Leasehold/deed of variation problem

Tangerine88

Good morning,

I am selling a leasehold flat in London. I am three months into the conveyancing process and the buyer's lender has only just raised the ground rent issue. They are demanding a deed of variation (will not accept an indemnity)

We have 108 years left on the lease. The GR is £150 pa, rising every 25 years until it finally reaches the threshold, becoming £1200 in 2082. The GR will remain low for decades to come and in effect will never reach the threshold as a future owner will almost certainly have renewed the lease by that stage. 

The freeholder (who owns 16 of these maisonettes) cannot give us a costs)premium estimate as, given give the low GR/long leases, it hasn't been requested before. It could be 5k, it would be 15k we don't know.

Our solicitor is suggesting we ask the buyer to contribute as they have already received a significant reduction on the property.

I am hopping mad that this has been raised so late and they are being so intransigent. We are not in a chain so we can pull the sale rather than expose ourselves to unknown costs.

I am also furious that the buyer's finances were misrepresented to us but that's a separate issue which the estate agent will be hearing about on Monday.

Anyone have any advice?

eddddy

It's unusual for a mortgage lender to reject a ground rent that doubles every 25 years.

There's an issue with the Housing Act, that applies to flats in London with ground rents over £1000. But that doesn't affect your flat until 2082, and the buyer's mortgage will be paid off by then.

I wonder if the seller's solicitor is just taking a punt - and asking for a lease variation because it would be 'nice to have' rather than vital?



In your position, I'd be tempted to get your estate agent on the case. Ask the estate agent to contact the buyer to say that...

...a lease variation isn't going to be achievable anytime soon, and it doesn't sound like it should be a necessity, so how does the buyer want to proceed?

Assuming the estate agent is paid on completion, they'll want to solve this problem - perhaps by persuading the buyer to contact their solicitor and/or mortgage lender to find out if this really is a problem,

Tangerine88

@eddddy We'll all be dead by then never mind the mortgage. It's absolutely ludicrous. The buyer is self-employed and I wonder if their lender is being overly stringent but the fact is we are three months in and it turns out they don't actually have the finances to proceed. 

This should have been raised months ago as the lease is one of the first documents they received. 

The estate agent is OOO today but I have said I need to speak to them as a matter of urgency. Our solicitor has as miuch fight as a wet stamp too. 

Thanks for your advice, this is very painful!! Should have been completed and moved by now! 

JustinTime19

I think the buyers solicitor is being a chancer on this, and trying to look after there client's long term interest. 

I had something similar and rejected the request. The lenders handbook available here shows what the lenders rules are when it comes to ground rent, and increases - https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1852/

The king speech is due the 7th of November there are suggestions we may hear some favourable changes for existing leaseholders being announced. The specifics aren't known yet but may cap ground rent, and some of the charges associated with being a leaseholder. 

Jonboy_1984

Tangerine88 said:

@eddddy We'll all be dead by then never mind the mortgage. It's absolutely ludicrous. 

Just a fyi, thee rational behind it is 35 year mortgages are not uncommon these days, if the buyer defaults they want another full mortgage terms worth of remaining lease within the rules to cover themselves and obtain the best sales figure (in line with their legal obligations) so 2 x 35 = 70 years or 2093….

Tangerine88

Thanks @Jonboy_1984 and @justintimebfoe these head ups. I am going to try to confirm who the lender is so I can ascertain whether it's legit or they are chancing it.  The rules vary hugely from lender to lender but our lease is well within the general guidelines. I spoke our appalling estate agent today but as usual they were utterly unhelpful, advocating for the buyer and trotted out their 'we're seeing this across the board' line. Rubbish they are. Anyway thank you for the. Intel.