Leasehold Sale - Lease term, ground rent, Deed of Variation

viper_987

Hi,

I am currently selling my leasehold apartment.

The buyer's solicitor is requesting a Deed of Variation because:

1. The term of the lease is only 105 years (it was originally incorrectly advertised by the estate agents as 124),
2. The ground rent is over £250 per annum (£300).

Is this necessary from a legal perspective?
I understand this would incur significant costs and delays.

Thanks

eddddy

viper_987 said:

Is this necessary from a legal perspective?

No - there is no law that says the lease length must be 124 years, and the ground rent must be £250 or less. It will simply be the buyer's preference.

But in theory, the buyer could decide to walk away, if you don't agree to do what they request.

One reason the buyer would prefer the ground rent to be reduced is that there is a greater risk of lease forfeiture (i.e. repossession of the flat), if the ground rent isn't paid on time, if it is over £250 (outside London). And a mortgage lender will probably want indemnity insurance.

But the lease length sounds like less of an issue.

RAS

Are you in London?

viper_987

@edddy Thanks. It seems all the more confusing given that they are a cash buyer.
@RAS No, I'm in the north of the country (west yorks).

user1977

Isn't your own solicitor giving you any advice?

viper_987

@user1977 Yes, my solicitor is also saying it is not required.

Equalee

viper_987 said:

Is this necessary from a legal perspective?
I understand this would incur significant costs and delays.

It is not necessary, but a lot of lenders for mortgages aren't lending due to the risk of lease forfeiture.

It's exactly what happened with me beginning of the year. Paperwork came in very late in process, was flagged by solicitor and then purchase fell through as it offer ran out. I think the cost was £1000 for the deed of variation but seller never purchased and instead he's had further 10 months so far of service charges to pay (which was less than the amount deed would have cost, also down to the leaseholder to agree on too.

loubel

As a cash buyer they can choose to accept the lease as it is and apply for a statutory lease extn in the future in order to increase the length and remove the ground rent so that it becomes more marketable. If they have asked you to do this that suggests they believe the property isn't worth what they've agreed without this being done.

eddddy

viper_987 said:

@edddy Thanks. It seems all the more confusing given that they are a cash buyer.

Yes - but they'll want to resell the flat at some point, perhaps to somebody who needs a mortgage.

But this could all be a 'big pile of nothing'.  The buyer's solicitor might just be diligently asking the question (because they routinely ask that question),  whilst being 95% certain that you will say "no".

eddddy

Equalee said:

It is not necessary, but a lot of lenders for mortgages aren't lending due to the risk of lease forfeiture.

It's not "a lot" of lenders. Most say they accept indemnity insurance. Very few say they won't. 

Equalee said:

It's exactly what happened with me beginning of the year. Paperwork came in very late in process, was flagged by solicitor and then purchase fell through as it offer ran out. I think the cost was £1000 for the deed of variation but seller never purchased and instead he's had further 10 months so far of service charges to pay (which was less than the amount deed would have cost, also down to the leaseholder to agree on too.

Sounds like there might be some misunderstandings here.

£1000 sounds like the solicitor's fee for preparing the deed of variation.

The freeholder would almost certainly want a payment of a good few thousand pounds on top of that, as compensation for loss of ground rent.

It's more likely that the freeholder and leaseholder couldn't agree on a sensible payment amount, so negotiations fell apart, or perhaps the freeholder simply refused to discuss a lease variation at all.

viper_987

Well it looks like the buyer is insisting on the Deed of Variation, but I am going to decline based on all the advice I've had.

On a separate issue, I was also asked for a Building Regulations Completion Certificate, which neither my solicitor nor I can locate.  Is there anything I can do about this? Is it a legal requirement? The property is 20 years old. My solicitor has indicated that it is not required and is an unusual request.