeling my solicitor isn't really working for me!
I will check the link you suggest, but I think this kind of thing is just beyond my 'brain-power' and so will not be confident that I am 'protected' 

Maffy52

eddddy said:

Maffy52 said:

I think I understand what you mean about the adding something to the deed, but I don't think this is practical as this is being sold by the New Homes group and they are basically 'demanding' a quick sale (the property was 'bought' by a developer as a part-exchange!), also the managment company seem unlikely to agree.

• Your solicitor should be able to tell you whether the Estate Rentcharge already complies with Mortgage Lenders' requirements - or whether a Deed of Variation is required

First of all, thanks for your detailed answers they really help. Now I understand why different people have different opinions/experiences. It is not simply a case of there being rentcharges or not. Crucially, it depends on whether the rentcharge comply with lender requirements or not. 

How can I find out if the estate rentcharges for the house I plan to buy are compliant? Should these details be in the Land Registry 'register of title'?

rini94

eddddy said:

Maffy52 said:

I think I understand what you mean about the adding something to the deed, but I don't think this is practical as this is being sold by the New Homes group and they are basically 'demanding' a quick sale (the property was 'bought' by a developer as a part-exchange!), also the managment company seem unlikely to agree.

Was the house advertised as "cash buyers only"?

• Your solicitor should be able to tell you whether the Estate Rentcharge already complies with Mortgage Lenders' requirements - or whether a Deed of Variation is required

• Here's what some mortgage lenders say about Estate Rentcharge requirements: https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1865/

• I'd be surprised if the developer's solicitors failed to spot a non-compliant Estate Rentcharge, when the part-exchange was arranged

• If there is a non-compliant Estate Rentcharge, and New Homes group decide they won't wait for a 'Deed of Variation' - what would they do instead? Nobody needing a mortgage can buy it. I doubt they would want to sell it as an unmortgageable property to a cash buyer at a huge discount.

I could desperately do with some advice from you 🙏

I am selling my shared ownership home. I own 50% and the housing association own 50%. My buyers are purchasing the entire house and being transferred the freehold with that.

The buyers are using a mortgage with Skipton. The buyers solicitor is insisting on a Deed of Variation because of an apparent estate rent charge in the transfer between the developer (Persimmon) and the housing association (Bromford).

Both Persimmon and Bromford are refusing this because apparently it is not an estate rent charge but an estate SERVICE charge. The buyer solicitor is not taking no for an answer. We are at a stalemate and I am terrified my buyers are going to drop out while this sale has been going on for six months.

I checked the wording from Skipton in the link you sent and that is exactly the response they sent to the buyers solicitor. My issue is that she has gone to Skipton saying it’s a rent charge but everyone else is adamant it’s a service charge, and the response from Skipton only refers to rent charge.

Is there a difference between estate rent charge and estate service charge? Any advice on how we could move forward would be so appreciated 🙏

daveyjp

Service charge and rent charge are completely different things.

A service charge is a payment made for communal services.  A rent charge is the legal mechanism for securing any service charge debt debt should you default.

If you don't pay your service charge debt the creditor can impose a lease which takes precedent over your freehold.

https://www.duttongregory.co.uk/site/blog/rentcharges_draconian_rights_back_with_a_vengeance

The modern way is to place a restriction in the title so a property can't be sold until any service charge debts are paid.

GixerKate

To the original poster, are you sure its a rent charge and not a service charge?  On the estate where I am we all have a service charge - an annual charge of around £220 that is used to maintain the green areas of the estate, fencing etc.  Its NOT a rent charge and it is currently managed by an estate management company but we have the option of moving it into the Residents Association if we wish.  A few house owners have sold up and moved on, the only impact this has had is that it took a bit longer for the service management pack to be provided by the developer (the estate management company weren't in place at the time of selling).

rini94

daveyjp said:

Service charge and rent charge are completely different things.

A service charge is a payment made for communal services.  A rent charge is the legal mechanism for securing any service charge debt debt should you default.

If you don't pay your service charge debt the creditor can impose a lease which takes precedent over your freehold.

https://www.duttongregory.co.uk/site/blog/rentcharges_draconian_rights_back_with_a_vengeance

The modern way is to place a restriction in the title so a property can't be sold until any service charge debts are paid.

Thank you, this is helpful.

We are still having the same problem. I have 2 questions if anyone can help me.

Part of the Transfer between the developer and the housing association states this:
"3. To pay interest to the Management Company or (if required) prior to the Handover Date the Transferor at the rate of 4% above the base rate of Royal Bank of Scotland plc for the time being on any part of the Estate Service Charge as shall be unpaid by the Transferee 28 days after payment fell due or after the date of demand (if later) together with any costs incurred by the Management Company or Transferor in recovering any arrears of the Estate Service Charge."

Does this constitute a rent charge?

One of the Lender's requirements for a rent charge says this:
"3. The rentcharge clause includes a mortgage protection clause, which states that notice of at least 28 days will be provided to the mortgagee prior to any enforcement action being taken by the owner of the rent charge."

Does this not satisfy the Lender's requirement, as it says 28 days after payment fell due?

GDB2222

rini94 said:

daveyjp said:

Service charge and rent charge are completely different things.

A service charge is a payment made for communal services.  A rent charge is the legal mechanism for securing any service charge debt debt should you default.

If you don't pay your service charge debt the creditor can impose a lease which takes precedent over your freehold.

https://www.duttongregory.co.uk/site/blog/rentcharges_draconian_rights_back_with_a_vengeance

The modern way is to place a restriction in the title so a property can't be sold until any service charge debts are paid.

Thank you, this is helpful.

We are still having the same problem. I have 2 questions if anyone can help me.

Part of the Transfer between the developer and the housing association states this:
"3. To pay interest to the Management Company or (if required) prior to the Handover Date the Transferor at the rate of 4% above the base rate of Royal Bank of Scotland plc for the time being on any part of the Estate Service Charge as shall be unpaid by the Transferee 28 days after payment fell due or after the date of demand (if later) together with any costs incurred by the Management Company or Transferor in recovering any arrears of the Estate Service Charge."

Does this constitute a rent charge?

One of the Lender's requirements for a rent charge says this:
"3. The rentcharge clause includes a mortgage protection clause, which states that notice of at least 28 days will be provided to the mortgagee prior to any enforcement action being taken by the owner of the rent charge."

Does this not satisfy the Lender's requirement, as it says 28 days after payment fell due?

No. The mortgagee is your buyer’s lender, and they want to be given 28 days notice of any default by your buyer.