estate rent charges / deed of variation -- should I use a solictor?

blue_hector

Hello!

We bought our freehold house 4 years ago direct from the property developer. We are currently looking to re-mortgage with a new lender (Nationwide). However, something interesting popped up -- which is the subject of estate rent charges. In short, the lender won't agree to a remortgage unless certain criteria are met, e.g. that these charges are fully paid up, or they are redeemed, etc. 

While I do pay for the variable component of the estate rent charges through service charges (for communal areas upkeep), the fixed component (a princely sum of 1.00 GBP per year) is never collected and it seems the rentcharge owner has no intention of collecting it ever.

I see that one possibility for dealing with this is a deed of variation to exclude Section 121 of Property Law 1925. I like this solution because it seems to future-proof us from this issue popping up again in case we remortgage again or if we sell to a buyer who needs a remortgage.

Fortunately, the property developer (who is the rentcharge owner) is being very reasonable and is happy to agree to a deed of variation to the above effect. In fact, they have even offered to have their lawyers draft it (for a fee of ~ 500 pounds).

My questions are:
(1) For those in the know, does the solution of a deed of variation sound like a good solution to you? Are there any things I should watch out for or be mindful of?

(2) Given the developer's offer of having their solicitors draft the deed of variation, do I still need a solicitor myself? And what role will they serve?

(3) If I do need a solicitor, then does anyone have any recommendations? Sadly I cannot count on the conveyancing team doing the remortgage because they seem to be acting only on behalf of the lender and are unbelievably non-responsive. I would have to find a new solicitor to act on my behalf if I want this done.

Thanks!

Postik

Not sure about #2 and #3.  Seems like an oversight that this wasn't sorted 4 years ago but I think this has come to light as more of an issue in recent years.

When I was looking at a house with a rent charge I read a horror story where the rent charge owner can take the freehold from you, without notice, if you miss a payment.  I think nobody ever thought this would happen, until it did, and now lenders are more clued up on it.  So I would definitely pay the £500 and get a deed of variation as it future proofs you.  Chances are when you come to sell your buyer won't be able to get it mortgaged without this.

I believe estate rent charges were a mechanism to ensure you could never get away without paying the estate management fee, but because of the issues above that's now typically achieved through a covenant.

Marky4040

blue_hector said:

Hello!

We bought our freehold house 4 years ago direct from the property developer. We are currently looking to re-mortgage with a new lender (Nationwide). However, something interesting popped up -- which is the subject of estate rent charges. In short, the lender won't agree to a remortgage unless certain criteria are met, e.g. that these charges are fully paid up, or they are redeemed, etc. 

While I do pay for the variable component of the estate rent charges through service charges (for communal areas upkeep), the fixed component (a princely sum of 1.00 GBP per year) is never collected and it seems the rentcharge owner has no intention of collecting it ever.

I see that one possibility for dealing with this is a deed of variation to exclude Section 121 of Property Law 1925. I like this solution because it seems to future-proof us from this issue popping up again in case we remortgage again or if we sell to a buyer who needs a remortgage.

Fortunately, the property developer (who is the rentcharge owner) is being very reasonable and is happy to agree to a deed of variation to the above effect. In fact, they have even offered to have their lawyers draft it (for a fee of ~ 500 pounds).

My questions are:
(1) For those in the know, does the solution of a deed of variation sound like a good solution to you? Are there any things I should watch out for or be mindful of?

(2) Given the developer's offer of having their solicitors draft the deed of variation, do I still need a solicitor myself? And what role will they serve?

(3) If I do need a solicitor, then does anyone have any recommendations? Sadly I cannot count on the conveyancing team doing the remortgage because they seem to be acting only on behalf of the lender and are unbelievably non-responsive. I would have to find a new solicitor to act on my behalf if I want this done.

Thanks!

I've just done a DoV on my leasehold apartment to remove the ground rent clause which (as you pointed out) did cause an issue with my lender when i was buying it. It was £750 solicitor fee which the Freeholder refunded to me on completion, but that was just a thing they were doing to help i guess. For what the process consisted of, it's really expensive but you need a solicitor to do it unfortunatley and can take 3-4 months to complete. 

Anyway, i was given the option at the point of purchase of an indemnity policy against any future issues with the ground rent. I paid £50 for this, then obviously once i was in, took the DoV option to remove the ground rent completley which the original builder was offering to all lease holders.